Tax Consequences of ITR14 and IT14SD forms

Presented by

Diane Seccombe

(B Com, LLB, LLM (Taxation)

Di Seccombe is an admitted attorney with a Masters degree in taxation. Di started her tax

career as a full time academic with the University of KwaZulu Natal before moving into practice.

She is currently the National Head of Tax Training with Mazars and in this capacity trains and

consults on Income Tax matters including, Corporate, Individual and International tax as well as

VAT.

Programme: 08:15 – 08:55 Registration 09:00 – 10:30 Tax Consequences of ITR14 and IT14SD forms 10:30 – 10:50 Tea Break (20 mins) 10:50 – 13:00 Tax Consequences of ITR14 and IT14SD forms

13:00 Conclusion

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Welcome2016 Tax Consequences of ITR14 & IT14SD forms

Presented by Diane Seccombe

Upcoming CPD Events

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Upcoming CPD EventsRefer to our website for all upcoming events

October• 2016 Accounting & Reconciliation• Tax Administration ActNovember

• Tax Legislative

2016 Tax Consequences of ITR14 and IT14SD forms

ITR14 AND IT14SD Disclaimer

The information in these notes is for general information purposes only and is not a substitute for professional advice,

legislation or textbooks on the relevant subject matter. Neither Mazars, SAIT nor the presenter accept any

responsibility for any actions taken or not taken on the basis of the information in these notes.

NB: The information contained in the notes is specifically drafted, worded and used to illustrate only the key concepts

presented, and as such is not to be regarded as a technical reference source by attendees.

CONTENTS INTERNATIONAL TRANSACTIONS ..................................................................................................... 2

The s 6quat rebate and section 6quat (1C) deduction ...................................................................... 2

Section 31 transfer pricing and thin capitalisation ............................................................................ 8

Uniform cross-border withholding regime to prevent base erosion .......................................... 13

DEDUCTIONS, ALLOWANCES AND RECOUPMENTS .................................................................... 19

Particular deductions ......................................................................................................................... 19

capital allowances .............................................................................................................................. 27

Recoupments ...................................................................................................................................... 29

LOANS .................................................................................................................................................. 35

Anti-hybrid debt instrument re-characterisation rules ................................................................... 35

VENTURE CAPITAL INVESTMENTS SECTION 12J ......................................................................... 40

DEBT REDUCTION .............................................................................................................................. 45

TAX ADMINISTRATION ACT (TAA) ................................................................................................... 52

Personal liability for tax debts ........................................................................................................... 53

Chapter 15 administrative non-compliance penalties ..................................................................... 55

chapter 16 understatement penalty .................................................................................................. 57

chapter 17 criminal offences ............................................................................................................. 61

DIVIDENDS AND DIVIDEND WITHHOLDING TAX ............................................................................ 63

DIVIDEND WITHHOLDING TAX .......................................................................................................... 67

FOREIGN DIVIDENDS: Section 10B .................................................................................................. 72

CAPITAL GAINS TAX (CGT) ............................................................................................................... 74

CONNECTED PERSONS ..................................................................................................................... 77

SECTION 18A DONATIONS TO PUBLIC BENEFIT ORGANISATIONS ........................................... 79

VALUE ADDED TAX ............................................................................................................................ 80

Deemed supplies ................................................................................................................................ 80

adjustments ........................................................................................................................................ 83

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INTERNATIONAL TRANSACTIONS THE S 6QUAT REBATE AND SECTION 6QUAT (1C) DEDUCTION

The s 6quat rebate

Section 6quat provides a special rebate, or unilateral tax credit, for foreign taxes payable by residents (natural

persons and legal entities) in respect of income from non-Republic sources.

Where a foreign country levies tax on income derived from a source in South Africa, s 6quat allows relief not as a

rebate but in the form of a deduction for the foreign taxes paid.

The rebate will reduce normal tax payable by a resident whose taxable income includes any of the following

amounts:

(a) Income, other than foreign dividends dealt with separately in item (c) below, received by or accrued to a

resident from a source outside, and not deemed to be within the Republic.

(b) The proportional amount of the net income referred to in s 9D. Section 9D is an anti-avoidance measure

which has the effect of including as income in the hands of residents, who hold more than 50% of the

participation rights or voting rights in a CFC, a proportional amount of its net income.

(c) Foreign dividends.

(d) Taxable capital gains derived from a source outside and not deemed to be within the Republic.

Section 26A includes in the taxable income of a person for a year of assessment his taxable capital gains

for that year, as determined in terms of the Eighth Schedule to the Act. It follows that when a resident

makes a taxable capital gain from a foreign source, which is not deemed to be within the Republic, but the

gain is subject to tax in the foreign country, the rebate provided by s 6quat would be available against

South African tax payable on the gain.

(e) Amounts referred to in items (a), (b) and (c) received by or accrued to any ‗other person‘, but deemed to

have been received by or accrued to a resident in terms of s 7. Section 7 contains specific anti-avoidance

provisions that aim to nullify, for fiscal purposes, schemes intended to shift the incidence of tax. More

specifically, the various provisions apply to particular and expressly defined transactions in terms of which

certain categories of income diverted by one person to another, are deemed to have accrued to the

person concerned Effectively, therefore, the resident will qualify for the s 6quat rebate in respect of the

income deemed to have been received by or accrued to him.

(f) A capital gain from a source outside and not deemed to be within the Republic, which is attributable to a

resident in terms of paras 68 (attribution of capital gains to a spouse), 69 (attribution of capital gains to

parent of minor child), 70 (attribution of capital gains subject to conditional vesting), 71 (attribution of

capital gains subject to revocable vesting), 72 (attribution of capital gains vesting in non-residents) or 80

(attribution of capital gains vesting in resident beneficiaries of a trust) of the Eighth Schedule.

(g) Amounts referred to in items (a), (b), (c) and (d) above representing capital of a trust and included in the

income of a resident beneficiary by virtue of s 25B(2A) or taken into account in determining his aggregate

capital gain or aggregate capital loss in terms of para 80(3) of the Eighth Schedule. Section 25B(2A)

establishes a special rule when a resident beneficiary, during a year of assessment, acquires a vested

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right to an amount representing the capital of a non-resident trust, if the capital arose from income

accrued to the trust in a prior year of assessment. The rule states that the amount must be included in the

income of the resident beneficiary in the year in which he acquires the vested right. And, in the context of

capital gains, para 80(3) of the Eighth Schedule achieves a similar result in relation to non-resident trusts.

Thus, when a resident beneficiary acquires a vested right to an amount representing the capital of a non-

resident trust, and the amount arises from a capital gain of the trust determined in a prior year, the amount

must be taken into account for the purposes of calculating his aggregate capital gain or aggregate capital

loss for the year in which he becomes entitled thereto.

In both situations the resident beneficiary will be entitled to the s 6quat rebate, even if, in the second

situation immediately above, the foreign tax has been paid by the non-resident trust.

The following is a summary of the legal nature of the income to qualify for the rebate:

• The income received or accrued by the resident must be from a source outside and not deemed to be

within the Republic, unless specifically indicated otherwise.

• The amount received or accrued must be included in the taxpayer‘s taxable income, that is, it must not

constitute exempt income.

• The amount must have been subject to foreign tax.

The foreign taxes

The rebate will be an amount equal to the sum of the foreign taxes on income proved to be payable to any

sphere of government of any country other than the Republic, without any right of recovery by any person (other

than a right of recovery in terms of an entitlement to carry back losses arising during any year of assessment to a

prior year of assessment).

The foreign taxes are those payable by the following persons:

• A resident in respect of

–income from sources outside and not deemed to be within the Republic (see item (a) above);

–‗foreign‘ dividends (see item (c) above);

–taxable capital gains (see item (d) above).

• A CFC in respect of a proportional amount referred to in item (b) above. In other words, even though the

foreign tax is borne by the CFC, the rebate may be claimed against the foreign tax relative to the

proportional amount of the CFC‘s net income imputed to the resident. The entitlement to the s 6quat

rebate is subject to s 72A(3), however, which denies a taxpayer the deduction if he fails, without

reasonable grounds, to submit a return reflecting the participation rights held in a CFC or a copy of its

financial statements.

The term ‗income‘ in the context of taxes on income includes ‗profits, income and gains and taxes imposed by

national and certain lower tiers of government [that is, state, provincial, local and any other level of government]

in a foreign country and capital gains taxes . . . qualify for the rebate‘.

The rebate may be claimed only if the foreign income is included in the resident‘s taxable income. Where the

resident is a member of a partnership or a beneficiary of a trust and the partnership or trust is liable for tax as a

separate entity in the foreign country, a proportional amount of any tax payable by the entity that is attributable to

the resident‘s interest in the partnership or trust is deemed to have been paid by the resident (proviso to

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s 6quat(1A)). In other words, where a foreign partnership or non-resident trust has paid tax in a foreign country,

the tax may be apportioned to the resident partners or beneficiaries.

Amount of rebate

The maximum amount available as a rebate or rebates for any foreign tax proved to be payable is limited in

aggregate to an amount that bears to the total normal tax payable the same ratio as the total taxable income

attributable to the included income, proportional amount, foreign dividend or taxable capital gain or amount bears

to the total taxable income (s 6quat(1B)(a)). In other words, the rebate must be determined on the

‗apportionment‘ or ‗pro rata‘ basis. This approach is in accordance with the dictates of Interpretation Note 18

issued by SARS.

Expressed as a formula, the rebate will be calculated as follows:

Section 6quat

rebate =

taxable income derived from all

foreign sources × Normal tax payable on taxable income

from all sources total taxable income from all sources

Since the taxable income attributable to the included income (that is, the total taxable income from all foreign

countries) must be aggregated, as must the normal tax payable on this income, for the purposes of calculating

the rebate, it is clear that the rebate is not ‗ring-fenced‘ relative to each foreign country. Instead it is calculated on

what can be described as a ‗pooled basis‘, which means that there is no need to link each amount of foreign tax

to a specific amount of income.

For example, say a South African company has the following income and tax liability for a year of assessment:

Income – South Africa R500 000

– Country A R250 000

– Country B 100 000 350 000

Taxable income 850 000

South African tax (28% × R850 000) 238 000

Less: Section 6quat rebate

Foreign tax(assumed) – Country A 112 000

– Country B 22 000

134 000

Limited to

R350 000 × R238 000

R850 000

98 000

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Carry forward of excess credits

Where the foreign taxes exceed the rebate determined above (hereafter referred to as the ‗excess amount‘), the

excess amount may not be refunded but is carried forward to the immediately succeeding year of assessment,

when it will be deemed to be an amount of foreign tax paid in that year. It may then be set off against the normal

tax payable by the resident during that year on foreign income that is included in his taxable income under

items (a) to (g) above.

The amount of ‗normal tax payable by [the] resident‘, for this purpose, is the amount remaining after the

deduction of the rebate for any tax payable to the government of a foreign country on any amount included in the

resident‘s taxable income in the succeeding year (proviso (ii)(bb) to s 6quat(1B)(a)). This means that the resident

may deduct the excess amount from the normal tax payable in the succeeding year, but only after the deduction

of the s 6quat rebate attributable to the foreign income in that succeeding year.

The excess amount may not be carried forward for more than seven years of assessment, reckoned from the

year of assessment when the excess amount was carried forward for the first time (proviso (iii) to s 6quat(1B)(a)).

Conversion of foreign tax

The foreign tax must be translated to the currency of the Republic on the last day of the relevant year of

assessment by applying the average exchange rate for that year. The amount translated must be rounded off to

the nearest rand.

Revised assessments

Section 6quat(5) provides for the situation where a rebate or deduction was allowed to a resident in a previous

year of assessment which is subsequently proved to be incorrect. It applies if

• the resident proves that the amount of the foreign tax actually payable exceeds the amount of the rebate

or deduction determined; or

• the Commissioner is satisfied that the amount of the foreign tax actually payable is less than the amount

of the rebate or deduction.

The Commissioner may then issue a reduced or additional assessment reflecting the correct amount of the

rebate or deduction in respect of the amount of tax actually payable in the other currency translated to rands at

the average exchange rate applicable for that previous year of assessment.

But the Commissioner may not issue a reduced or additional assessment more than six years from the date of

the assessment in terms of which the rebate or deduction was originally allowed. If, however, the amount of the

foreign tax was incorrectly reflected due to fraud, misrepresentation or non-disclosure of material facts, no time

limit applies.

Amendment In Respect Of Timing Of Foreign Tax Rebates Section 6quat

The foreign tax rebate can be matched against the year in which the South African tax system recognises the

underlying foreign taxable income. This matching ensures that the rebate will apply when these rebates are of the

greatest practical use for South African taxpayers.

Example: South African Holding Company owns all the shares of Foreign Subsidiary (located in Foreign Country

X. A cross-border of R5 million loan exists between the two entities with South African Holding Company acting

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as the creditor and with Foreign Subsidiary acting as debtor. In 2014, R750 000 of interest accrues on the loan in

respect of the South African tax system. The interest is paid in 2015 with Foreign Country X imposing withholding

in 2015.

Result: South African Holding Company can re-open the 2014 year of assessment due to the withholding tax

imposed by Foreign Country X in 2015. This foreign withholding tax can then be applied as a foreign rebate

against South African taxes otherwise due for the 2014 year of assessment.

The foreign tax deduction: section 6quat(1C)

Where a South African resident is subject to tax in a foreign country, but the originating cause (or source) of the

activities giving rise to the income received is in South Africa, he is entitled to deduct from the income so derived

the sum of any foreign taxes payable. The deduction will be an amount equal to the sum of the foreign taxes on

income proved to be payable to any sphere of government of any country other than the Republic, without any

right of recovery by any person other than a right of recovery in terms of any entitlement to carry back losses

arising during any year of assessment to any year prior to such year of assessment (s 6quat(1C)).

The deduction must not in aggregate exceed the total taxable income attributable to the foreign income before

taking into account the deduction of the foreign tax. The effective consequence is that the resident will not be

able to create a loss in relation to the foreign income, which loss would then be used to shield other income from

South African tax. If the taxpayer has paid foreign taxes but has no South African taxable income, for example,

as a result of having an assessed loss, the foreign taxes may not be utilized to further increase the assessed loss

nor may the deduction be carried forward to a succeeding year of assessment.

So, for example, assume that a South African company renders technical services to an entity in a foreign

country. The services are rendered from South Africa and the Brazilian entity makes payment of the amount due,

R10 000, less a withholding tax of R2 500. The South African company is entitled to deduct the withholding tax

from the fee and pay tax on the net amount of R7 500 (R10 000 less R2 500).

Section 6quin

Special credit for foreign taxes on South African sourced income

Until 1 January 2016 if the taxable income of a South African resident included any South African source income

arising from services rendered in South Africa and this income was subject to:

a withholding tax levied in a foreign country (whether in terms of that country‘s domestic law or

otherwise), with which South Africa has concluded a Double Taxation Treaty; or

any tax properly imposed in any foreign country with which no such treaty has been concluded.

A unilateral credit was available equal to the lesser of the normal tax attributable to the amount received and the

tax withheld or imposed.

The credit applied even if the double taxation treaty deems the source of the service income concerned, to be

located in the foreign territory.

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The provision recognised that the general restriction of double tax credit to situations where the income

concerned is from a foreign source, can lead to inequitable double taxation. It also dealt to some extent with the

reality that certain treaty countries impose withholding taxes in contravention of their domestic law and/or their

treaties with South Africa.

No rebate was granted if the SA resident taxpayer does not submit a return to the Commissioner within 60 days

from the date on which the amount of foreign tax was withheld, stating the amount of tax levied and withheld. The

form ―FTW01 Declaration of Foreign Tax Withheld‖ is available on the SARS website, and is specific to

section 6quin only. The form was only required to be submitted when the tax was withheld by a country with

which SA has a DTA.

No credit was available if there was an illegitimate withholding of tax by the foreign country (ie. the withholding is

not provided for in terms of its domestic law) and no treaty exists with South Africa.

In the event that in a subsequent year, the tax against which a credit has been claimed is recovered or the liability

is discharged, the amount of the recovery/discharge is deemed to be an amount of normal tax payable in that

year.

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SECTION 31 TRANSFER PRICING AND THIN CAPITALISATION

Section 31 is an anti-avoidance provision. The section provides special anti-avoidance rules with regard to

identified international transactions involving transfer pricing and thin capitalisation to ensure that international

transactions are based on arm‘s length principles. Thin capitalisation is seen as a category of transfer pricing

relating to the funding of a business with a disproportionate amount of debt.

A draft IN was issued by SARS in respect of section 31 on April 2013, but the IN has not been finalised to date

Definitions

In its latest form section 31 applies where any transaction, operation, scheme, agreement or understanding

constitutes an affected transaction and

any term of condition of that transaction, operation, scheme, agreement or understanding is different

from any term or condition that would have existed had the persons been independent persons dealing

at arm‘s length, and

the non-arm‘s length term or condition results in any tax benefit being derived by any party to the

transaction, operation, scheme, agreement or understanding

the taxable income or tax payable by each party to the transaction, operation, scheme, agreement or

understanding that derives a tax benefit must be calculated as if the transaction, operation, scheme, agreement

or understanding had been entered into on an arm‘s length basis without the intervention of SARS.

Affected transaction

(section 31(1)(a))

An affected transaction means any transaction, operation, scheme, agreement or understanding that has been

entered into (directly or indirectly) between (or for the benefit of) either

a resident and a non-resident or,

between a non-resident and a PE in SA of another non-resident to which the transaction, operation,

scheme, agreement or understanding relates, or

between a resident and a PE of another resident outside of SA to which the transaction, operation,

scheme, agreement or understanding relates, or

between a non-resident and any CFC in relation to a resident,

And

the parties are connected persons in relation to each other,

And (section 31(1)(b))

any term or condition of that transaction, operation, scheme, agreement or understanding is different

from any term or condition that would have existed if those persons had been independent persons

dealing at an arm‘s length.

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SARS does not have any discretion when applying section 31, however before the section can be applied

the following must both apply:

There must be a lack of an arm‘s length term or condition (this may be subjective)

A tax benefit must have been derived (after an investigation of the overall tax position of the parties

involved)

The parties must be connected persons, and essentially a resident and a non-resident.

Taxpayers are therefore required to account for transfer pricing on an arm‘s length basis, without

SARS intervention. SARS also has the power to adjust the terms and conditions of a transaction,

operation, scheme, arrangement or understanding to reflect the terms and conditions that would

have existed at arm‘s length.

Non arm‟s length

As stated a requirement of an ―affected‖ transaction is that any term or condition of the transaction be different

from any term or condition that would have existed had the parties to the transaction been independent persons

acting at arm‘s length.

The OECD has published transfer pricing guidelines and according to these guidelines there are 5 methods

taxpayers can use to determine an arm‘s length price

Comparable uncontrolled price method

Resale price method

Cost plus method

Transactional net margin method

Transactional profit split method

The OECD transfer pricing guidelines for Mutinational Enterprises and Tax Administrations can be found on the

OECD‘s website and are continually updated.

No hierarchy or preference for particular methodologies is suggested. The suitability and reliability of a particular

method is dependent on the facts and circumstances of each case. In addition, the availability of data is

considered to be key in determining the taxpayer‘s choice of method. As the South African market is small,

however, the availability of reliable comparables may be difficult to identify.

The Commissioner‟s approach to transfer pricing reviews, audits and investigations

The Commissioner may obtain information on transfer pricing practices from various sources including:

the taxpayer;

other taxpayers within the same or similar industry;

financial databases and publicly available industry information;

other jurisdictions, through the exchange of information provisions contained in the double tax

agreements.

SARS does not utilise non-publicly available information in attempting to substitute an alternative measure of the

arm‘s length price, although this possibility has not been entirely ruled out.

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SARS Draft Public Notice: Section 29 Tax Administration Act

SARS has issued a draft public notice, citing the ―records, books of account or documents‖ that are required to be

kept by persons entering into an ―affected transaction‖. Of great significance is the fact that the para (b) of the

section 31(1) definition of ―affected transaction‖ is specifically excluded in the public notice. The effect of this is

that the documentary obligations of the public notice have to be fulfilled whether the relevant transactions are

concluded on an arm‘s length basis or not.

Thin capitalisation

Section 31 does not deal specifically with thin capitalisation any longer. The general arm‘s length provisions will

be used to determine whether a company is thinly capitalised.

Application

Primary adjustment

Where any non-arm‘s length term of a cross-border transaction results or will result in a tax benefit being derived

by any party to the scheme of which that transaction forms a part, the taxable income of or tax payable by that

party must be calculated as if the transaction had been entered into on arms-length terms and conditions.

This rule applies equally to transfer pricing of goods and services and to the determination of interest rates and

royalties, with only minor variations, as noted below.

Financial assistance

In the case of financial assistance, therefore, it is necessary to apply the arms-length standard to determine

whether interest bearing loans from connected parties are greater in aggregate value, or bear different terms,

than would be the case where the loans to be made by an unconnected party transacting at arms-length with the

company concerned. To the extent that debt taken on by the company is in excess of that arms-length standard,

the interest would not be deductible and must be reversed in the preparation and filing of the taxpayer‘s return.

The calculation is not an adjustment which SARS is empowered to make on assessment through the exercise of

its discretion. Instead, the taxpayer is required to make the adjustment in filing his tax return, so that a very much

higher burden of responsibility rests on taxpayers than was the case under earlier versions of s 31, in which the

Commissioner was responsible for making any adjustment.

Financial assistance and intellectual property transactions

Where the cross-border transaction under examination is the granting of financial assistance or the use of

intellectual property, two special rules apply.

Firstly, the definition of connected person is amplified to ignore the requirement that in the case of a 20% equity

holding in a company, a connection exists only if no other person holds a majority of the voting rights.

Secondly, if the grantor is a resident (other than a headquarters company) and the recipient is a CFC either in

relation to the resident or to any company in the same group, no adjustment must be made if:

the CFC has a foreign business establishment (presumably, to which the transaction relates); and

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the CFC pays taxes to a foreign government during the existence of the transaction, of at least 75% of

the amount of normal tax that would have been payable if the CFC had been a resident. The taxes paid

must be determined after taking into account any DTA, any right of recovery, credit or rebate of taxes

and must ignore any foreign tax losses from other years or other companies which might be applicable

under the foreign tax code.

Secondary adjustment – loan, dividend or donation rules

Where, in order to arrive at an arms-length recalculation of the taxable income of a resident, an amount is

presumed to accrue or to be incurred which is different from the amount actually accrued or incurred, the

difference is used to make a secondary adjustment to the taxpayer‘s tax liability, over and above the adjustment

of the accrual or expenditure itself.

Up to 1 January 2015

the adjustment amount is deemed to be a loan which itself constitutes an affected transaction. The consequence

of this ‗loan‘ being an affected transaction is that, because it cannot bear interest, an arms-length adjustment

must be made in the determination of the taxable income of the ‗creditor‘.

Example

Assume A, a resident, has disposed of trading stock to a non-resident connected person B, for

R1000 when its arms-length value is R1500.

On the basis of s 31(2) there is an immediate adjustment to A‘s taxable income of R500.

On the basis of s 31(3) there is a loan made from A to B, a connected person, of R500.

Accordingly, an adjustment must be made to A‘s taxable income which reflects an arms-length

interest charge on the R500 for the period for which it is outstanding.

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From 1 January 2015

The amount of the adjustment is treated as follows.

If the taxpayer is a resident and the counterparty to the transaction is either a non-resident or the non-South

African PE of a South African resident, then:

if the taxpayer is a company, the difference is deemed to be a dividend of an asset in specie declared by

the taxpayer (and thus potentially subject to dividends tax), or

if the taxpayer is not a company, the difference is deemed to be a donation (and thus potentially subject

to donations tax).

The date of the deemed dividend or donation is six months after the end of the tax year in respect of which the

primary adjustment was made.

In the case of a deemed loan arising before 1 January 2015, any amount still outstanding on 1 January 2015 is

treated as a dividend or donation, as the case may be, on that date.

Exclusions for back-to-back transactions by headquarter companies

Where a headquarter company enters into a transaction with a non-resident who grants financial assistance or

the right of use of intellectual property to the headquarter company, no adjustment need be made to the extent

that the grant is made back-to-back with a grant by the headquarter company to any of its foreign company

holdings of 10% or greater (the 10% being made up by direct or indirect holdings together with other companies

in the same group).

Exemption for certain loans to connected non-resident companies

A specific exemption from the application of the basic rule exists where a debt is granted by a resident company

(or by a company, resident or not, in the same group of companies as a resident company) to a connected non-

resident company, if the creditor (together with any group company) holds at least 10% of the equity and voting

rights of the debtor, provided:

o that foreign company is not obliged to redeem that debt within 30 years from the date it is incurred;

o the redemption of the debt in full is contractually conditional upon the market value of the debtor‘s

assets exceeding its liabilities; and

o no interest accrued in respect of the debt during the tax year concerned

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UNIFORM CROSS-BORDER WITHHOLDING REGIME TO PREVENT BASE EROSION

SERVICE FEES WITHHOLDING TAX

In terms of the 2016 draft Taxation Laws Amendment Bill the proposed withholding tax on services fees will be

withdrawn as of 1 January 2017 (the original intended implementation date)

DIVIDEND WITHHOLDING TAX

Section 64D – 64N

A resident company (or regulated intermediary) that pays a cash dividend to a beneficial owner (the party entitled

to the dividend stream) is generally required to withhold the amount of dividend tax the beneficial owner is liable

for, from the dividend paid. Dividend tax is levied at a rate of 15% of the dividend paid.

Written declaration and undertaking

The company (or regulated intermediary) may have to withhold tax at a lower rate if the beneficial owner is a non-

resident. A lower rate of dividend tax must be withheld if the non-resident beneficial owner has by the date set by

the company (or regulated intermediary) or if no such date was set, by the date the dividend was paid, furnished

the company (or regulated intermediary) with a written declaration and undertaking. In the written declaration and

undertaking the non-resident beneficiary will indicate their country of residence and refer to the relevant DTA SA

has with that country and the reduced rate of dividend tax as set out in the DTA.

Exemption from normal tax (section 10(1)(k)

In terms of section 10(1)(k) the dividend will be generally be exempt in the hands of the non-resident.

Date of payment of dividend

In the case of a listed company, on the date the dividend is paid

In the case of a non-listed company the earlier of when the dividend is paid or becomes due and

payable

Date of payment of dividend tax

Dividend tax must be paid to SARS by the end of the month following the month that the dividend was paid.

INTEREST WITHHOLDING TAX (WTI)

Section 50A-H

With effect from 1 March 2015 a 15% withholding tax will be applied to South African sourced amounts of interest

paid to a non-resident.

Exemption from normal tax (section 10(1)(h)

In terms of section 10(1)(h) the interest will be exempt in the hands of the non-resident unless:

The non-resident is a natural person and is physically present in the Republic for more than

183 days during the 12 months before the interest was received or accrues, or

The debt claim in respect of which the interest is paid is effectively connected to a permanent

establishment of that non-resident in the Republic.

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Date of payment

The deemed date of the payment of the interest amount to the non-resident will be the earlier of the date of

payment and the date the amount is due and payable.

The withholding tax is a final tax and the tax withheld must be paid over to SARS by the last day of the month

following the month in which the interest is regarded as paid.

WTI can only be paid to SARS electronically via eFiling, A payor must submit the Return for Withholding Tax on

Interest (WT002), which is a summary of the total of all interest payments made and tax withheld during a month,

to SARS. The WT002 and the payment must be submitted to SARS before the end of the month after the month

in which the interest was paid

Double taxation agreement relief

The withholding of the tax at 15% is subject to double taxation agreement relief and the non-resident must submit

a written declaration in this regard.

Exemption from withholding tax (section 50D(1))

Amounts of South African sourced interest paid to non-residents that will not be subject to the 15% withholding

tax include interest paid to the non-resident by:

The government

SA Bank

Interest paid in respect of listed debt

Exempt Non-residents (section 50D(3))

Non-resident who is a natural person and who was physically present in SA for more

than 183 days in the 12 month period before the date on which the interest is paid

If the debt claim respect of which the interest is paid is effectively connected to a

permanent establishment of that non-resident in the Republic.

WTID – Withholding Tax On Interest Declaration form

A WTID form must be completed by an exempt non-resident recipient (section 50D(3)) and a non-resident

recipient seeking DTA relief.

ROYALTY WITHHOLDING TAX SECTION 49A-G

With effect from 1 January 2015 the rate of withholding tax was increased from 12% to 15%.

―Royalty‖

Any amount that is received or accrues in respect of:

The use or right of use of or permission to use any IP as defined in section 23I or

The imparting of or the undertaking to impart any scientific, technical, industrial or commercial

knowledge or information, or the rendering of or the undertaking to render any assistance or service in

connection with the application or utilisation of such knowledge or information.

Levy of the withholding tax

A 15% tax must be levied on the amount of any royalty that is paid by any person to any foreign person, where

the royalty is regarded as having been received by or accrued to that foreign person from a source within SA in

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terms of section 9. The withholding tax is a final tax.

Section 49D Exemption

A foreign person is exempt from the royalties withholding tax if:

The non-resident is a natural person and is physically present in the Republic for more than

183 days during the 12 months preceding the date on which the royalty is paid, or

The property in respect of which the royalty is paid is effectively connected to a permanent

establishment of that non-resident in the Republic.

Payment date

The royalty is deemed to be paid at the earlier of the date on which the royalty is paid or becomes due and

payable.

Where withholding tax on royalties was withheld by a withholding agent, a Return for Withholding Tax on

Royalties (WTR01) form must be submitted to SARS with the proof of payment.

The same treatment in respect of a DTA and timing of the payment of the tax withheld apply as with section 50A-

H.

WTRD – Withholding Tax On Royalty Declaration form

A WTRD form must be completed by an exempt non-resident recipient (section 49D) and a non-resident recipient

seeking DTA relief.

SERVICES RENDERED: EMPLOYEES‘ TAX

Employees‘ tax is deductible in respect of any remuneration payable to an ‗employee‘ as defined in the Fourth

Schedule to the Act. It follows that any remuneration payable to a non-resident in respect of remuneration from a

source within the Republic is subject to the deduction of employees‘ tax, as is the case with a resident of the

Republic.

Independent contractors

The definition of remuneration excludes an amount paid or payable for services rendered or to be rendered by a

person in the course of a trade carried on by that person, where the trade is carried on independently of the

person paying for the service so rendered. These are often referred to as services rendered by an independent

contractor, and the amount paid for the services rendered is excluded from being remuneration.

The above exclusion does not apply to a non-resident and as such a non-resident cannot be regarded as being

an independent contractor, and amounts paid to a non-resident for services rendered will be regarded as

remuneration.

In the case where an employer is not resident in the Republic, any agent of the foreign employer, who has the

authority to pay remuneration will be regarded as a ―representative employer‖ for the purposes of the Fourth

Schedule and will have the attendant employee‘s tax responsibilities as a resident employer.

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RESIDENCE OF PERSONS OTHER THAN NATURAL PERSONS

A person other than a natural person, for example, a company (which includes a close corporation) or trust, will

be regarded as a resident if

it is incorporated, established or formed in the Republic or

has its place of effective management in the Republic

The definition excludes any person that is deemed to be exclusively a resident of another country for purposes of

the application of any tax treaty.

It follows that if a company or close corporation is incorporated, established or formed in the Republic, it will be

regarded as a resident, regardless of where it is, or becomes, effectively managed. Similarly, if a trust is

established or formed in the Republic it will remain a resident. But if the company or trust is not incorporated,

established or formed in the Republic, it will be regarded as a resident only if, and for so long as, it is effectively

managed in the Republic.

PLACE OF EFFECTIVE MANAGEMENT (POEM)

The Act does not define the expression ‗place of effective management‘.

SARS INTERPRETATION NOTE 6 (ISSUE 2, 3 NOV 2015)

SARS has issued Interpretation Note 6 (issue 2) setting out its view of the meaning of the term.

Importantly SARS‘s interpretation of the meaning of POEM has been adjusted from what was set out in IN 6

(issue 1)

The term ―place of effective management‖ is not defined in the Act and must be ascribed its ordinary meaning,

taking into account international precedent and interpretation. It does, however, not have a universally accepted

meaning and various countries, including members of the OECD, continue to attach different meanings to it.

The purpose of this Note is to discuss the principles and guidelines that will be applied for purposes of

considering the definition of ―resident‖ in section 1(1). These principles and guidelines are consistent with the

determination of the place of effective management when that term is used as a tie-breaker rule in a tax treaty

that adheres to paragraph 3 of Article 4 of the condensed version of the OECD Model Tax Convention as at 15

July 2014 and its accompanying Commentary.

Although this Note deals with effective management in the context of companies, the underlying principles will

generally apply to other entities and bodies of persons that are not natural persons. For example, with a trust

the structures involved and terminology used may require some adaptation but the determination of the place of

effective management would take into account the same considerations as those discussed in the Note.

Depending on the facts applicable there may be additional considerations that need to be taken into account.

Many countries have introduced legislation creating a variety of hybrid entities that combine traditional features of

partnerships and companies. A number of countries have also enacted legislation creating new types of trusts.

These new business vehicles may present unique issues that are not specifically addressed in this Note.

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The place of effective management must be supported by the facts. Under section 102 of the Tax

Administration Act No. 28 of 2011 a company bears the onus of proving its place of effective management and

must, under section 29 of that Act, retain the necessary evidence to support the view taken.

General principle – the meaning of place of effective management

A company‘s place of effective management is the place where key management and commercial decisions that

are necessary for the conduct of its business as a whole are in substance made. This approach is consistent

with the OECD‘s commentary on the term ―place of effective management‖. The place of effective management

is used in paragraph 3 of Article 4 of the OECD‘s Model Tax Convention on Income and on Capital as a tie-

breaker when a person other than an individual is considered, before the application of the tie-breaker, to be a

resident of both the Contracting States which are parties to the tax treaty. The application of the tie-breaker

results in the person being deemed to be a resident only of the State where its place of effective management is

located.

A company may have more than one place of management but it can only have one place of effective

management at any one time. If a company‘s key management and commercial decisions affecting its business

as a whole are made at a single location, that location will be its place of effective management. However, if

those decisions are made at more than one location, the company‘s place of effective management will be the

location where those decisions are primarily or predominantly made.

Experience has shown that the application of these principles does not present serious problems in the majority

of cases. For example, it is relatively easy to determine a company‘s place of effective management if that

company operates in several countries through branches with local managers, but has its head office in South

Africa where most of its senior management are located and where most, if not all, of its board meetings take

place. In contrast, the determination in the case of a company that is part of a global group that operates on a

divisional as opposed to a separate legal entity basis with senior management teams that are responsible for

different aspects of the business being based in different locations, and whose senior management teams travel

frequently, would be more complicated. This complexity can be compounded when overlaid with modern

technology such as video- conferencing and electronic mail. Notwithstanding the potential levels of complexity,

the determination of the place of effective management still involves an application of the same core principles.

Key facts and circumstances

There are normally multiple facts that need to be taken into account, often involving multiple locations, and from

those facts and locations it is necessary to determine a single dominant place where effective management is

located. The determination looks at where the key management and commercial decisions are regularly and

predominantly made. It is not a snapshot requiring an assessment at a particular moment in time.

Although the determination of the place of effective management is not based on a snapshot at a particular

moment in time, when a company changes its place of effective management the change in residence occurs on

a particular date and is not in relation to a year of assessment.

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Relevant facts and circumstances

Definitive rules cannot be laid down in determining the place of effective management and all relevant facts and

circumstances must be examined on a case- by-case basis.

The place of effective management test is one of substance over form. It therefore requires the identification of

those persons in a company who actually ―call the shots‖ and exercise ―realistic positive management‖.

Otherwise stated, a company‘s place of effective management must be determined by ascertaining what are and

who makes the key management and commercial decisions for the conduct of the company‘s business as a

whole. Once this determination has been made, it is necessary to determine where those decisions are in

substance actually made.

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DEDUCTIONS, ALLOWANCES AND RECOUPMENTS

PARTICULAR DEDUCTIONS

( c) Legal expenses

(cA) Restraint of trade payments

(d) Repairs

(e) Wear and Tear

(f) Lease premium

(g) Leasehold improvements

(h) Present value of improvements

(i) Bad debts

(j) Doubtful debts

(l) Employer contributions to fund

(m) Annuity to former employees and partner

11A Pretrade expenses

Pre-trade expenditure and losses (start-up costs) (section 11A)

The section 11A deduction applies to all expenditure actually incurred which would have been allowed as a

deduction in terms of section 11 (other than section 11(x)) or section 11B, and 11D had the expenditure been

incurred after commencement of the carrying on of that trade.

The section 11A deduction is limited to the trade income prior to the deduction of section 11A (after deducting

any amounts deductible in that year of assessment in terms of any other provisions of this Act) and may therefore

not create a loss in respect of the relevant trade.

Furthermore the excess is ring-fenced and it may not be set-off against income from a different trade. The Act is

silent on whether or not the excess may be carried forward for possible deduction in a subsequent year of

assessment. It appears as if section 11A can again be applied in a subsequent year as the Act reads as follows:

―For purposes of determining the taxable income derived during any year of assessment by a person from

carrying on any trade…‖ It is considered that the excess can be carried forward to the subsequent year of

assessment for possible set-off against income from that trade.

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Legal expenses in respect of claims, disputes or actions at law

Certain legal expenses are deductible in terms of the general deduction formula, but s 11(c) provides for the

deduction of certain legal expenses which might not rank for deduction in this way. The legal expenses referred

to in s 11(c) are—

(a) fees for the services of legal practitioners;

(b) expenses incurred in procuring evidence or expert advice;

(c) court fees;

(d) witness fees and expenses;

(e) taxing fees;

(f) the fees and expenses of sheriffs or messengers of the court; and

(g) other expenses of litigation which are of an essentially similar nature to any of the fees and expenses

mentioned.

Any legal expenses of this nature actually incurred by the taxpayer during the year of assessment in respect of

any claim, dispute or action at law arising in the course of or by reason of the ordinary operations undertaken by

the taxpayer in the carrying on of his trade, are deductible. The amount of the deduction is limited, however, to so

much of the legal expenses as—

(a) is not of capital nature

(b) is not incurred in respect of any claim made against the taxpayer for the payment of damages or

compensation if, by reason of the nature of the claim or the circumstances, any payment which is or might be

made in satisfaction or settlement of the claim does not or would not rank for deduction under the general

deduction formula;

(c) is not incurred in respect of any claim made by the taxpayer for the payment to him of any amount which does

not or would not constitute income in his hands; and

(d) is not incurred in respect of any dispute or action at law relating to any claim referred to in (b) or (c) above.

The requirement of s 11(a), namely that an expense is deductible only if it has been incurred in the production of

income, does not apply to s 11(c). For the application of s 11(c) it is necessary that there exists a causal

connection between a taxpayer‘s trading operations and the claim, dispute or action in respect of which legal

expenses are incurred. This argument applies to all legal expenses covered by s 11(c).

The deduction of legal costs under s 11(c) is not limited to disputes or actions which come before the ordinary

courts. Therefore s 11(c) also applies to legal costs in respect of disputes or actions before statutory bodies such

as water courts, licensing courts and industrial conciliation councils. The section does not apply, however, to

proceedings before such bodies when no dispute exists. Legal costs incurred in this connection are deductible, if

at all, in terms of the general deduction formula.

It is important to note that legal expenses which are not deductible under s 11(c) can be deducted under the

general deduction formula where the requirements of ss 11(a) and 23(g) are satisfied. Similarly, s 11(c) does not

cover the actual payment of damages or compensation, which is deductible only under the general deduction

formula.

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Most problems in the interpretation of this section have arisen in relation to the requirement that the legal

expenses for which a deduction is sought must not be of a capital nature. The following cases are examples of

legal expenses which passed this hurdle and fulfilled the other requirements of the section:

(a) expenses incurred in defending the taxpayer, a registered accountant and auditor, against charges of fraud

and of contraventions of certain statutes arising from the insolvency of a company in which the taxpayer, as part

of his professional practice, held office as secretary, director and public officer;

(b) expenses incurred in connection with the termination of an agency agreement, where the taxpayer sold

products through agents and associated companies;

(c) expenses incurred in claiming damages arising out of alleged false advertising, including seeking an interdict

restraining those advertisements;

(d) expenses incurred in resisting an order to remove machinery from a piece of land, since the machine was

operating profitably and time was needed to find an alternative site;

(e) expenses incurred in opposing an interdict preventing the infringement of copyright by manufacturing and/or

selling certain products.

By way of contrast, legal expenditure incurred in respect of legal action aimed at securing an interdict preventing

manufacture and sale of a competing product, and thus eliminating the resulting competition, was held to be of a

capital nature.

Wear and tear allowance Section 11(e)

In terms of s 11(e) a deduction is allowed of such sum as the Commissioner may think just and reasonable as

representing the amount by which the value of any machinery, implements, utensils and articles used for

purposes of trade has been diminished by reason of wear and tear or depreciation during the year of

assessment.

The words ‗machinery, plant, implements, utensils or articles‘ are wide-ranging. Although the words refer only to

inanimate objects. The allowance may be claimed only if the asset is owned by the taxpayer or if ownership will

be acquired as purchaser under an instalment credit agreement. Furthermore, no allowance can be claimed by a

person who remains the owner of an asset which has been sold by him in terms of an instalment credit

agreement. These two restrictions prevent the claiming of allowances by both parties.

The deduction is subject to the certain qualifications, including, most relevant for this seminar are the following

in no case is an allowance made for the depreciation of buildings or other structures or works of a

permanent nature;

where any machinery, plant, implement, utensil or article qualifying for the wear and tear allowance

is mounted on or affixed to a concrete or other foundation or supporting structure, that structure is

not regarded for this purpose as a structure or work of a permanent nature, and is deemed to be a

part of the article mounted on or affixed to it. This applies only if the Commissioner is satisfied

that—

(i)the foundation or supporting structure is designed for the article concerned and constructed in such a manner

that it is, or should be regarded as being, integrated with that article;

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(ii)the useful life of the foundation or supporting structure is or will be limited to the useful life of the article

concerned

No allowance can be made in respect of depreciation of buildings or other structures or works of a permanent

nature. It would appear that the distinction between movable and immovable property is used as the basis for the

distinction between buildings or other structures or works of a permanent nature on the one hand, and

machinery, implements, utensils and articles on the other.

The provision requires that the assets concerned be used by the taxpayer for the purposes of his trade, not

wholly and exclusively for that purpose. As a result the practice is to calculate the allowance with reference to

the proportion of time for which an asset is used for the purposes of trade, if also used for some other purpose.

Small items, for example loose tools, which cost less than R7000 per item may be written off in full during the

year of acquisition. A small item is regarded as an item which normally functions in its own right and is not an

individual item that forms part of a set. Accordingly, a set cannot be divided into individual independent items,

each costing less than R7000.

Repairs Section 11(d)

The cost of repairs is deductible to the extent that it is expenditure actually incurred during the year of

assessment on—

(a) repairs to property occupied for the purpose of trade or in respect of which income is receivable (including any

expenditure so incurred on the treatment against attack by beetles of any timber forming part of such property);

and

(b) the repair of machinery, implements, utensils and other articles employed for purposes of trade.

It is not necessary that the taxpayer be the owner of the premises, or the machinery, implements, utensils or

articles concerned.

The prohibition on the deduction of expenditure of a capital nature contained in s 11(a) does not apply to the cost

of repairs claimed as a deduction under s 11(d). The cost of improvements or additions to property is not,

however, deductible under s 11(a), because such expenditure is of a capital nature. The meaning of the word

‗repairs‘ as used in s 11(d) is therefore of particular importance. The enquiry is usually whether an expense

relates to the repair of an asset as opposed to additions or improvements to the asset.

From the nature of things it is very difficult in a borderline case to determine whether an expense relates to one or

the other. It is not surprising, therefore, that in so many decisions it has been emphasised that in borderline cases

the question is one of degree.

Various cases have created some general principles as follows:

(1)Repair is restoration by renewal or replacement of subsidiary parts of the whole. Renewal as distinguished

from repair is reconstruction of the entirety, meaning by the entirety not necessarily the whole but substantially

the whole subject matter under discussion.

(2)In the case of repairs effected by renewal it is not necessary that the materials used should be identical with

the materials replaced.

(3)Repairs are to be distinguished from improvements. The test for this purpose is — has a new asset been

created resulting in an increase in the income-earning capacity or does the work undertaken merely represent the

cost of restoring the asset to a state in which it will continue to earn income as before?

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In view of the rather grey aspect of the distinction between repairs and improvements, there is a large body of

case law on this subject, which is not always consistent. However, the following may be regarded as general

principles in this connection:

(a)unless the structure or article on which repairs are deemed to have been done was damaged or had

deteriorated and replacement was required, no repair for the purposes of s 11(d) has taken place, and no further

inquiry need be made. Replacing something which is serviceable solely for aesthetic reasons, or in order to

improve the service provided, does not constitute a repair;

(b)in judging whether a renewal or repair has been carried out, regard must be had to the extent of the restoration

work in relation to the whole of which the portion restored forms a part. The greater the restoration work in

relation to that whole, the less likely it is that a repair has taken place;

(c)the fact that the materials used in making the repair are different and possibly better than the materials used

originally does not mean that a repair within the meaning of s 11(d) has not taken place but if better materials are

voluntarily used the work will not constitute a repair as the work will not constitute a ‗restatement‘ but a voluntary

improvement;

(d)the cost of an improvement as distinct from a repair does not rank for deduction, and an improvement may

have been made although work has only been carried out on a subsidiary part of the whole. Where, however, the

work constitutes a repair with elements of improvement, this does not disqualify identifiable elements of the work

as a repair, the costs of which are deductible in full (including any portion of these costs which may relate to the

improvement);

(e)work that results in an addition to the original structure will not constitute a repair;

(f)where a reconstruction is effected, the taxpayer is not entitled to make a claim in respect of the notional cost

that could have been incurred had repairs been carried out in place of a reconstruction.

The cost of repairs is deductible if incurred in respect of a property occupied for the purpose of trade or in respect

of which income is receivable. Expenditure on repairs incurred before the property concerned is occupied for

purposes of trade or before income is receivable is not, therefore, deductible under s 11(d).

Structured leases (section 11(f), (g) and (h))

A lease premium is a consideration paid by a lessee to a lessor that is over and above rental. It must be

distinguished from the amount paid to an existing tenant for the assignment of the lease rights to the payer. Any

lease premium paid by a tenant to a property-owner is tax deductible by the tenant over the period of the lease or

twenty-five years (whichever is shorter) in terms of section 11(f). Conversely, it is fully taxable in the hands of

the landlord in the year of receipt or accrual in terms of paragraph (g) of the definition of ‗gross income‘.

Any improvements effected to the leasehold property by the tenant of his own volition have no normal tax

implications for the property-owner. But improvements in terms of an obligation imposed on the tenant by the

lease agreement impact on both the landlord and the tenant provided the landlord is a tax-paying entity.

The tenant is entitled under the provision of section 11(g) to write-off the value of the obligatory improvements in

equal instalments over the period of the lease or twenty-five years, (whichever is the shorter period) commencing

in the year when the improvements are completed and used for trade purposes.

The property-owner is taxable on the value of the obligatory improvements in the year that the lease is concluded

in terms of paragraph (h) of the definition of ‗gross income‘. He should then qualify for the special allowance

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under section 11(h). This allowance has the effect of discounting the amount included in his gross income to the

present value of improvements at 6% over the period of the lease.

Bad Debts (section 11(i)

Section 11(i) permits the deduction from his income of the amount of any debts due to a taxpayer to the extent to

which they have during the year of assessment become bad, provided that the amount was included in the

taxpayer‘s income in either the current or some previous year of assessment.

As regards the requirement that the debts be due to the taxpayer, it is submitted that a debt must belong to him

on the last day of the year of assessment. Consequently, when, during the year of assessment, he sells his

business including all his debts, whether good, bad or doubtful, he cannot claim an allowance for bad debts.

On this principle, it must also follow that when a taxpayer compromises with one of his debtors during the year

and waives his right to claim portion of the debt owing by the debtor, the portion that he has waived his right to

recover cannot rank as a bad debt, since it does not belong to him at the end of the year of assessment. In

practice, however, the Commissioner permits a taxpayer to write off as a bad debt any loss sustained in the event

of a compromise.

It has been held that, in order to rank as a bad debt in a particular year of assessment, a debt must have become

irrecoverable for the first time during that year. Therefore debts proved to have been irrecoverable prior to the

year of assessment in which the deduction is claimed are not deductible. A taxpayer is therefore not entitled to

accumulate bad debts for the purpose of writing them off in a later year. This approach is confirmed by the

current wording of the deduction, which specifically refers to debts that have become bad during the year of

assessment, that is, the year in which they are claimed as a deduction. For example, if a debtor goes insolvent in

a particular year of assessment, the taxpayer cannot claim a deduction under s 11(i) for that debt in a later year

of assessment. If he has neglected to claim the deduction in the year in which the debtor went insolvent (or an

earlier year if the debt went bad before insolvency), his only remedy is to seek a revision of the assessment or a

refund of tax overpaid for the year in which the debt went bad.

It has been held that a taxpayer is entitled to claim the deduction of bad debts up to and as at the time when he

finally regards them as being bad, and if evidence can be adduced that he came to the conclusion that they were

bad and irrecoverable only in a particular year of assessment, their amount may properly be deductible in that

year. But is it is unlikely that it is the taxpayer‘s subjective assessment of the quality of a debt that is critical to its

deduction or time of deduction.

As regards the requirement that the amount of debts written off have been included in the taxpayer‘s income, the

debt must be in the nature of income before it may be allowed as a bad debt. A bad debt arising out of the sale of

goods is deductible since the amount of the debt will have been included in the seller‘s income. On the other

hand, a bad debt arising out of money lent, for example, to an employee, is not deductible in terms of s 11(i),

since the amount of the debt would never have been included in the lender‘s income.

On the purchase of a business, debts taken over and subsequently found to be bad are not allowable, since the

amounts of these debts would never have been included in the income of the buyer of the business. The loss is

clearly one of a capital nature. The same principle applies to an inherited business. The heir is not entitled to

deduct any bad debts outstanding at the date of death of the deceased. When a taxpayer carrying on business

on his own account admits a partner, the partner is not entitled to deduct his share of the bad debts written off

relating to debts incurred prior to the commencement of the partnership. The original owner is, however, entitled

to such a deduction.

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It is not uncommon for the seller of a business who has included in the sale debts due to him to guarantee

payment of those debts to the buyer in the event of their proving to be irrecoverable. It has been held that the

seller cannot deduct an amount subsequently payable under his guarantee, since it is a capital loss. The

agreement usually provides that if the seller is compelled to make any payment to the buyer under his guarantee

for irrecoverable debts, he is entitled to re-cession of the debts. If these debts are re-ceded to the seller, it is

submitted that they are deductible, since they now belong to him and were previously included in his income and

therefore comply with s 11(i).

Section 11(i) does not prevent a finance company or a money-lender from writing off any moneys lent that prove

to be bad. Such losses are deductible in terms of s 11(a) as losses incurred in the production of income and not

of a capital nature. Similarly, when it is satisfactorily established that it is the custom of a business or profession

to make advances to customers or clients as an integral part of the business carried on for the purpose of

securing or retaining business, losses arising from these advances, if the advances are found to be irrecoverable,

are allowable deductions in terms of s 11(a).

Section 11(i) does not require as a prerequisite to the deduction of bad debts the continued existence of the

taxpayer‘s business out of which the debts arose. Therefore a taxpayer is allowed to deduct from his income from

trade in a particular year any bad debts incurred in a previous business, provided that all the other requirements

of s 11(i) are satisfied. In practice SARS also permits a taxpayer to deduct his cost of collecting such debts.

If amounts allowed as bad debts are subsequently recovered, they form part of the gross income in the year of

receipt, and previous assessments cannot be reopened. Section 8(4)(a) is also authority for the inclusion of these

amounts in the income of the taxpayer in the year in which they are recovered.

In practice it may happen that a debt is secured by a pledge of an asset of the debtor. If, upon realization of the

security, the amount received by the creditor is less than the amount owing to him by the debtor, the

irrecoverable portion is deductible in terms of s 11(i) as long as the other requirements of the deduction are

satisfied. If the creditor himself buys the property for an amount that is insufficient to discharge the amount owing

by the debtor, the balance irrecoverable is deductible in terms of s 11(i), and the Commissioner cannot claim that

the creditor must first realize the property. If the creditor acquired the property by public auction, the price paid

must be regarded as its fair market value, and his loss is to be measured in terms of this value.

The question whether a debt is bad or not must be decided at the time when the bad debt is claimed and

according to the then existing circumstances of the debtor; subsequent events cannot influence the determination

made for that year of assessment. In practice the taxpayer is permitted to make his determination at the time

when his financial statements are prepared and not necessarily on the last day of his year of assessment.

The Commissioner may be entitled to refuse the allowance when the amount of a debt is recoverable from some

other person under a guarantee or suretyship agreement, since s 23(c) prohibits as a deduction any loss that

would otherwise be allowable to the extent to which it is recoverable under a contract of insurance, guarantee,

security or indemnity.

Doubtful Debts section 11(j)

Section 11( j) authorizes the Commissioner to make an allowance each year for so much of any debts due to the

taxpayer that he considers to be doubtful, but only if those debts would have been allowed as a deduction under

any other provision of Part I of Chapter II had they become bad. The amount of the allowance granted must be

included in the taxpayer‘s income in the following year of assessment.

The taxpayer is required to render a detailed list of all doubtful debts.

26

The question whether a debt is doubtful must be decided at the time when the debt is returned as doubtful and

according to the then existing circumstances of the debtor; subsequent events cannot influence the determination

made for that year of assessment. In practice the taxpayer is permitted to make his determination at the time

when his financial statements are prepared and not necessarily on the last day of his year of assessment.

The Commissioner will grant an allowance only for debts belonging to the taxpayer on the last day of the year of

assessment. He will not grant the allowance on the amount of any debts that have not been included in the

taxpayer‘s income, either in the current year of assessment or in any previous year of assessment, although,

unlike s 11(i), s 11(j) does not restrict the allowance to debts the amounts of which were included in the

taxpayer‘s income.

In practice SARS makes an exception with professional money-lenders, and allows them to deduct an allowance

for doubtful debts under s 11(j), despite the fact that no amount will have previously been included in their income

on account of their loans.

Contributions by employers to funds (section 11(l)

In terms of section 11(l) employers may deduct contributions to a pension, provident or benefit fund, in an

amount at least equal to 10 per cent of the ―approved remuneration‖ of covered employees. In addition,

SARS has the discretion to allow a greater percentage, and in practice, a 20 per cent threshold is accepted

without specific SARS permission.

Unlike other 'in kind' (fringe) benefits, employer contributions to pension and provident funds for the benefit of their

employees have not been subject to employees‘‘ tax (PAYE) and did not form part of the taxable income of

employees.

WEF 1 March 2016

With effect from 1 March 2016 employer contributions to all approved retirement funds will be deductible

against income of the employer. The deduction will effectively be unlimited

Annuities paid to former employees or partners and their dependants

Section 11(m) permits a taxpayer to deduct from his income a reasonable amount paid by way of an annuity

during the year of assessment to a qualifying recipient. Qualifying recipients for this purpose are listed below:

• A former employee who has retired from his employ on the ground of old age, ill health or infirmity

• A person who was for a period of at least five years a partner in an undertaking carried on by the

taxpayer who retired from the partnership ‗in respect of‘ the undertaking on grounds of old age, ill health

or infirmity, provided that the amount paid is reasonable if one has regard to the services rendered by

the person concerned as a partner in the undertaking prior to his retirement and to the profits made in

the undertaking, and provided that the amount paid does not represent a consideration payable to him

for his interest in the partnership.

• A person who is dependent for his maintenance upon a former employee or former partner in an

undertaking carried on by the taxpayer or, should the former employee or partner be deceased, was so

dependent upon the former employee or partner immediately prior to his death, for example, a widow of

a former employee or partner.

The words ‗amount paid by way of annuity‘ clearly rule out voluntary pensions terminable at the will of the payer

or lump-sum gratuities. Such payments made to former employees or partners on retirement or to their

dependants are not deductible in terms of s 11(m). The taxpayer must bind himself to pay an annuity.

27

CAPITAL ALLOWANCES

The allowances granted in terms of the Income Tax Act in terms of buildings are dependent on the nature of the

building, how it is acquired and the use to which it is put.

The Act does not allow any deductions in respect of the cost of land.

Tax allowances in respect of owned buildings

Manufacturing buildings s 13

Hotel buildings - s13bis

Residential housing projects s 13ter

Urban development zones s 13quat

Commercial buildings - s 13quin

Repairs to building - s 11(d)

Section 12C

Manufacturing plant and Machinery

New and unused: 40/20/20/20

Used: 20/20/20/20/20

Section 13

Manufacturing buildings: 5%

Section 13quin

Commercial Buildings and improvements (new and unused): 5%

Section 13sex

Residential accommodation: 5%

―Low cost‖ residential accommodation 10%

28

Leased land and buildings

The following sections of the Act apply to leased land and/or buildings:

Rental costs s 11(a)

Lease premiums s 11(f)

Leasehold improvements s11(g)

Repairs s 11(d)

Assessed losses section 20

Section 20 applies for the purpose of the determination of the taxable income derived by a person from carrying

on a trade, and allows to be set off against the income derived by him from carrying on such a trade:

• A balance of assessed loss incurred by him in any previous year that has been carried forward from the

preceding year of assessment.

• An assessed loss incurred by him during the same year of assessment in carrying on any other trade

either alone or in partnership with others, otherwise than as a member of a company whose capital is

divided into shares.

Section 20 envisages a continuity in the setting-off of an assessed loss against income in every year succeeding

the year in which it was originally incurred, so that in each succeeding year a balance of assessed loss can be

determined, which can be carried forward until the assessed loss is exhausted.

An ‗assessed loss‘ means any amount by which the deductions admissible under s 11 inclusive, exceeds the

income in respect of which they are so admissible.

The set-off is against income derived by the taxpayer. In practice this fact is recognized by SARS with the result

that as long as there is continuity in trading all assessed losses are brought forward for set-off against income.

Taxpayers must be aware of the anti-avoidance provisions contained in section 103(2) dealing specifically with

tax avoidance due to the use of an assessed loss.

29

RECOUPMENTS

Section 8(4)(a)- general recoupment provision:

Recoupment= Proceeds – Tax value.

Tax Value = Cost – Tax Allowances claimed

The recoupment to be included in gross income is limited to allowances claimed on the asset.

Example

A second hand machine acquired in year 1 for R100 000 is sold in year 3 for R140 000.

Allowances are claimed at 20% per annum in terms of s12C.

Sum of allowances (100 000 x 20% x 3) 60 000

Tax value (100 000 – 60 000) 40 000

Recoupment (140 000 – 40 000) = 100 000 (limited to 60 000) 60 000

Taxable Capital Gains {([140 000 – 60 000*] – [100 000 – 60 000*]) x 66.6%} 26 640

The Income Tax Consequences

Year 1

S12C Allowance (100 000 x 20%) (20 000)

Year 2

s12C Allowance (100 000 x 20%) (20 000)

Year 3

s12C Allowance (100 000 x 20%) (20 000)

Recoupment 60 000

Taxable Capital Gain 20 000

* Proceeds for CGT purposes cannot include amounts (the recoupment) already included in income

** Base Cost for CGT purposes cannot include expenses already deducted against income

Rollover provisions may apply in respect of the involuntary disposal of assets and replacement of certain

depreciable assets in terms of para 65 and 66 of the Eighth Schedule.

30

Section 8(5) Recoupments — acquisition of hired assets

Section 8(5)(a) comes into operation when

• an amount has been paid by a person for the right of use or occupation of any movable or immovable

property, for example, by way of rent or a premium as envisaged by s 11(f);

• that amount has been allowed as a deduction in the determination of that person‘s taxable income; and

• it or its equivalent is upon the subsequent acquisition of the property by that or any other person

applied in reduction or towards settlement of the purchase price of the property.

The amount must then be included in the income of the person who acquires the property for the year of

assessment during which he exercised his option to acquire it or for the year of assessment during which he

concluded the agreement to acquire it.

The operation of s 8(5)(a) is suspended by a proviso, which ensures that this provision does not apply when, in

consequence of the acquisition of property to which s 8(5)(a) refers, the person who acquires it or any other

person has derived a taxable benefit and the cash equivalent of that taxable benefit has been included in his

gross income in terms of para (i) (fringe benefits) of the definition of the term ‗gross income‘ in s 1. The ‗taxable

benefit‘ referred to is defined in para 1 of the Seventh Schedule, and the situation envisaged is that in which such

a benefit is deemed to be granted by an employer to his employee in the form of an asset acquired by the

employee either for no consideration or for a consideration less than its determined value and the cash

equivalent of the value of the taxable benefit thus arising is fixed by para 5 of that Schedule. The purpose of this

proviso clearly seems to be to prevent the same acquisition of the same asset from generating both a taxable

recoupment and a taxable fringe benefit.

But these alternative inclusions in gross income need not necessarily be equal in amount, since they are

determined under entirely different rules.

But, in the absence of circumstances bringing this proviso into play, if X, the lessor, agrees to sell the hired

property to Y, the lessee, or to any other person at an agreed price less whatever amount has been paid by way

of rent by Y, say R3 000, Y or whoever else has acquired the property is liable to tax on the amount of the rent

previously allowed as a deduction to Y, namely, R3 000.

SARS will also apply this provision when a lessee of premises undertakes improvements at a certain cost, being

given an option to purchase the premises during the currency of the lease at a price that must be reduced by the

cost to the lessee of the improvements undertaken. To the extent to which the cost of the improvements has

been allowed as a deduction to the lessee in terms of s 11(g) (leasehold improvements), it must be included in

his income in the year of assessment during which he exercised the option to purchase.

It may happen that there is no reduction in the purchase price by the amount of rental paid by the lessee but the

property is acquired by the lessee or some other person for a consideration that in the opinion of the

Commissioner is not an adequate consideration or for no consideration. In such a situation the fair market value

of the property as determined by the Commissioner less the amount of the consideration, if any, not exceeding

the amount paid for the right of use or occupation of the property, must be deemed to have been applied in

reduction or towards settlement of the purchase price of the property and is taxable, unless the Commissioner,

having regard to the circumstances, otherwise decides (s 8(5)(b).

31

Example

If A, the lessor, has given B, the lessee, an option to acquire property at any time during the currency of the lease

at a price of R10 000 and B exercises the option at a time when the market value is R15 000, B may be subject

to tax in the year in which he exercises the option on the difference between R15 000 and R10 000, that is, on R5

000, or the aggregate amount he has paid for the right of use or occupation and allowed to him as a deduction in

previous years, whichever is the lesser.

For example, if R3 000 has been allowed to him by way of deductions, only R3 000 is taxable. If R8 000 has

been allowed to him, R5 000 is taxable. If B has ceded all his rights under the lease to C, who exercises the

option, it is C who may be subject to tax on the recoupment in terms of s 8(5)(a) even though C enjoyed no

deductions from his taxable income in respect of prior rentals paid.

A lessee is deemed to have acquired the property for no consideration for the purposes of s 8(5)(b) in certain

circumstances (s 8(5)(bA). This deeming provision applies if after the termination of a lease ‗by the effluxion of

time or otherwise‘ the person who was the lessee under the lease (referred to as the ‗former lessee‘) is, with the

express or implied consent or acquiescence of the person who was the lessor under the lease (referred to as the

‗former lessor‘) or of the owner of the property, allowed to use, enjoy or deal with the property as he (the former

lessee) may deem fit

• without the payment of any consideration; or

• for a lease entered into on or after 1 September 1983, without the payment of any rental or other

consideration or subject to the payment of a consideration that is nominal in relation to the fair market

value of the property.

Section 8(5)(bA) applies only to a lease of property consisting of corporeal movable goods or of machinery or

plant on which the former lessor was entitled to any allowance under the Act. Since there is no express

requirement that the machinery or plant be movable, the provision would presumably apply also to machinery or

plant that is or has become immovable, perhaps through annexure to the building in which it is housed, provided

that it qualified for any allowance under the Act.

In terms of s 8(5)(bA) the former lessee is deemed to have acquired the property for no consideration for the

purposes of s 8(5)(b). If the property was owned by the former lessor, its fair market value will, unless and until it

is otherwise determined to the satisfaction of the Commissioner, be deemed to be

• the cost to the former lessor of the property; or

• when the lease was a ‗financial lease‘ as defined in s 1 of the Sales Tax Act 103 of 1978, the ‗cash

value‘ of the property ‗contemplated in‘ para 2 of Schedule 4 to the Sales Tax Act

less a depreciation allowance calculated in accordance with s 8(5)(bB)(i) for the period from the commencement

to the termination of the lease.

Section 8(5)(bB)(i) requires the depreciation allowance to be calculated at the rate of 20% a year on the

‗reducing-balance‘ method. More specifically, it provides that the depreciation allowance be calculated as an

aggregate of annual allowances for the years in the period for which it may be made.

For the first year in that period it is calculated at the rate of 20% of the cost or cash value of the property, and for

each succeeding year in that period it is calculated at the rate of 20% on the balance of the cost or cash value

remaining after the deduction of the allowance or allowances calculated for the preceding year or years.

32

It should be observed that this basis of determination of the fair market value of the property applies only if the

property was owned by the former lessor. Provision is not expressly made in this connection for the situation

contemplated elsewhere in s 8(5)(bA) in which there is an owner other than the former lessor, for example, when

there is a sublease. In this situation the fair market value would presumably have to be determined by the

Commissioner under s 8(5)(b).

A consideration payable for the property after the termination of the lease is deemed to be nominal in relation to

the fair market value of the property for the purposes of s 8(5)(bA) if, in relation to the period for which it is

payable, it amounts to less than 10% a year of the fair market value (s 8(5)(bB)(iii)).

For example, if after the termination of the lease the former lessee is permitted to continue to use property that

has a fair market value of R2 000 for a consideration of less than R200 a year, the consideration will be nominal

and the former lessee will be deemed to have acquired the property for the purposes of s 8(5)(b) for no

consideration. He will be liable to tax on a recoupment of R2 000 (or, if less, the amounts previously paid for the

right of use of the property that have been deducted). He will be able to claim a deduction of the current rentals

under s 11(a).

The former lessor or the owner of the property will, unless and until the contrary is proved, be deemed to have

consented to the former lessee‘s using, enjoying or dealing with the property for the purposes of s 8(5)(bA) if, at

the end of a period of three months reckoned after the date on which the lease terminated, the former lessor has

not instituted proceedings to compel the former lessee to return the property to him, to relinquish possession of it

or to dispose of it in accordance with the terms of the lease. For a lease that terminated on or before 31

December 1983, the period of three months is reckoned from that date. (Section 8(5)(bB)(ii).

In certain circumstances a lease is deemed to have terminated: It is deemed to have terminated when the former

lessee is, after the termination of a lease referred to in s 8(5)(bA), required to pay a consideration in respect of

his right to use, enjoy or deal with the property but ceases to pay that consideration, or, if the lease was a ‗rent-

free‘ or ‗nominal-rent‘ lease entered into on or after 1 September 1983, he pays a consideration for the right that

is ‗nominal‘ (see above) in relation to the fair market value of the property. The lease is deemed to have been

terminated on the date from which the former lessee is no longer required to pay the consideration or, for such a

lease entered into on or after 1 September 1983, from the date on which the consideration payable by the lessee

becomes nominal. (Section 8(5)(bB)(iv)

It is submitted that no recoupment can arise under s 8(5) of any portion of an allowance or advance paid towards

an employee‘s transport expenses not included in a taxpayer‘s taxable income by virtue of s 8(1)(a) and (b)

should the vehicle used by the employee be first hired and then acquired, since s 8(5) applies to past deductions

determining taxable income, while s 8(1)(a) and (b) merely measure inclusions in taxable income. Any effective

reduction of such inclusions they might achieve cannot be equated with deductions from taxable income.

33

Section 23A Section 23D

Limitation of allowances granted to lessors

Limitation of allowances granted to lessors in sale and leaseback arrangements or a

licenser who licenses a depreciable asset back to the person who disposed of it to

him/her (now the licensee).

Applicable to Lessors of affected assets Lessors (in sale and leaseback arran- gements) or licenser of depreciable assets.

Limitation Sections 11(e), 11(o) & 12C allowances claimed by lessor in respect of affected assets that are let, are limited to taxable rental income.

Disallowed portion carried forward to sub- sequent year.

Any deductions or allowances claimed by the lessor or licenser will be calculated on the purchase price of the depreciable asset, but always limited to

the cost to the lessee or licensee

less

all deductions allowed to the lessee or

licensee

plus

any recoupment on the sale by the lessee or

licensee

plus

the taxable capital gain included in the

taxable income of the lessee or licensee.

Definitions Affected asset

Any machinery, plant, implement, uten- sil, article or aircraft

which has been let

Lessor entitled to an allowance under section 11(e), 12C or 37B(2)(a) (allow- ance on environmental treatment and recycling assets – 40%/20%/20%/20%)

But excluding

assets leased out under an operating lease (see definition below)

assets used by the lessor mainly in a trade other than leasing (i.e. incidental letting)

Operating lease means a lease of movable property where the

asset may be hired by general public directly

from lessor for < 1 month

maintenance cost is borne by the lessor

risk of loss or destruction remains with the lessor

Depreciable asset (section 1)

An asset as defined in the Eighth Schedule (property of whatever nature, excluding currency, and a right or interest in any property) that qualifies for a deduction or allow- ance that is in whole or partially based on its cost or value,

but excluding trading stock or any debt.

34

Rental income means income

derived by way of rent

from the letting of movable property, plant and machinery in respect of which a section 11(e) or 12C allowance is or has been granted to the lessor

(NB - the income from the letting of fixed property is excluded, as the asset will not qualify

for an allowance.)

Apportionme

nt

Apportion any deduction if it relates to both rental income and other income in the calculation of taxable rental income.

Only the portion in respect of rental in- come is deductible in determining the taxable rental income.

35

LOANS ANTI-HYBRID DEBT INSTRUMENT RE-CHARACTERISATION RULES

Sections 8F and 8FA

In the area of corporate financing, there are three basic sources of finance:

equity,

debt and

retained profits.

For commercial purposes, debt and equity are the key sources of external finance. As a general matter, debt is

redeemable with a yield based on the time value-of-money (e.g. interest), and payment obligations exist without

regard to the performance of the debtor company (i.e. payments are required without regard to profits or cash

available). On the other hand, equity is typically non-redeemable with the yield (i.e. dividends) depending on the

performance of the company (i.e. profits), and payment obligations are discretionary or can be deferred without

giving rise to legal claims.

For tax purposes, interest on debt is generally deductible in the hands of the payor (e.g. if incurred in the

production of income) and included as ordinary revenue in the hands of the recipient. On the other hand,

dividends are not deductible by the payor nor are they includible in the hands of the shareholder. However,

dividends may be subject to the Dividends Tax.

In order to reduce the scope for the creation of equity that is artificially disguised as debt, a two-fold regime is

proposed for domestic company issuers:

Section 8F: This provision focuses on features relating to the nature of the instrument itself (i.e. the

corpus);

Section 8FA: This provision focuses on the nature of the yield.

In making these rules, it is understood that the features distinguishing debt from equity are varied and are often

contextual. Nonetheless, the provisions take aim at companies that issue stated debt instruments so as to

artificially generate interest deductions if clear-cut equity features exist when viewed in isolation.

36

Section 8F: Instrument focused re-characterisation

Features

The re-characterisation rules target certain mechanisms commonly used to avoid required redemption. These

anti-avoidance rules take into account not only the instrument itself, but side arrangements as well

Conditions to be considered are:

1. conditions allowing the company in a particular year of assessment to repay the debt in the form of

shares whose market value is less than the outstanding amount of debt. (Repayment must generally

come in the form of cash or shares equal to the value of the outstanding debt).

2. the obligation to repay any amount owing in respect of the debt instrument is conditional upon the

market value of the assets of the company not being less than the market value of the liabilities of the

company.

3. the company owes the amount to a connected person in relation to that company and is not obliged to

redeem the instrument within 30 years, where the instrument is not payabe on demand.

A key feature of debt is the holder‘s ability to redeem the capital amount loaned within a reasonable

period. Instruments without this key feature operate more like equity (i.e. shares), and the yield on

these instruments will accordingly be treated as equity yields (i.e. dividends in specie). This is

particularly an issue between related parties who are indifferent to the redemption of their

capitalisations into companies that form part of the same economic unit. In order to avoid the re-

characterisation, the debt instrument (i.e. the corpus) must be fully redeemable within 30 years from

the date of issue (taking into account the terms of the instrument itself or any side arrangement).

However, this treatment will not apply to financial instruments payable on demand.

The test for whether a debt is commercially real or artificial must be tested continuously, not merely from the date

of issue or modification. If the conditions of the debt change, the debt becomes subject to the avoidance rules at

the time of the change (and not before)

Impact of re-characterisation

Debt instruments falling under the reclassification rules will remain within the debt paradigm. Only the

interest in relation to the instrument will be treated as a dividend in specie in the hands of the payor as well as the

payee for the period during which the debt instrument constitutes a hybrid debt instrument. As a result, the payor

will be denied the deduction for the stated interest. The stated interest will be treated as a dividend in specie

(potentially subject to the Dividends Tax depending on circumstances), and the interest incurral rules (e.g.

section 24J) will no longer be relevant to the existence of the instrument.

37

Section 8FA Yield focused re-characterisation

In some circumstances, the debt/equity re-characterisation will focus on the yield of the instrument without

looking to the whole. Under these rules, the re-characterisation will similarly deem the particular yield at issue to

be a dividend in specie in the hands of both the payor and the payee without converting the instrument as a

whole (or even without converting other yields that lack equity features). In order to breach this standard, the

yield at issue (taking into account all agreements) must have one of the following features:

1. The yield must not be determined with reference to time-value-of-money principles or a specified

rate of interest (e.g. instead being based on company profits); or

2. The interest rate is raised with reference to the increment in the profits of the issuer.

As a result, the payor will no longer obtain any deduction for the stated interest. So much of the interest as is

dependent on the increase in the profits of the issuer will be treated as a dividend in specie (potentially subject to

the Dividends Tax depending on circumstances), and the interest incurral rules (e.g. section 24J) will no longer

be relevant to the existence of the instrument. The instrument itself will retain its debt characterisation and other

payments will have to be tested separately for debt/equity recharacterisation.

Exemptions from reclassification

The anti-hybrid rules will be subject to certain exemptions as a matter of policy. In particular, exemptions will exist

for small business companies as well as certain regulated debt issued by banks and insurers.

Relief for small businesses

Small business companies (see section 12E) will not be subject to the hybrid recharacterisation rules. In most

cases, the differences between debt and equity have little overall impact on the fiscus.

Relief for regulated bank capital

Banks often issue various forms of capital, including Tier I (straight equity) and Tier II (debt with equity features)

capital. Increased pressure is being placed on the banks to increase these forms of capital via the international

banking Basel standards. While it is understood that certain forms of Tier II capital will probably be in violation of

the hybrid recharacterisation rules, these rules will be waived for Tier I and Tier II capital issued by banks and

controlling companies in relation to those banks so as not to place further pressure on the cost of banking capital

given the global regulatory uncertainties in this regard. It is also understood that tax systems of other countries

similarly exempt these forms of debt from potential recharacterisation on similar policy grounds.

Relief for regulated insurer capital

Short-term and long-term insurers are required to maintain a sound financial condition by maintaining adequate

levels of assets to cover their regulated liability and capital requirements. As a safeguard mechanism, the

redemption of certain classes of debt instruments issued by short-term and long-term insurers are subject to

approval by the Registrar of short term and long term insurance (respectively). These forms of debt operate

roughly similar to Tier I and Tier II debt and will accordingly be exempt from the hybrid debt reclassification rules.

38

Linked units held by Pension Funds, Provident Funds, REITs, Long-Term Insurers and Long Term Insurers

It is also understood that there are certain companies partly owned by pension funds, provident funds, REITs,

Short-term insurers and Long-term insurers (―Insurers‖) that issue linked units (constituting of a share and a

debenture) to these funds. Profits distributed by these subsidiaries often have a dividend element (for example, 1

per cent as a dividend and 99 per cent as interest). Interest payments in respect of these linked units (the

debenture part) will therefore be potentially reclassified in these rules. As a consequence, the subsidiary will not

be able to claim a deduction in respect of the yield paid to the funds in respect of these instruments.

Interest paid in respect of the linked units held by a pension fund, provident fund, REIT or Insurers will be

excluded from the application of the reclassification rules. However, this exclusion will only apply if the fund

acquired the shares before 01 January 2013 and the instrument was also issued before that date.

Effective date

The proposed hybrid instrument re-characterisation rules will come into effective in the case of amounts incurred

or accrued on or after 1 April 2014.

39

DISCOUNTED LOANS OR ADVANCES (SECTION 64E(4))

Where during any year of assessment any amount is owing to a company by

A person that is

o not a company,

o a resident; and

o a connected person in relation to that company (or a connected person to a connected person

in relation to the company)

in respect of that debt, the company must be deemed to have paid an in specie dividend, if the debt arose by

virtue of any share held in the company by the persons listed above and the company has not charged a

sufficient amount of interest on the debt.

Deemed dividend in specie

The amount of the in specie dividend that is deemed to have arisen from the loan or advance will be equal to the

market-related amount of interest in respect of the loan or advance less the amount of interest that is actually

paid. The market-related interest rule is similar to the rules for an interest-free or discounted loans contained in

the Seventh Schedule, and the ―official rate‖ of interest is used. Moreover, even with regard to the proposed

deeming rules, a dividend could still be deemed to occur under the general facts-and-circumstances analysis if a

borrower has no intention to repay the capital amount borrowed.

The official rate

With effect from 1 August 2012 the official rate of interest was 6%, from 1 February 2014 6.5%, from 1 August

2014 6.75%, from 1 October 2015 7%, from 1 December 2015 7.25%, from 1 February 2016 7.75%, from 1 April

2016 8%.

Example

Facts: A Trust owns 100 percent of the equity shares in Company X. Company X provides a loan of R 100 000 to

A trust at an interest rate of 4 percent. Assume the corresponding current ―official interest rate‟ at the time of the

loan as fixed by the Minister is 6 percent.

Result: A Trust intends to repay the loan over a period of 5 years. The amount to be treated as a dividend will be

equal to R 2 000. [R 100 000 (6 percent - 4 percent) = R 6 000 – R 4 000]. However if, based on the facts and

circumstances, A Trust does not have any intention to repay the loan, the loan capital can be treated as a

dividend upfront (that is, when the R 100 000 is made available to A Trust).

Payment date

The dividend in specie is deemed to have been paid by the company on the last day of the year of assessment of

the company, and as such the dividend tax that the company is liable for must be paid over to SARS by the end

of the month following the end of the company‘s year of assessment.

STC

If the debt in question, or part of it, has already been deemed a dividend and subject to the pre-1 April 2012

secondary tax on companies (STC) then section 64E(4) will not apply to that debt or part of the debt.

40

VENTURE CAPITAL INVESTMENTS SECTION 12J

The small- and medium-sized business sector in South Africa has traditionally experienced difficulty in accessing

venture finance, which is an integral component for formation and growth. This is partly due to a lack of expertise

in locating potential investors, and partly because the business risks in this sector of the economy have tended to

discourage investors. In addition to these impediments, expenditure incurred in the acquisition of shares in a

company, in terms of general principles, is not deductible by the purchaser (unless the latter is a sharedealer,

that is, a taxpayer using shares as its trading stock, buying and selling shares with the purpose of earning profits

in a profit-making scheme, in which event the expenditure is deductible under s 11(a)). Nor, of course, is the

company issuing the shares taxable on receipt of the moneys as a contribution to its share capital, in

consideration for the share issue.

In order to assist small- and medium-sized companies, including junior mining companies, in gaining access to

capital, s 12J establishes an incentive for such investment. The incentive is available to taxpayers who invest in

approved venture capital companies that will, in turn, provide finance to small and medium companies.

A ‗venture capital company‘ is defined essentially as a company that has been approved by the Commissioner

and in respect of which such approval has not been withdrawn (definition of ‗venture capital company‘ in s

12J(1)).

The tax incentive takes the form of a deduction (subject to certain anti-avoidance provisions) of the amount

invested, in other words, the expenditure actually incurred, in acquiring shares in the venture capital company

(s 12J(2)).

The venture capital company must be approved by the Commissioner as such after application by the taxpayer

and, once approved, it is required to channel its investment capital into shares into qualifying companies, as

defined (s 24J(5) read with the definition of ‗qualifying company‘ in s 24J(1)).

Meaning of qualifying shares

With effect from 1 January 2012 and in respect of years of assessment commencing on or after that date, a

‗qualifying share‘ is defined as follows:

A qualifying share (see s 12J(1) means an equity share held by a venture capital company which is issued to that

company by a qualifying company (or, presumably, by more than one qualifying company) but does not include

• any share which that venture capital company has an option to dispose of or the qualifying company has an

obligation to redeem for an amount other than the market value of the share at the time of disposal or

redemption; or

• that would have constituted a hybrid equity instrument (as defined in s 8E(1) but for the three-year period

requirement in that definition (s 12J(1)).

Venture capital share — definition

As with a ‗qualifying share‘, a ‗venture capital share‘ is accorded two definitions, operative for two different

periods.

41

With effect from 1 January 2012 and as from years of assessment commencing on or after that date, a venture

capital share means an equity share held by a taxpayer in a venture capital company which is issued to that

taxpayer by a venture capital company and does not include a share which

• the taxpayer has an option to dispose or, or the venture capital company has an obligation to redeem, for an

amount other than the market value of the share at the time of that disposal or redemption; or

• would have constituted a hybrid equity instrument but for the three-year period required in para (b) of that

definition.

With effect from 1 October 2012, a ‗venture capital share‘ means an equity share held by a taxpayer in a venture

capital company which is issued to that taxpayer by a venture capital company and does not include a share

which

• would have constituted a hybrid equity instrument (as defined in s 8E(1) but for the three-year period

required in para (b) of that definition;

• constitutes a third-party backed share (as defined in s 8EA(1)).

Anti-avoidance provisions

The deductibility of expenditure incurred by a taxpayer in acquiring shares in a venture capital company is subject

to anti-avoidance provisions.

Firstly, where the taxpayer has used any loan or credit to finance such expenditure, in whole or in part, the

amount of the deduction is limited to the amount for which the taxpayer is deemed to be at risk on the last day of

the year of assessment (s 12J(3)(a)). A taxpayer is deemed to be so at risk to the extent that (having regard to

any transaction, agreement, arrangement, understanding or scheme in this regard) the incurral of expenditure or

the repayment of the loan or credit would result in economic loss to the taxpayer were no income to be derived by

the taxpayer in future years from the disposal of any venture capital share issued to him as a result of that

expenditure (s 12J(3)(b)). This deeming provision is subject to provisos which deem a taxpayer not to be at risk if

the loan or credit is not repayable within five years or if such loan or credit is granted to the taxpayer by the

venture capital company itself (provisos to s 12J(3)(b)).

If, during any year of assessment, a taxpayer incurs expenditure in acquiring any venture capital share issued to

that taxpayer by a venture capital company and, as a result of or immediately after such acquisition, that taxpayer

is a connected person in relation to that venture capital company, no deduction is allowed in respect of such

expenditure (s 12J(3A)).

Modus operandi of an approved venture capital company

In general, an approved venture capital company would open a fund (that is to say, a pool of money provided by

persons who subscribe for its shares) which is then invested in other companies, referred to as ‗qualifying

companies‘. Typically, it would invest its entire fund in a spread of qualifying companies within a chosen profile in

the expectation of liquidating all of its investments in a given period, in other words, within the usual time frame

that a successful business will experience substantial growth, and hence an escalation in the value of its shares.

It may take a measure of control over a qualifying company by appointing persons to the board of directors, or by

contractual arrangements in which large transactions will need the venture capital company‘s approval. But in

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many instances, a venture capital company offers expertise by way of advice, or business contacts, as well as

just money.

The general intention is that an approved venture capital company cannot itself carry on an active business, save

as advisers to the companies in which it invests, and that its sole object will be the management of investments in

qualifying companies (s 12J(5)(b)). This notwithstanding, a venture capital company is permitted to engage in

other activities ancillary to its sole purpose, such as leasing office space, investing in short-term debt instruments

or preference shares with its temporarily liquid capital.

Criteria for approval as a venture capital company

The Commissioner is obliged to approve a venture capital company if it has applied for approval and he is

satisfied that

• the company is a resident;

• the sole object of the company is the management of investments in qualifying companies. (Note, however,

that a venture capital company may engage in other activities ancillary to its sole object, such as the leasing

of excess office space or investing in short-term debt instruments or preference shares with temporarily

liquid capital);

• the tax affairs of the company are in good order and the company has complied with all the relevant

provisions of the laws administered by the Commissioner;

• the company is licensed in terms of s 7 of the Financial Advisory and Intermediary Services Act 37 of 2002.

Withdrawal VCC status

If the Commissioner is satisfied that a company that was approved, has during a year of assessment failed to

comply with the provisions, the Commissioner may, after due notice, withdraw the approval from the

commencement of the year if corrective steps suitable to the commissioner have not been taken.

If at the end of any year of assessment after the expiry of a period of 36 months commencing on the first date of

the issue of venture capital shares—

less than 80% of the expenditure incurred by the company to acquire assets held by it, was incurred to

acquire qualifying shares issued to the company by qualifying companies each of which immediately

after the issue, held assets with a book value not exceeding—

–R500m where the qualifying company was a junior miner;

–R50m where the qualifying company was any other company; or

more than 20% of any amounts received in respect of the issue of shares in the company was utilised to

acquire qualifying shares issued to the company by any one qualifying company,

the Commissioner must after due notice, withdraw the approval if no corrective action has been taken.

If the Commissioner withdraws the approval under the circumstances above, then an amount equal to 125% of

the expenditure incurred by the person for the issue of shares held in the company must be included in the

income of the company in the year of assessment in which approval was withdrawn.

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The scheme of s 12J requires that an approved venture capital company, as noted, must channel its investment

capital into ‗qualifying shares‘. The expression ‗qualifying share‘ is defined as an equity share held by a venture

capital company which is issued to it by a qualifying company, unless the venture capital company has an option

to dispose of the share, or the qualifying company has a clear and unequivocal obligation to redeem that share,

for an amount other than the market value of the share at the time of that disposal or redemption (s 12J(1)).

A qualifying company

A ‗qualifying company‘ is defined as a company which has the following characteristics:

The company is a resident.

It is not a controlled group company in relation to a group of companies.

Its tax affairs are in good order and it has complied with all the relevant provisions of the laws

administered by the Commissioner.

It is an unlisted company (as defined in s 41(1)) or a ‗junior mining company‘, which is taken to mean a

company that is solely carrying on a trade of mining exploration or production and is either an unlisted

company or listed on the alternative exchange division of the JSE Limited (definition of ‗junior mining

company‘ in s 12J(1)).

It is not carrying on any ‗impermissible trade‘.

The sum of its investment income derived during any year of assessment does not exceed 20% of its

gross income for that year.

Impermissible trade

In order to ensure that venture capital companies provide finance to sectors of the economy that the state wishes

to encourage, s 12J(1)(e), as noted, excludes as a qualifying company any company carrying on an

‗impermissible trade‘. The term ‗impermissible trade‘ is defined as any trade carried on

• in respect of immovable property, other than a trade carried on as a hotel keeper;

• by a bank as defined in the Banks Act 94 of 1990, a long-term insurer as defined in the Long-term Insurance

Act 52 of 1998, a short-term insurer as defined in the Short-term Insurance Act 53 of 1998, and any trade

carried on in respect of money-lending or hire-purchase financing;

• in respect of financial or advisory services, including trade in respect of legal services, tax advisory services,

stock broking services, management consulting services, auditing or accounting services;

• in respect of gambling;

• in respect of liquor, tobacco, arms or ammunition; or

• mainly outside the Republic.

The concept ‗impermissible trade‘ clearly embraces not only companies carrying on the kinds of business typical

of the wealthier sector of the populace who need no state support or encouragement, such as legal services, tax

44

advisory services, auditing and banking, but also those types of businesses which the state does not particularly

wish to promote, such as gambling and the supply of liquor.

Also included in the definition of ‗impermissible trade‘ is a trade carried on in respect of immovable property other

than as a hotelkeeper. Thus, a venture capital company that seeks approval as a qualifying company cannot

acquire shares in property companies save for those that operate hotels.

Venture capital company tax regime

An approved venture capital company is a taxable entity and no special dividend or other tax rules apply. But a

tax benefit is extended to any taxpayer (the previous restriction to natural persons and certain companies has

been lifted) who invests in such approved venture capital companies, which takes the form of a tax deduction for

the ‗expenditure actually incurred . . . in acquiring shares‘ issued by a venture capital company (s 12J(2)).

Notwithstanding the provisions of s 8(4), no amount shall be recovered or recouped in respect of the disposal of

a venture capital share if that share has been held by the taxpayer for a period longer than 5 years

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DEBT REDUCTION TAX CONSEQUENCES FOR THE DEBTOR Para 12A (CGT consequences) and section 19 (recoupment via section 8(4)(a))

Section 19 and para 12A contain ordering rules for dealing with debt relief and replace the previous rules that

were contained in s 8(4)(m), the proviso to s 20(1)(a) and para 12(5).

Assets and expenses financed by debt

The new ordering rules apply to trading stock, other tax deductible expenditure, allowance assets and capital

assets financed by the debt which is then subsequently reduced.

Briefly the rules provide as follows upon a reduction of such debt:

Trading stock still on hand – Any s 11(a) deduction or the value of opening stock as well as any closing

stock is reduced by the debt reduction. Any excess is treated as a recoupment.

Trading stock disposed of and other deductible expenditure excluding capital allowances – The debt

reduction is treated as a recoupment to the extent that the expenditure was allowed as a deduction.

Allowance assets – The debt reduction first reduces any base cost expenditure after which any excess

is treated as a recoupment. Future capital allowances will be limited to the cost of the asset less the

reduction amount and any previous allowances claimed on the asset.

Capital assets that are not allowance assets – The base cost of the asset is reduced by the debt

reduction. Any excess reduces any assessed capital loss (an assessed capital loss is not the same as

an assessed tax loss in terms of section 20).

Para 12A(6)

In terms of para 12A(6), the paragraph (and therefore consequences for the debtor that the paragraph would

trigger) must not apply to any debt owed by a person

a) that is an heir or legatee of a deceased estate to the extent that

(i) the debt is owed to that deceased estate

(ii) the debt is reduced by that deceased estate , and

(iii) the amount by which the debt is reduced by the deceased estate forms property of the

deceased estate for the purposes of the Estate Duty Act

b) to the extent that the debt is reduced by way of

(i) donation as defined in section 55(1); or

(ii) any transaction to which section 58 applies,

c) to an employer of that person, to the extent that the debt is reduced in the circumstances

contemplated in para 2(h) of the seventh schedule (that is, the reduction of the debt is taxed as a

taxable fringe benefit in the hand of the debtor employee);

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d) to another person, where that person and that other person are companies that form part of the

same group of companies as defined in section 41 (subject to a host of anti-avoidance provisions

listed para 12A)

The above exclusions are largely mirrored in section 19(2), but not para 12A(6)(d).

Reduction amount

Both section 19 and para 12A calculate the tax effect on the debtor in terms of the ―reduction amount‖. This is

essentially the amount by which the debt was reduced less any amount applied by that person as considerations

for that reduction.

It should be noted that the.paradigm will apply whenever debt is reduced or cancelled for less than full fair market

value consideration. This debt reduction or cancellation can occur within insolvency, business rescue, similar

statutory proceedings or informal workouts. The reduction or cancellation also need not explicitly result from the

inability to pay.

An essential consideration for the debtor is to examine what the monies, obtained when the debt was originally

incurred, was used for. The purpose for which the funds were applied will determine how the reduction amount

will be treated for taxation purposes.

Three types are expenses that may have been incurred are envisaged, namely:

1. The purchase of a non-depreciable capital asset (capital debt relief)

2. The purchase of a depreciable asset

3. The purchase of trading stock, or payment of other expenditure which would have resulted in a full

normal tax deduction of the expense. (ordinary debt relief)

Debt previously incurred in respect of depreciable assets

If debt was used to fund the acquisition of a depreciable/allowance asset:

the reduction or discharge of the debt will initially be viewed as funding the capital expenditure

to the extent of the remaining base cost (tax value) of the depreciable asset so held.

the residual (i.e. any amount of debt reduction or cancellation exceeding base cost) will be

viewed as having funded the depreciation/allowances and will be recouped in terms of section 8(4)(a).

In summary, the net effect will be to initially reduce the base cost of depreciable assets so held. If the base cost is

reduced to nil, the reduction or cancellation will then trigger a recoupment of allowances claimed thereby the

triggering of ordinary revenue.

If the depreciable asset is no longer held at the date of the debt reduction, the total ―reduction amount‖ will be

subject to the normal tax recoupment provisions as contained in section 19 and section 8(4)(a).

Example 1

Facts: Company X borrows R3.5 million. Company X applies all of the borrowed funds to acquire a plant.

Company X ―depreciates‖ the plant by R800 000, leaving R2.7 million of base cost (R3.5 million less the R800

000 allowances previously claimed). The lender subsequently cancels R2 million of the debt.

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Result: The R2 million of the cancelled debt will be applied towards the capital portion (reducing the base cost of

the plant from R2.7 million to R700 000). None of the reduction will be viewed as having been applied against the

allowances previously claimed.

Example 2

Facts: Company Y borrows R3.5 million. Company Y applies all of the borrowed funds to acquire a plant.

Company Y ―depreciates‖ the plant by R3 million, leaving R500 000 of base cost (R3.5 million less the R3 million

allowances previously). The lender subsequently cancels R3 million of the debt.

Result: The R3 million of the cancelled debt will initially be applied towards the remaining base cost of R500 000

(reducing the base cost of the plant to R500 000 to zero). The remaining R2.5 million will be viewed as having

been applied against previously claimed allowances (resulting in ordinary revenue).

―Capital‖ debt relief

1. Two-tier system

If the initial debt was not used to finance deductible expenditure or allowances the reduction of the debt will have

the following two-tier impact:

Base cost reduction: the debt reduction or cancellation will firstly reduce the base cost of the

capital assets so held by the debtor. However, this base cost reduction will apply only to the extent to

which the borrowed funds were used to acquire those capital assets still held by the debtor and only to

the extent that the capital assets have any remaining base cost.

Reduction of assessed capital losses: If the debt reduction or cancellation cannot be traced to

an asset so held (or the base cost in the asset is fully depleted to zero), the excess reduction or

cancellation will be applied against any assessed capital losses that the debtor may have. (para 12A(4))

If the ―capital‖ debt reduction or cancellation falls outside the above parameters, the debt reduction or

cancellation has no further impact. In other words, if the debtor‘s base cost and assessed capital losses are fully

reduced to nil in accordance with the above, no capital gains arise.

Example

Facts: Debtor borrowed R5 million to acquire two vacant lots. Vacant Lot 1 was purchased for R3 million, and

Vacant Lot 2 was purchased for R2 million. Vacant Lot 2 was sold for R1.2 million, generating an R800 000

capital loss. Due to circumstance outside Debtor‘s control, Vacant Lot 1 is has significantly declined in value.

Debtor also used the R1.2 million of proceeds from Vacant Lot 1 for personal consumption. In order to alleviate

Debtor‘s circumstances, the lender of the debts cancels R3 million of those debts. Of this amount, R2 million of

the debt reduction is attributable to formerly held Vacant Lot 2, and R1 million of the debt reduction is attributable

to Vacant Lot 1.

Result: The R1 million amount of debt cancelled that is attributable to Vacant Lot 1 reduces the base cost in that

lot from R3 million down to R2 million. The other R2 million cancelled cannot be applied against Vacant Lot 1

because the debt was not initially applied to acquire that lot. Instead, the R2 million is applied to eliminate the

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R800 000 of assessed capital losses. No further impact arises (i.e. the R1.2 million of unallocated debt reduction

does not give rise to capital gain).

Special relief for cancelled tax debts

Reduced or cancelled tax debts are excluded from the base cost/capital loss reduction regime by way of

definition (i.e. are excluded from the definition of debt for purposes of para12A).

―Ordinary‖ debt relief

Two-tier system

An ―ordinary‖ treatment for debt reductions and cancellations will apply as long as the initial debt was used to

finance deductible expenditure. Ordinary treatment will have the following two-tier impact:

Trading stock cost price reduction:

the debt reduction or cancellation at issue will firstly reduce the cost price of trading stock so held by the debtor.

However, this cost price reduction will apply only to the extent to which the borrowed funds were used to acquire

the trading stock still held by the debtor and only to the extent that trading stock has any remaining cost price.

Ordinary recoupment

If the debt reduction or cancellation is viewed as falling within an ordinary paradigm and the amount falls outside

the trading stock cost price reduction rules, any residual will be viewed as giving rise to ordinary revenue in terms

of a section 8(4)(a) recoupment.

Example 1

Facts: Company X owes debt of R1 million which was utilised to purchase trading stock. The trading stock held

by Company X has a cost price of R400 000, and Company X has assessed losses of R350 000. Company X‘s

creditors discharge all R1 million of the debt owed due to Company X‘s inability to pay. Of the debt owing, R400

000 stems from trading stock currently held and R150 000 stems from previously held trading stock.

Result: The amount of the discharged debt (R1 million) will first be applied to reduce the cost price of the trading

stock (R400 000) to zero. The remaining amount (R600 000) will included in the income of Company X as

ordinary revenue but reduced by the assessed losses of R350 000.

Allowance limitations and exclusions

Going forward, allowances on assets in respect of which a debt was reduced or cancelled may not exceed the

aggregate of the expenditure incurred by a taxpayer in respect of an allowance asset, less the sum of

(i) the allowances previously claimed on that allowance asset, and

(ii) the amount of the debt reduced.

Example

Facts: Company X acquired a machine in respect of which expenditure of R800 000 was incurred. For tax

purposes, Company X may claim allowances in respect of the machine on the basis of a 40 per cent allowance in

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the first year and 20 per cent in each of the subsequent three years. In year 1, Company X accordingly claims an

allowance of R320 000. Subsequently, the supplier of the machine, forgives R300 000 of the cost price.

Result: The amount of the discharged debt (R300 000) will be applied to reduce the cost price of the machine. In

the subsequent year of assessment, allowance Company X may claim on the machine will be limited to a cost

price of R180 000 (R800 000 less R320 000 prior allowance less R300 000 debt reduction). Of the R180 000

remainder, Company X can claim R160 000 of allowances in Year 2 and the final R20 000 in Year 3.

Effective date

Para 12A and section 19 will apply with effect from 1 January 2013 and applicable to years of assessment

commencing on or after that date

TAX CONSEQUENCES FOR CREDITOR

Donations Tax

Donations tax is levied in terms of Part V of the Income Tax Act. Section 54 subjects to donations tax donations

made by any ―resident‖. Donations tax is levied at a flat rate of 20%.

Deemed donation

Section 58 provides that donations for this purpose include property disposed of for what, in the opinion of the

Commissioner, is an inadequate consideration, to the extent of that inadequacy.

Meaning of ―donation‖

A donation is defined as:

“Any gratuitous disposal of property including any gratuitous waiver or renunciation of a right”

(section 55(1)).

Property in the definition of ―donation‖ means:

“any right in or to property movable or immovable, corporeal or incorporeal, wheresoever

situated”.

Deemed donation: Property disposed of for any inadequate consideration

Section 58 reads as follows:

“Where any property has been disposed of for a consideration which, in the opinion of the Commissioner, is not

an adequate consideration that property shall for the purposes of this Part be deemed to have been disposed of

under a donation: Provided that in the determination of the value of such property a reduction shall be made of an

amount equal to the value of the said consideration.”

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For section 58 to apply, the consideration must be inadequate. It is not necessary that the consideration be less

than market value. ―Adequate consideration‖ is not necessarily synonymous with ―market value‖. So, for example,

a disposition by a father to his child could be for an adequate consideration even though the consideration is less

than market value.

Section 56: Exemptions from donations tax

Specific exemptions

The exemptions from donations tax are broken down into two categories essentially. In terms of section 56(1)

specific exemptions are created that apply to specific types of donations.

Certain categories of donations are exempt from donations tax, and two are of specific relevance to companies:

• donations by any company recognised as a public company for tax purposes (section 56(1)(n)); and

• property disposed of to any other company that is a resident and is a member of the same group of companies

as the company making that donation (section 56(1)(r)).

General exemptions

Once it has been determined that none of the specific exemptions apply, the value of the donation after the

deduction of the general exemption will be subject to donations tax.

Donor other than a natural person

If the donor is not a natural person, the general exemption is R10 000 per annum, of all the casual gifts made by

the donor during the year of assessment.

SARS regards gifts such a birthday, Christmas and wedding gifts as casual gifts.

Natural person donor

Donations made by a natural person up to a maximum of R100 000 in respect of each year of assessment are

exempt from donations tax. These donations are not limited only to casual gifts as in the case of non-natural

persons. It should be noted that this R100 000 per annum threshold is available to each spouse. Accordingly, a

married couple may freely dispose of property worth up to R200 000 per annum without being subject to

donations tax.

Where the donated property formed part of the joint estate, each spouse is deemed to have made half the

donation. Where the donated property is excluded from the joint estate, the donation is deemed to have been

made solely by the donor spouse (section 57A).

Liability for and payment of donations tax

The tax is payable by the donor. However, if the donor fails to pay within the stipulated time period, both the

donor and the donee become jointly and severally liable for the tax (section 59).

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Where any property is disposed of under a donation by any body corporate at the instance of any person, the

person at whose instance the donation is made is deemed to have made the donation (section 57(1)). Thus the

latter is liable for the tax.

Donations tax shall be paid to the Commissioner by the end of the month following the month in which a

donations takes effect or such longer period as the Commissioner may allow.

CGT IMPLICATIONS

There are also CGT implications for the creditor when a debt, or a portion of a debt is written off:

8th Schedule Summary and application

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Losses

When a creditor disposes (includes the reduction of that debt) of a debt owed by a debtor who

is a connected person, any loss on that disposal must be disregarded by that creditor. This

paragraph will not apply if par 12A applies (applied to the debtor), which will be if there is an

under- lying asset linked to the debt.

Par 56(2)(a) therefore applies to the creditor. From an accounting perspective, the amount

disposed of (or written off) will represent a debit amount (hence a loss) in the books of the

creditor.

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Clogged losses

This paragraph ring-fences a capital loss between ―connected persons‖. Such losses may only

be off-set against future capital gains arising from disposals between the same connected

persons. This is called clogged-losses. If par 56(2)(a) applies, then par 39 will not apply.

Par 39 therefore applies to the taxpayer that disposes of the asset.

20(3)

Base cost

This paragraph is only applicable if the base cost of the asset is reduced or recovered. If the

asset is no longer on hand, there will be a capital gain. If the reduction or recoupment of

expenditure relates to a debt reduction, par 12A applies.

Par 20(3) applies to the purchaser of the asset.

35(1)(a)

Proceeds

If for some reason the selling price of an asset is reduced, the seller of the asset must reduce

the ―proceeds‖ of this asset with that amount.

Par 35(1)(a) applies to the seller of the asset.

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TAX ADMINISTRATION ACT (TAA)

The TAA deals with a number of administrative issues and this chapter will deal only with those most relevant to

this presentation.

CHAPTER 10

New categories of persons liable to tax (sections 151 to 159)

This Chapter includes new categories of persons liable to tax in order to simplify and clarify the tax liability of

different persons, and the capacity in which they may be liable for tax debts. The circumstances when a tax

liability in respect of each category of person will arise both in representative capacities and personal capacities

are then described.

The categories are:

(a) Persons (primary) chargeable to tax

(b) Representative taxpayers

(c) Withholding agents

(d) Responsible third parties

(e) A person who is the subject of a request to provide assistance under an international tax arrangement.

Measures are introduced to combat instances where the collections process is frustrated which extend SARS‘s

authority to recover tax debts beyond the actual taxpayer - the person originally chargeable to tax. Powerful

interventions are now also available when taxpayers divest themselves of assets, conduct business with no

regard for the tax consequences, or retain assets off-shore to avoid paying what is due.

Debt relief is also provided to taxpayers, for example:

Under certain circumstances the payment of tax may be suspended if a taxpayer intends to pursue a valid

objection and possible appeal, provided an application has been made in terms of section 164 to suspend

the payment of the taxes in dispute has been made.

In order to recognise legitimate circumstances where a taxpayer suffers a temporary liquidity problem, SARS

may extend the date for paying a tax debt or enter into an instalment payment arrangement with the

taxpayer.

SARS is also authorised to compromise a tax debt that is not disputed, and SARS may also write tax off

temporarily or permanently.

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PERSONAL LIABILITY FOR TAX DEBTS

The circumstances when a tax liability in respect of each category of person will arise both in representative

capacities and personal capacities are prescribed.

Requirements for personal liability

Category Requirements for personal liability

Representative taxpayers A representative taxpayer becomes liable in terms of TAA section155 if the tax could have

been paid to SARS but was not; or the amount in respect of which the tax was chargeable

was disposed of.

Withholding agents Liability arises in terms of TAA section157 if tax is withheld but not paid to SARS, or if the tax

could have been withheld but was not.

Responsible third parties

Under TAA section159 a responsible third party is personally liable to the extent described in Part D of Chapter 11

Person in control of

financial management

TAA section180 provides that a person who controls or is regularly involved in the

management of the overall financial affairs of a taxpayer is personally liable if the person was

negligent or fraudulent in the payment of the tax debts of the taxpayer

Shareholders of a

company in liquidation

TAA section181 provides that when a company is wound up while having a tax debt, a

shareholder who received a company asset within one year is personally liable.

The section does not apply to listed companies.

It is important to note that the tax debt also includes tax that would have existed had the

company complied with its tax obligations; and the shareholder has the same rights

against SARS as the company had.

The section applies to a company that is a principal taxpayer, a representative taxpayer, a

withholding agent, and any category of responsible third party

A transferee of assets TAA section182 provides that if a connected party to the taxpayer receives a taxpayer‘s

asset for free or below market value, the person becomes personally liable to pay a tax

debt that existed at the time the asset was transferred.

The liability is the lesser of the tax debt at the time of receipt and the difference between

the fair market value and the consideration paid.

The tax debt is the actual tax debt at the time or what the tax debt should have been had

the taxpayer complied with tax obligations.

Liability is triggered in respect of assets received less than a year before SARS notifies

the transferee of personal liability.

Person assisting to

dissipate assets

TAA section183 provides that a person who obstructs collection assists in dissipating a

taxpayer‘s assets is jointly liable with the original taxpayer.

This person is liable to the extent that their assistance reduces the taxpayer‘s assets.

Liability of person

appointed to satisfy a tax

debt

If SARS appoints a person to pay tax from money held for the taxpayer, and the person

ignores the appointment, then in terms of TAA section179 the person becomes personally

liable for the money

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Representative taxpayers

Duties, entitlements and liabilities of representative taxpayers (sections 154 and 155)

A representative taxpayer is in such capacity

subject to the duties, responsibilities and liabilities of the taxpayer represented

entitled to any abatement, deduction, exemption, right to set off a loss and other items that could be

claimed by the person represented

liable for the amount of tax specified by a tax Act.

The above duties, responsibilities, entitlements and liabilities of a representative taxpayer are, however, limited to

the following:

The income to which the representative taxpayer is entitled;

Moneys to which the representative taxpayer is entitled or has the management or control;

Transactions concluded by the representative taxpayer; and

Anything else done by the representative taxpayer in such capacity.

A representative taxpayer may be assessed in respect of any tax but such assessment is regarded as made

upon the representative taxpayer in such capacity only.

Section 1 of the Income Tax Act “Representative taxpayer”

A ‗representative taxpayer‘ means a natural person who resides in South Africa and

• for the income of a company, its public officer (para (a)),

• for the income under his management, disposition or control, the agent of a person (para (b)),

• for income that is the subject of a trust or for the income of a minor or mentally disordered or defective

person or another person under legal disability, the trustee, guardian, curator or other person entitled to

the receipt, management, disposal or control of this income or remitting or paying to or receiving

moneys on behalf of the person under disability (para (c)),

• for income paid under the decree or order of a court or judge to a receiver or other person, this receiver

or person, whoever may be entitled to its benefit, and whether or not it accrues to a person on a

contingency or an uncertain event (para (d)),

• for the income received by or accrued to a deceased person during his lifetime and the income

received by or accrued to his estate, the executor or administrator of his estate (para (e)), and

• for the income received by or accrued to an insolvent estate, its trustee or administrator (para ( f )).

There is a proviso to the definition of a ‗representative taxpayer. It states that for the purposes of this definition,

‗income‘ includes an amount received or accrued or deemed to have been received or accrued in consequence

of the disposal of an asset envisaged in the Eighth Schedule.

55

CHAPTER 15 ADMINISTRATIVE NON-COMPLIANCE PENALTIES

Financial sanctions consist of the administrative non-compliance penalty and the understatement penalty regime

which, together with the criminal sanctions, provide a comprehensive framework to deter non-compliance. The

TAA sets out that the purpose of the administrative non-compliance penalties is to ensure the widest possible

compliance of the tax Acts in a way that is impartial and which is proportional to the seriousness and duration of

the incidence of non-compliance.

Administrative non-compliance penalties

These penalties comprises of fixed amount-based and percentage-based penalties. A fixed amount-based

‗penalty‘ is charged when an administrative obligation is not complied with, and the percentage-based ‗penalty‘ is

imposed when an amount of tax is not paid.

Fixed-amount penalties

There are a number of obligations that a taxpayer is legally required to comply with, and a fixed amount ‗penalty‘

is imposed when a taxpayer does not comply with an obligation. If the taxpayer does not remedy the default

within a month, the administrative non-compliance penalty automatically increases by the same amount for every

month that the default is not corrected, up to a maximum of 35 months.

The amount of the ‗penalty‘ imposed in a ‗penalty assessment‘ will increase automatically for each month, or part

thereof, that the person fails to remedy the non-compliance within one month after:

the date of the delivery of the ‗penalty assessment‘, if SARS is in possession of the current address of the

person and is able to deliver the assessment, but limited to 35 months after the date of delivery; or

the date of the non-compliance if SARS is not in possession of the current address of the person and is

unable to deliver the ‗penalty assessment‘, but limited to 47 months after the date of non-compliance.

A ‗penalty assessment‘ must be duly delivered in one of the prescribed manners to constitute a valid assessment.

SARS may, however, issue a reminder of the automatic increase every month that the default continuous which

may be communicated in any form, including sms, as this is not a new imposition or ‗penalty assessment‘.

Fixed amount administrative non-compliance penalties may only be imposed in respect of non-compliance listed

in a public notice by the Commissioner, and not any non-compliance with an obligation under a tax Act. The

purpose of the notice is to only target impactful or more serious non-compliance and only when SARS‘s systems

are in place to do so effectively.

Govt Gazette 35377 Notice 790 (1 October 2012)

In terms of the above notice the only act of non-compliance currently listed, that will trigger the fixed amount

penalty, is in respect of a natural person who has failed to submit an income tax return by the required date, as

determined by the ITA, for years of assessment commencing on or after the 1 March 2006, where that person

has two or more outstanding income tax returns for such years of assessment.

56

Reportable arrangements

A ‗penalty‘ will be imposed on a participant of a reportable arrangement who fails to report the reportable

arrangement to SARS.

Taxpayers are required to constantly monitor the type of transactions regarded as reportable arrangements, as

the definition contained within the TAA can be extend by way of Government Gazette

Percentage based penalties

In terms of section 213, percentage based penalties are imposed under the TAA if SARS is satisfied that an

amount of tax that was not paid as and when required under a tax Act. SARS may impose a ―penalty‖ equal to

the percentage, as prescribed in the relevant tax Act, of the amount of unpaid tax. The procedures for the

imposition and remittance of a percentage based penalty are regulated by the TAA.

Examples when the percentage-based penalty will be imposed

Tax Incident

Income tax

[ITA

section35A]

When a SA resident buys immovable property from a non-resident seller and does not withhold

and pay the fixed percentage to SARS, a penalty of 10% is imposed

Turnover tax

[ITA 6th

Sched.

par 11(6)]

A late payment penalty will be imposed if a micro-business doesn‘t pay VAT, or a vendor that

deregistered because the value of supplies no longer exceeds R1million doesn‘t pay VAT.

Provisional

tax

[ITA Fourth

Sched.]

A 10% penalty is imposed on the late or non-payment of provisional tax [par 27]

A 20% penalty is imposed if a taxpayer fails to file an estimate [par 20A] Deleted wef yoa

commencing on or after 1 March 2015

A 20% penalty is imposed if the taxpayer understates a provisional tax estimate by a particular

percentage of the taxable income [par 20]

Employers &

employees‘

tax

[ITA Fourth

Sched.]

If an employer fails to file a return (reconciliation) SARS can levy a maximum of 10% penalty

per month

If employees‘ tax is not paid the employer must pay a 10% penalty

A 10% penalty is imposed if UIF contributions are not paid

Failure to indicate taxable fringe benefits in employees‘ tax certificates triggers a penalty equal

to 10% of the cash equivalent of the taxable benefit.

Value-Added

Tax

[VAT Act

section39]

Failing to pay by the 25th

attracts a 10% penalty but note the changes to eFilers discussed

above under Chapter 10 and 12.

57

Imposition of penalty

The fixed-amount and percentage-based penalties are contained in a ‗penalty assessment‘. This Penalty

Assessment Notice can be in a format determined by the Commissioner and contains the date when the ‗penalty‘

must be paid. If the ‗penalty‘ is raised simultaneously with an assessment for a tax then the date of payment is

the same date of payment for the tax assessed.

CHAPTER 16 UNDERSTATEMENT PENALTY

The penalty will be determined by locating each case within a table that assigns a percentage to objective

criteria. SARS must now prove that the grounds exist for imposing an understatement penalty.

An understatement penalty will be included in an assessment issued by SARS and must be paid by the date

specified in the notice of assessment. An understatement penalty may only be imposed if the fiscus is prejudiced

by the taxpayer‘s conduct in reporting. The fiscus will be prejudiced if there is a ―shortfall‖. In simple terms, the

―shortfall‖ is the difference between the correct amount of ‗tax‘ that should have been reported and the amount

that existed by virtue of the taxpayer‘s action.

If there is prejudice, this must have been caused because a taxpayer—

did not file a return;

filed a return but omitted an item from that return;

filed a return in which an incorrect statement was made

Substantial understatement

‗Substantial understatement‘ means a case where the prejudice to SARS or the fiscus exceeds the greater of five

per cent of the amount of ‗tax‘ properly chargeable or refundable under a tax Act for the relevant tax period, or

R1 000 000.

Finally, the amount that is imposed as the understatement penalty is calculated by applying the applicable

percentage to the amount of the ―shortfall‖.

Calculation of ―shortfall‖

The shortfall, on which the applicable percentage is applied, is the sum of the difference between–

(a) the ‗tax‘ properly chargeable and what would have been charged if the taxpayer‘s reporting had been

accepted;

(b) the amount properly refundable and what was refundable according to what the taxpayer reported;

and

(c) the ‗notional‘ amount of ‗tax‘ applied to the loss or other benefit properly carried forward, and what the loss or

benefit was according to what the taxpayer reported.

If an ‗understatement‘ results in a difference under both paragraphs (a) and (b) of TAA section 222(3), the

shortfall must be reduced by the amount of any duplication between the paragraphs. The tax rate is the maximum

tax rate applicable to the taxpayer, ignoring an assessed loss or any other benefit brought forward from a

preceding tax period to the tax period.

58

Understatement Penalty Table (Section 223)

1

Item

2

Behaviour

3

Standard

case

4

If obstructive,

or if it is a

‗repeat case‘

5

Voluntary disclosure

after notification of

audit

6

Voluntary disclosure

before notification of

audit

(i) ‗Substantial

understatement‘

10% 20% 5% 0%

(ii) Reasonable care not

taken in completing

return

25% 50% 15% 0%

(iii) No reasonable grounds

for ‗tax position‘ taken

50% 75% 25% 0%

(iv) Gross negligence 100% 125% 50% 5%

(v) Intentional tax evasion 150% 200% 75% 10%

Bona fide errors

The amendment to section 222 clarifies when an ―understatement‖ will not result in a penalty by excluding bona

fide inadvertent errors. The amendment will apply from 1 October 2012, and also to understatements made in a

return before 1 October 2012.

In determining if the ‗understatement‘ results from a bona fide inadvertent error, a SARS official will generally

have regard to the circumstances in which the error was made as well as other factors, for example:

In the context of factual errors—

if the standard of care taken by the taxpayer in completing the return is commensurate with the

taxpayer's knowledge, education, experience and skill and the care a reasonable person in the same

circumstances would have exercised;

the size or quantum, nature and frequency of the error;

whether a similar error was made in a return submitted during the preceding years; or

in the case of a arithmetical error, whether the taxpayer had procedures in place to detect arithmetical

errors.

In the case of a legal interpretive error, whether—

the relevant provision of a tax Act is generally regarded as complex;

the taxpayer took steps to understand it including following available explanatory material or making

reasonable enquiries; or

the taxpayer relied on information that, although incorrect or misleading, came from reputable sources

and a reasonable person in the same circumstances would be likely to find the relevant information

complex.

59

PRESCRIPTION

Periods of limitation for issuance of an assessment

To provide certainty to taxpayers the TAA prescribes periods after which SARS cannot raise an assessment.

SARS administered tax and self-assessment tax

The period that applies depends on whether the underlying liability arose from an assessment by SARS or

through a self-assessment by the taxpayer.

Periods of limitation for issue of assessments in terms of section 99

Incident Example Period

Original assessment is issued by SARS Income tax Three years from the date of the original

assessment.

Self-assessment by a taxpayer VAT, PAYE Five years from the date of submission of the

return.

Original assessment is issued by SARS because a

self-assessment return is not filed

VAT, PAYE when

no return filed

Five years from the date of the original

assessment.

No return is required but payment required Five years from the date of the last payment

made

Periods if action taken in line with a practice generally prevailing

A practice generally prevailing is intended to provide certainty on how a provision will be applied. In line with this

principle additional assessments and reduced assessments cannot be issued if the preceding assessment was

made in line with a practice generally prevailing at the time. The same rule applies if no return is required and a

payment is made in line with a practice generally prevailing at the time of payment.

Non-application of the prescription rules

Fraud, misrepresentation and non-disclosure: Generally the prescription period that prohibits SARS from

issuing an assessment does not apply if the reason why the full amount of tax was not charged was due to

fraud, misrepresentation, or non-disclosure of material facts.

When the tax is a self-assessment tax, such as VAT and PAYE, the basis on which the period of limitation

does not apply is extended beyond these three broad grounds to include both intentional and negligent

misrepresentation and non-disclosure.

Failure to submit a return: SARS is not barred from making an assessment if a person has not submitted a

return for a self-assessment tax.

Agreement between SARS and taxpayer: SARS and the taxpayer may agree that the prescription periods

do not apply provided that this agreement is concluded prior to the expiry of the periods.

Mistake made on returns, and incorrect assessments by SARS

The TAA makes it easier to fix mistakes made by taxpayers in a return without having to follow the formal

objection and appeal process:

60

If an original assessment has not been made, then SARS may request and allow a taxpayer to submit an

amended return to correct an undisputed error

If an incorrect original assessment has already been made because of a mistake made by the taxpayer in a

return then SARS is entitled to issue a reduced assessment to correct the error.

For instance, if a taxpayer has submitted an income tax return but has made an error, such as when amounts are

captured, SARS may draw this to the taxpayer‘s attention before issuing an original assessment. The taxpayer

may then elect to submit an amended return, and SARS will then issue an original assessment. On the other

hand, if an original assessment has been made, for instance when a VAT or employees‘ tax return is submitted,

and the taxpayer has made an error in the return, then the taxpayer can request SARS to issue a reduced

assessment without having to lodge an objection.

It is important to note that the TAA provides that the error has to be an ―undisputed error‖. Before a taxpayer

takes this quick route of correcting an assessment, SARS must be satisfied that the mistake is a genuine error. If

there is no ―undisputed error‖ then the taxpayer must follow the objection and appeal route.

Reportable arrangements

The TAA effects the following significant changes to the reportable arrangement scheme under current law:

All listed ‗arrangements‘ likely to lead to an undue ‗tax benefit‘ are to be identified by the Commissioner by

public notice, and the Commissioner may determine an arrangement to be an excluded arrangement by

public notice;

Failure to report a reportable arrangement will not constitute a criminal offence, but is subject to an

administrative non-compliance penalty under Chapter 15.

Govt Gazette 36038 (28 Dec 2012)

In terms of the abovementioned Gazette, the Commissioner has listed as reportable arrangements any hydrid

equity (s8E) or hybrid debt (s8F) instruments that would qualify as such if the prescribed period was 10 years. In

respect of s8F this will not include listed instruments

61

CHAPTER 17 CRIMINAL OFFENCES

Chapter 17 provides that offences may be separated into statutory offences and serious tax offences.

Serious tax offences relate to intentional tax evasion, and one distinction to a ―non-compliance‖ offence is that the

period of imprisonment for a serious tax offence is a sentence of five years. The investigation of a serious tax

offence will be carried out with regard to the rights that a suspect has by suitably qualified and experienced SARS

officials. An investigator must have authority from a senior SARS official to investigate, and only a senior SARS

official may lay a complaint with the police concerning an offence related to tax evasion.

The ―reverse onus‖ under the previous law has been removed and replaced with a practical evidentiary rule. In a

prosecution under the evasion provisions, the person who makes a statement that is the basis of the evasion is

considered to have committed the offence unless able to prove that there is a reasonable possibility that he or

she was ignorant of the falsity of the statement was false and that that ignorance was not due to negligence. This

does not result in a so-called ‗reverse onus‘, but only places on the accused an evidentiary burden in relation to

statement made by him. If discharged the onus would remain on the state to prove beyond reasonable doubt

knowledge of, or negligence in relation to, the falsity of the statement. While it limits the fundamental right to

silence, it does so only in relation to facts which are peculiarly within the knowledge of the accused and in respect

of which it would not be unreasonable to require the accused to discharge an evidentiary burden.

Criminal offences relating to non-compliance with the tax Acts

A criminal offence may be committed if a person does not comply with an obligation imposed under a tax Act,

and section 234 of the TAA contains a comprehensive list of these obligations. These offences are committed if

the person performs or fails to perform an act wilfully and without just cause. If found guilty the taxpayer is subject

to a fine or to imprisonment for a period not exceeding two years.

The following obligations are offences if not complied with-

the failure to register and notify SARS of a change to registered particulars;

the failure to appoint a representative taxpayer;

the failure to register as a tax practitioner

refusing or neglecting to take an oath of secrecy or solemn declaration;

the failure to retain records, or to retain them in the form required;

not complying with a request issued under the information gathering powers;

not disclosing relevant material facts to SARS when required;

the failure or neglect to submit a return or document to SARS or issue a document to a person as required

by a tax Act;

the failure to comply with a directive or instruction issued by SARS to the person under a tax Act;

the refusal to give assistance during a field audit or criminal investigation required under TAA section49(1);

and

impeding the collection of tax by assisting a taxpayer to dissipate assets.

These offences are committed if the person performs or fails to perform the relevant obligation wilfully and

without just cause.

62

Criminal offences relating to the evasion of tax

Section 235 lists these offences as being committed by a person who with intent to evade or to assist another

person to evade tax or to obtain an undue refund under a tax Act—

(a) makes or causes or allows to be made any false statement or entry in a return or other document, or signs a

statement, return or other document so submitted without reasonable grounds for believing the same to be true;

(b) gives a false answer, whether orally or in writing, to a request for information made under this Act;

(c) prepares, maintains or authorises the preparation or maintenance of false books of account or other records

or falsifies or authorises the falsification of books of account or other records;

(d) makes use of, or authorises the use of, fraud or contrivance; or

(e) makes any false statement for the purposes of obtaining any refund of or exemption from tax, is guilty of an

offence and, upon conviction, is subject to a fine or to imprisonment for

a period not exceeding five years.

(2) Any person who makes a statement in the manner referred to in subsection (1) must, unless the person

proves that there is a reasonable possibility that he or she was ignorant of the falsity of the statement and that the

ignorance was not due to negligence on his or her part, be regarded as guilty of the offence referred to

subsection (1).

A senior SARS official may lay a complaint with the South African Police Service or the National Prosecuting

Authority regarding an offence contemplated in subsection (1).

63

DIVIDENDS AND DIVIDEND WITHHOLDING TAX GENERAL

• A dividend is an amount (which includes a dividend in specie) that a company distributes to its

shareholders.

• A dividend is a return on an investment for an investor recipient.

• A distribution can only be a dividend if the company does not expect anything in return or as repayment

for the amount. For example, if a shareholder is also an employee of the company, any distribution to the

shareholder must be analysed to determine whether or not the amount was paid for services rendered. If

the payment was for services rendered, the distribution cannot be regarded as a dividend as it has been

rendered in return for the services performed. In terms of section 10(1)(k)(i)(ii) any dividend received for

services rendered will not be exempt from normal tax

• The dividend may be funded by way of cash, assets or a journal entry to the loan account of a

shareholder. When an asset is distributed to the shareholder it is called a dividend in specie.

• A repayment by a company of ―contributed tax capital‖ (CTC) cannot be a dividend.

• A distribution by a company that cannot be regarded as a dividend because it is excluded from the

definition of a dividend, must be either

a receipt of a capital nature in the hands of an investor (which may be subject to the provisions of

the Eighth Schedule which deals with taxable capital gains and assessed capital losses) or

a receipt of an income nature (gross income) in the hands of a speculator/share dealer.

NEW DIVIDEND DEFINITION: EFFECTIVE 1 JANUARY 2011

A new definition of dividend came into effect 1 January 2011 and provides that any amount that is transferred or

applied by a company for the benefit of any shareholder in relation to the company by virtue of any share held by

the shareholder in the company is a dividend. An amount transferred to a shareholder would include going

concern distributions, liquidation distributions and amounts paid as a result of a redemption, cancellation or

buyback of issued shares.

The above definition was amended by the Taxation Laws Amendment Act 2011 (TLAA 2011) with effect from 1

April 2012. The amendment effectively widened the nexus between a shareholder and a distribution from a

resident company by expanding the ―dividend‖ definition to include an amount transferred or applied by a

company on behalf of any person in respect of a share in that company. If a company transfers an amount at the

instance of a shareholder to a third party, the amount so transferred could still constitute a dividend, and be

subject to the new dividend tax. The amount so transferred may also leave the shareholder subject to donations

tax.

The proviso to the definition still specifies that an amount of contributed tax capital returned to any shareholder

must be determined proportionately in relation to the total contributed tax capital returned to all shareholders in

that class. That is, different shareholders in the same class cannot be allocated contributed tax capital amounts

that are not in proportion to their relative shareholding.

64

Dividend definition (as amended by the TLAA 2011)

A ―dividend‖ means

"any amount transferred or applied by a resident company for the benefit or on behalf of any person in respect of

any share in that company whether the amount of transferred or applied:

by way of a distribution; or

as consideration for the acquisition of any share in that company,

but does not include any amount so transferred or applied to the extent that the amount so transferred or

applied results in a reduction of contributed tax capital;

constitutes shares in the company;

constitutes an acquisition by a company of its own securities by way of a general purchase as contemplated

in sub para (b) of para 5.67B of s 5 of the JSE Limited Listings Requirements, where that acquisition

complies with the requirements prescribed by paras 5.68 to 5.84 of s 5 of the JSE Limited Listings

Requirements.

The dividend definition will therefore include any amount transferred or applied by a company whether

(a) by way of a distribution; or

(b) as consideration for the acquisition of any share in that company

but does not include any amount so transferred or applied by the company to the extent that the amount so

transferred or applied-

(i) results in the reduction of contributed tax capital

(ii) constitutes shares in that company

(iii) constitutes a listed company share buyback

From the above definition it is clear that:

Paragraph (a) deals with a dividend distribution, while para (b) deals with a share buy-back.

Any capitalisation issue is not a dividend (capitalisation issue includes the issues of equity shares

and non-participatory preference shares).

Definition of ‗contributed tax capital‘ (CTC) and co-ordination with Company Law Reform

Company law in South Africa has recently undergone major transformation with the enactment of the Companies

Act, 2008 (Act No. 71 of 2008). The new Companies Act modernises company law in line with evolving economic

and international trends. This far-reaching modernisation includes: (i) the removal of capital maintenance rules for

determining dividends in favour of market value solvency and liquidity tests, (ii) modernisation of reorganisation

rules, and (iii) the facilitation of business rescue procedures.

Dividend definition and the concept of profits

Under previous company law principles, company dividends came from profits and reserves. In line with modern

trends, the 2008 company legislation completely jettisons these mechanical concepts in favour of a more

commercial approach. Under the revised rules, distributions are generally tested to determine whether these

dividends reduce assets below liabilities (the solvency test) and whether the dividends will deprive the company

of urgently needed cash (the liquidity test).

65

Contributed tax capital is solely a tax concept, determined without regard to company law. In essence,

contributed tax capital represents the tax consideration contributed to the company in exchange for the issue of

shares.

Contributed tax capital (CTC)

The definition of ‗contributed tax capital‘ has been inserted in section 1, and amended by the TLAA 2011. CTC is

basically what a shareholder has paid for the issue of the shares by the company; it is pure share capital and

pure share premium.

The amount of CTC received by or accruing to a company for the issue of shares would mainly include cash, the

market value of an asset received and the value of services provided by a person to the company as

consideration for a share issue or the cancellation of a loan account owed by the company as a consideration for

the issue of shares.

CTC DEFINITION

(a) In relation to a non-resident company that becomes resident on or after 1 January 2011, CTC will be an

amount equal to the sum of the market value of all the shares of that company immediately before the date on

which the company becomes a resident and any consideration received by the company for the issue of shares

after the company becomes a resident, less so much of any amount of CTC that has in terms of a director‘s

resolution (or comparable authority) been transferred for the benefit of any person holding a share in the

company of that class in respect of that share;

(b) In the case of any other company, it means an amount equal to the sum of

(i) the stated share capital or share capital and share premium of that company immediately before 1

January 2011 in relation to shares issued by that company before that date, less so much of that stated

share capital or share capital and share premium as would have constituted a dividend (that is, capitalised

profits/tainted share capital), as defined before that date, had the stated capital or share capital and share

premium been distributed by the company immediately before that date; and

(ii) the consideration received by or accrued to it for the issue of shares on or after that date, reduced by

so much of that amount as the company has transferred on or after that date for the benefit of any person

holding a share in the company of that class in respect of that share, and has by the date of the transfer

been determined by the directors of the company or persons of comparable authority to be an amount so

transferred: Provided that for both paras (a) and (b) the amount so transferred for the benefit of any

person holding a share in the company of that class in respect of that share is deemed to be an amount

that bears to the total amount of contributed tax capital attributable to that class of shares immediately

before the distribution the same ratio as the number of shares of that class held by that shareholder bears

to the total number of shares of that class.

Essentially:

Para b(i) has the effect that capitalisation shares (equity shares), issued out of capital and revenue

reserves on or after 1 January 1974, are not CTC. Therefore if those capitalisation shares are redeemed,

the payment to the shareholders is a dividend as defined. Similarly, if any share premium was created out

of capital or revenue reserves, such share premium is not CTC.

Para (b)(ii) means that if shares have been issued to a shareholder, the amount paid by the shareholder

to subscribe for the shares is CTC.

66

CTC amounts of both para (a) and (b) must be reduced by any amount repaid for the benefit of any person

holding a share in the company out of share capital or share premium contributed by the shareholder.

In order for a transfer from a company for the benefit of any person holding a share in the company to constitute

a reduction of CTC (and accordingly fall outside of the definition of a dividend), the company directors (or persons

with comparable authority) must determine that the transfer constitutes a transfer of CTC. There must be written

proof of the determination for example in the form of a company resolution and the determination must be made

(and the company resolution to this effect signed) immediately before the transfer is made. If there is no

sufficient proof of the timeous determination, the transfer will not be regarded as a reduction of CTC and will

constitute a dividend.

As with any company distribution, the distribution must be lawful and made in terms of the Companies Act.

The proviso to the CTC definition means that if a company has issued different classes of shares, each class of

shares must be looked at separately. The CTC created by an ordinary share issue cannot be allocated or

reallocated to preference shares for example. (see further amendments to the CTC proviso)

Example

Facts: Company X has two ordinary shareholders (Shareholders A and B) and one preferred shareholder

(Shareholder C). Shareholder A owns 25 ordinary shares and Shareholder B owns the other 75 ordinary shares.

Company X has CTC of R150 in respect of its preference shares and R380 in respect of its ordinary shares. As

part of a written company resolution when making a distribution to its ordinary shareholders of R200 (R50 to

Shareholder A and R150 to Shareholder B), Company X decides to allocate R60 of the ordinary share CTC to the

ordinary distribution.

Results: The amount of CTC that is transferred to shareholders A and B will be calculated as follows:

CTC transferred to A = 25 per cent x 60 = R15

CTC transferred to B = 75 per cent x 60 = R45

Hence, shareholder A receives a dividend of R35 (i.e. R50 less R15 of CTC). Shareholder B receives a dividend

of R105 (i.e R150 less R45 of CTC). The dividend portion of the distributions is subject to the Dividends Tax, and

the CTC portion is viewed as capital distributions that fall within the Capital Gains Tax.

67

DIVIDEND WITHHOLDING TAX

STC was replaced as a tax on ―dividends‖ as of the 1 April 2012 by the dividend tax. One of the main differences

between STC and dividends tax is that STC was a company level tax, whereas dividends tax is mostly a

shareholder level tax. STC was levied at a rate of 10%. The dividend tax will be levied at 15%.

A “headquarter company” will be excluded from the realm of the dividend tax when it is implemented.

LEVY OF TAX

Dividends tax of 15% will be imposed on the amount of any dividend paid by a company that is a resident.

DIVIDEND TAX RETURNS

Company (or relevant party) paying the dividend

In order to request a dividend tax return (DTR) a dividends tax transaction(s) information declaration (DTR01)

needs to be completed and submitted to SARS. SARS will then use the information on the DTR01 to pre-

populate the dividend tax return (DTR02). The DTR02 must then be carefully reviewed to ensure the correct

information was populated. The DTR02 will reflect the amount of dividend tax payable to SARS. The DTR02 must

be submitted to SARS and payment of the dividend tax made.

BENEFICIAL OWNER (64F)

The dividend may be exempt from dividends tax depending on who the beneficial owner of the dividend is. The

beneficial owner of a dividend is the person entitled to the benefit of the dividend attaching to the share.

In terms of section 64K(1A)(b) a person that receives a dividend that is exempt from dividends tax (in terms of

Section 64F or 64FA), must also submit the relevant returns to SARS timeously.

Dividends that are received by the following beneficial owners are exempt from dividends tax:

A company that is a resident. A company is a resident if it is incorporated, established or formed in the

Republic or which has its place of effective management in the Republic (definition of a ‗resident‘ in s 1).

The reason for this exemption is to avoid dividends tax being levied more than once on the same

amount when the company receiving the dividend transfers it to its shareholders. This exemption applies

irrespective of the resident companies shareholding in the company declaring the dividend.

The Government, a provincial administration or a municipality.

A public benefit organisation approved by the Commissioner in terms of s 30(3).

A closure rehabilitation trust s 37A.

An institution, board or body contemplated in s 10(1)(cA) (certain entities providing beneficial services).

A fund contemplated in s 10(1)(d)(i) or (ii) (retirement and benefit funds e.g. pension and provident

funds).

A person contemplated in s 10(1)(t) (certain specified entities providing services).

A shareholder in a registered micro business, as defined in the Sixth Schedule, paying that dividend, to

the extent that the aggregate amount of dividends paid by it to its shareholders during the year of

assessment in which that dividend is paid does not exceed R200 000 .

A person that is not a resident and the dividend is paid by a company that is not resident if the share in

respect of which that foreign dividend is paid is a listed share and to the extent that the foreign dividend

does not consist of a distribution of an asset in specie.

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A portfolio of a collective investment scheme in securities

Any person to the extent that the dividend is not exempt from normal tax

Any person to the extent that the dividend was subject to STC on companies

A natural person in respect of a dividend paid in respect of a tax free investment as contemplated in

section 12T.

DIVIDEND WITHHOLDING TAX (DWT)

One of the key features of the dividend tax relates to the withholding mechanism. The DWT is based on the type

of shareholder that is receiving the dividend. The withholding mechanism must cover a wide range of

shareholders some of which are taxable, some exempt and some subject to a reduced rate of dividend tax due to

a double taxation treaty.

However the liability for withholding shifts if the dividend is paid to regulated intermediaries so that the primary

withholding obligation falls on the regulated intermediary. The withholding obligation for both the paying company

and the regulated intermediary can also be eliminated or reduced upon timely receipt of a written declaration that

the beneficial owner is entitled to exemption or tax treaty relief.

Essentially, any payment by the company to a regulated intermediary will result in the regulating intermediary

assuming the withholding responsibility. Any payment by a company to a party other than a regulated

intermediary will result in the withholding obligation for the company payor.

Regulated intermediaries are mostly involved in respect of dividends arising from listed shares because regulated

intermediaries are typically the only parties who are aware who the registered shareholders of listed companies

are (especially in the case of uncertificated shares). However, regulated intermediaries may also hold listed

paper shares. Regulated intermediaries include central securities depository participants (―CSDP‖), brokers (i.e.

authorised users or approved nominees), collective investment schemes in securities (―CIS in securities‖) and

listed investment services providers (―LISP‖).

WITHHOLDING OBLIGATION BY COMPANIES DECLARING AND PAYING DIVIDENDS

A company declaring and paying a dividend will generally be liable to withhold Dividends Tax at a rate of 15

percent of the dividend paid. The amount so withheld must be paid to SARS by the last day of the month

following the month in which that dividend was paid.

However, a company will not have the liability to withhold if the company

(i) has received a declaration of exemption from the Dividends Tax in respect of the beneficial owner

of a dividend or

(ii) makes a payment to certain entities. In addition, a company may be only required to withhold at a

reduced rate if the company has received a declaration of treaty relief in respect of the beneficial

owner.

Once a declaration form has been submitted, the company or regulated intermediary is permitted to rely on the

declaration form submitted until such time as the beneficial owner notifies the company or regulated intermediary

that the circumstances of the beneficial owner have changed. The beneficial owner will in writing undertake to

inform the company should the beneficial owner cease to be the beneficial owner.

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WITHHOLDING LIABILITY RELIEF

Declarations

A company declaring and paying a dividend must not withhold Dividends Tax if the company has a written

declaration and undertaking that the beneficial owner is entitled to a dividend exempt from the Dividends Tax. If

the registered owner of the shares in respect of which the dividend is paid is the beneficial owner of the dividend,

the registered owner (as beneficial owner) must submit the declaration. However, if the registered owner is not

the beneficial owner of the dividend, the registered owner must submit the declaration of the beneficial owner to

the company paying the dividend to enable the beneficial owner to benefit from an exempt dividend.

Similarly, a company declaring and paying a dividend must withhold Dividends Tax at a reduced rate if the

company has a written declaration and undertaking that the beneficial owner is entitled to tax treaty relief. The

required process of declarations for tax treaty relief is the same as the process for receiving declarations for

exemption (except for the additional requirement of submitting the received declaration to SARS.

Form and Timing of declaration and undertaking

The declaration forms in the case of a claim for exemption or treaty-reduced rate have been prescribed by the

SARS. In order for these forms to be effective for purposes of withholding, these forms must be submitted to the

company (or regulated intermediary) by a specified due date. If forms are submitted after the due date,

withholding must occur in full despite an applicable exemption or treaty reduction.

If the company paying the dividend is the withholding agent, the company must set a due date before which the

declaration form must be submitted. If the company does not set a date, the declaration will be valid if received

by the company by the date of payment of the dividend (i.e. accrual to the beneficial owner). In other words, the

declaration of the beneficial owner must be submitted at the earlier of the date set by the company or the date of

payment of the dividend.

It should be noted that late submission of the declaration form does not mean that the amount of Dividends Tax

withheld from the dividend becomes a final tax.

Late declaration forms can still be used in order to claim refunds.

Other exemptions

In addition to the above, a company paying a dividend can take into account automatic exemptions from

withholding without receipt of a declaration form. This form of withholding exemption arises in two circumstances:

• If the company paying a dividend pays the dividend to a regulated intermediary (with the regulatory

intermediary assuming the withholding obligation); or

• If the company paying the dividend forms part of the same group of companies (as defined in section 41)

as the company receiving the dividend.

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DATE OF PAYMENT OF A DIVIDEND

Dividends Tax will be triggered when the dividend is ―paid‖. In the case of a listed company a dividend is

regarded as paid on the date that the dividend is actually paid. In the case of a company that is not listed a

dividend is regarded as paid, at the earlier of the dividend being actually paid or becoming due and payable.

In many cases (especially in the case of closely-held companies), the date of dividend declaration and the date of

dividend payment are the same. However, a delay may exist between declaration and payment. This delay is

most prominent in the case of listed companies with these companies using a ―last date to register‖ as an interim

date for settling dividend accrual. This issue can also arise in closely-held situations. For example, a closely-held

company may declare a dividend far in advance of cash available to clear profits before the entry of new

shareholders.

PAYMENT OF DIVIDEND TAX

Dividend tax withheld or owing must be paid to SARS by the last day of the month following the month in which

the dividend was paid.

IN SPECIE DIVIDENDS

Companies pay dividends in cash or in kind (i.e. the latter being referred to as dividends in specie).

Domestic companies making in specie dividends

The company distributing the in specie dividend remains liable for paying the tax. The withholding mechanism for

in specie dividends of this nature will be rendered irrelevant.

Despite the shift in liability, in specie dividends will be eligible for the same exemptions as cash dividends. For

instance, in specie dividends paid by domestic companies to domestic companies will be exempt like cash

dividends. In order for the company payor to receive this exemption, the company must generally receive a

written declaration and undertaking of exemption from the beneficial owner by the date that the dividend is paid.

The only deviation from the declaration rule involves dividends paid to a domestic group company member or for

certain residential property company distributions; in these latter instances, the exemption applies automatically.

Tax treaty relief is also available for in specie dividends with declarations from beneficial owners similarly

required. Lastly, credits stemming from the Secondary Tax on Companies will be available to the same extent as

those credits are available for cash dividends.

Administration of in specie dividends by domestic companies will operate under roughly the same administration

as cash dividends. For instance, the tax payment due date will remain the same (i.e. the last day of the month

following the month in which the dividend was paid).

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LOSS OF DIVIDEND EXEMPTION

‗Local‘ dividends the company receives are not subject to dividend tax. Ordinarily the company receives a local

dividend exempt from normal tax in terms of section 10(1)(k)(i). With effect from the 25 October 2012 a new

proviso (ee) to the section 10(1)(k)(i) dividend exemption was created as an anti- avoidance provision to

eliminate tax avoidance by means of a ―cession‖ of the dividend stream.

Dividend cessions and loss of dividend exemption

Section 10(1)(k)(i)(ee)

Treasury has indicated its concern in respect of the abuse of the dividend tax exemption accorded to local

company beneficial owners (shareholders). As a result an amendment was made whereby the local dividend

exemption will be lost in respect of any dividend received by or accrued to a company in consequence of:

Any cession of the right to that dividend; or

The exercise of a discretionary power by any trustee of a trust,

unless that cession or exercise results in the holding by that company of all the rights attaching to the share.

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FOREIGN DIVIDENDS: SECTION 10B

Taxation of dividends paid by foreign companies

As a general rule, foreign dividends are included in the recipient‘s gross income and any portion of the

amount that is not exempt will be taxed at the marginal rates relevant to the specific recipient (that is,

28 percent for companies, up to 41 percent for individuals and 41 percent for Trusts).

Partial exemption section 10B(3)

The partial exemption formula rates are:

the 26/41 exemption for natural persons and trusts (wef 1 March 2015) and

the 13/28 exemption for companies (wef 1 April 2012)

as set out in section 10B(3).

Total exemption section 10B(2)

Foreign dividends are now subject to four exemptions as listed below:

10B(2)(a) Participation exemption. Under this exemption, foreign dividends will be exempt if

received by or accrued to a person who holds at least 10 percent of the equity shares and

voting rights in the company declaring the foreign dividend.

10B(2)(b)Country-to-country participation exemption. In terms of the country-to-country

exemption, a CFC will be allowed to claim the participation exemption without regard to the 10

percent participation requirement if the foreign dividends are paid by a foreign company which

is situated within the same country as the CFC to which the foreign dividend is paid.

10B(2)(c) The previously taxed income (or CFC exemption) exemption. Where a foreign

dividend is received by or accrued to a resident, it will be exempt in his hands to the extent

that the foreign dividend does not exceed the aggregate of all amounts included in his (the

resident‘s) income in any year of assessment under s 9D, which includes a proportionate

amount of a CFC‘s net income in the income of a resident shareholder (s 10B(2)(c)). The s

10B(2)(c) exemption therefore prevents the incidence of double taxation of the same profits in

terms of s 9D and when distributed as a dividend.

The expression ‗all amounts‘ relate to the net income of the company declaring the foreign

dividend or the net income of any other company which has been included in the income of

the resident (in terms of s 9D) by virtue of the resident‘s participation rights in that other

company held indirectly through the company declaring the foreign dividend. The net income

of either of these companies, for the purposes of s 10B(2)(c), must be determined without

regard to the formula for determining that part of a foreign dividend which is exempt in s

10B(3) (proviso to s 10B(2)(c)).

10B(2)(d) An exemption for foreign dividends will be added in respect of JSE listed shares

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(because these are taxed under the Dividends Tax).

6quat rebate

While these rebate only takes into account taxable income (thereby excluding foreign dividends

exempt by virtue of the participation and previously taxed income exemptions), the rebate will not be

directly reduced by the partial income (26/41 or13/28) exemption.

Expenses to produce foreign dividends disallowed

In terms of section 23(q) the deduction of any expenses incurred to produce foreign dividends is

disallowed. As a result, no deductions will be allowed for expenses incurred in relation to the

acquisition of the foreign shares because no comparable deduction is allowed for expenses

associated with domestic shares (section 23(f) with the exception of section 24O).

Example 1 SA Company shareholder

Facts: A Co, a South African resident company, pays taxes at 28 percent. A Co holds 2 percent of

the total equity shares and voting rights in Foreign Company (a company that does not qualify as a

controlled foreign company). Foreign Company pays a dividend of R1.2 million to A Co, which is

subject to foreign withholding taxes of 8 percent (i.e. R96 000).

Result: The gross R1.2m dividend will be included in A Co‘s gross income. The participation and

previously taxed income exemptions do not apply. However, the dividend is exempt to a ratio of 13/28

(section 10B(3)). Therefore, the amount included in A Co‘s taxable income in relation to the dividend

is R642 857 [R1.2m less R557 143(13/28th of R1.2 million)]. Assuming the South African tax on the

foreign dividend is R180 000 (i.e. R642 857 x 28%) less the R96 000 of foreign tax rebates, thereby

amounting to R84 000.

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CAPITAL GAINS TAX (CGT)

General Summary

The net capital gain of a company is multiplied by an inclusion rate of 80% to determine the taxable capital gain,

which is brought to account in the company‘s taxable income and subject to the company tax rate of 28%, giving

an effective tax rate on capital gains of 22.4%.

A variety of special rules apply to certain distributions by companies and the gains made by shareholders on

transactions in the shares of companies. Furthermore, there is a particularly awkward ‗cascade‘ effect that may

result from distributions of capital gains through a chain of companies on liquidation. And lastly, there is no

general relief for ‗unrealised group gains‘ and a deferral of recognition of group losses.

The date of a distribution is defined and generally is the date of the distribution, or the last date to register in the

case of listed companies.

• Issue of shares by a company in return for cash or kind, whether or not at a premium: There is no CGT

event for the company but the shareholder or member has a base cost in the shares or interest acquired

equal to the subscription price.

A “rights offer” :Where a company issues a rights offer there are no CGT consequences for the Company.

• Declaration of a normal cash dividend by a company: There is no CGT event for the company. Where the

dividend constitutes more than 15% of the proceeds of a subsequent disposal of the shares within two

years of their original acquisition by the recipient of the dividend, any loss suffered by the shareholder can

be affected.

• Distribution of capitalisation shares: There is no CGT event for company or shareholder. Shareholder has

deemed base cost expenditure of nil.)

• Distribution of an asset to a shareholder (whether called a dividend in specie or not): Deemed disposal by

company at market value on the date of distribution – CGT on net gain. Shareholder has a deemed base

cost of the asset acquired equal to market value.

• Disposal of an asset to a connected person and especially to another company within the same group of

companies. Unless one of the corporate rollover provisions apply, deemed disposal is at market value and

CGT on net gain (if any), even though the group as a whole has not realised any gain. If there is a loss,

there is no recognition of that loss against other gains, unless made in relation to the same connected

person.

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CGT CONSEQUENCES OF VARIOUS COMPANY TRANSACTIONS

Meaning of „disposal‟

A capital gain is made, or a capital loss is incurred, when proceeds or deemed proceeds arise on the disposal or

deemed disposal of an asset. The statutory definition of the term ‗disposal‘ is extremely wide and extends well

beyond its ordinary and natural meaning.

For convenience, the definition of ―disposal‖ can be divided into three parts:

the general definition,

the extended definition in terms of which certain events are deemed to constitute the disposal of an

asset, and finally,

the excluding part in terms of which certain specific events are not regarded as a disposal of an asset.

In terms of the general definition a ‗disposal‘ is any event, act, forbearance or operation of law that results in the

creation, variation, transfer or extinction of an asset. The term ‗disposal‘ expressly includes:

The sale, donation, expropriation, conversion, grant, cession, exchange or any other alienation or

transfer of ownership of an asset.

The forfeiture, termination, redemption, cancellation, surrender, discharge, relinquishment, release,

waiver, renunciation, expiry or abandonment of an asset.

The scrapping, loss or destruction of an asset.

The vesting of an interest in a trust asset in a beneficiary.

The distribution of an asset by a company to a shareholder.

The granting, renewal, extension or exercising of an option.

The decrease in value of a person‘s interest in a company, trust or partnership as a result of a ‗value

shifting arrangement‘.

CGT consequences for Companies

Distributions of an‖ in specie‖ dividend

When a company makes a distribution of an asset in specie to a shareholder, the disposal will give rise to normal

tax and CGT consequences for the company.

Normal tax consequences

If the asset is a capital asset (not trading stock), there will be a recoupment of deductions or allowances that have

been claimed on the asset. Such allowances are recouped upon the transferring of the asset, in whatever

manner or form to the shareholder. The market value of the asset is regarded as recouped. The effect of this is

that the difference between the market value of the asset and its tax value (cost of the asset less all allowances

claimed) on the date of transfer will be included in the company‘s income as a recoupment.

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CGT consequences

The company is treated as having disposed of the asset to its shareholder for proceeds equal to the market value

of the asset. The difference between the market value proceeds of the asset at the date of transfer and the base

cost of the asset will constitute a gain or loss in the hands of the company. The proceeds will be reduced by any

amount that was already recouped in respect of the asset and the base cost will be reduced by any allowances

already claimed in respect of the asset elsewhere in the Act.

A shareholder and a company may in certain circumstances be regarded as ―connected persons‖ in terms of the

Act, and in these circumstances any capital loss that may arise from the distribution of an asset to that

shareholder, will become a ―clogged loss‖, such that the capital loss in the hands of the company may only be set

off against future capital gains made from disposal to that specific shareholder

Distribution of trading stock in specie

Should a company distribute its trading stock in specie to any of its shareholders by way of a dividend, there will

be included in its income during the year of assessment in which the trading stock was distributed an amount

equal to the market value of that trading stock. Although the market value of trading stock distributed in specie is

included in full in the distributing company‘s income, the company will effectively have enjoyed a deduction of the

cost to it of that stock, either under s 11(a) on account of purchases during the year of assessment during which

the distribution was made, or because of its effective deduction of the value of its opening stock at the beginning

of that year.

Donations and disposals not at arm‘s length between connected persons

When a person disposes of an asset by means of a donation or for a consideration not measurable in money, or

to a connected person for a consideration that does not reflect an arm‘s length price, he is treated as having

disposed of it for an amount received or accrued equal to its market value on the date of the disposal (That is, for

proceeds equal to market value). The person who acquires the asset, in turn, is treated as having acquired it at a

cost equal to the same market value. This cost must be treated as the ‗para 20 base cost expenditure‘ of the

asset (para 38).

The provision requires that the disposal be made ‗for a consideration that does not reflect an arm‘s length price‘.

It applies, therefore, to all disposals not at an arm‘s length price, whether the consideration is greater or less than

the arm‘s length price of the underlying asset.

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CONNECTED PERSONS

Connected person in respect of a company (as defined in section 1 of the Income Tax Act)

(d) in relation to a company—

(i) any other company that would be part of the same group of companies as that company if the expression ―at

least 70 per cent of the equity shares of‖ in paragraphs (a) and (b) of the definition of ―group of companies‖ in this

section were replaced by the expression ―more than 50 per cent of the equity shares of or voting rights in‖;

(ii) . . . . . .

(iii) . . . . . .

(iv) any person, other than a company as defined in section 1 of the Companies Act, 2008 (Act No. 71 of 2008),

who individually or jointly with any connected person in relation to himself, holds, directly or indirectly, at least 20

per cent of—

(aa) the equity shares in the company; or

(bb) the voting rights in the company;

(v) any other company if at least 20 per cent of the equity shares of or voting rights in the company are held by

that other company, and no shareholder holds the majority voting rights in the company;

(vA) any other company if such other company is managed or controlled by—

(aa) any person who or which is a connected person in relation to such company; or

(bb) any person who or which is a connected person in relation to a person contemplated in item (aa);

and

(vi) where such company is a close corporation—

(aa) any member;

(bb) any relative of such member or any trust (other than a portfolio of a collective investment scheme in

securities or a portfolio of a collective investment scheme in property) which is a connected person in

relation to such member; and

(cc) any other close corporation or company which is a connected person in relation to—

(i) any member contemplated in item (aa); or

(ii) the relative or trust contemplated in item (bb); and

(e) in relation to any person who is a connected person in relation to any other person in terms of the foregoing

provisions of this definition, such other person:

Provided that for the purposes of this definition, a company includes a portfolio of a collective investment scheme

in securities;

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―group of companies‖ means two or more companies in which one company (hereinafter referred to as the

―controlling group company‖) directly or indirectly holds shares in at least one other company (hereinafter

referred to as the ―controlled group company‖), to the extent that—

(a) at least 70 percent of the equity shares in each controlled group company are directly held by the controlling

group company, one or more other controlled group companies or any combination thereof; and

(b) the controlling group company directly holds at least 70 per cent of the equity shares in at least one controlled

group company.

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SECTION 18A DONATIONS TO PUBLIC BENEFIT ORGANISATIONS

This deduction is available to all donors, not just individual taxpayers

Section 18A allows for a deduction of bona fide donations to, amongst others—

(a) any—

(i) public benefit organisation approved by the Commissioner under s 30; or

(ii) institution, board or body contemplated in s 10(1)(cA)(i) which carries on in the Republic any public

benefit activity listed in Part II of the Ninth Schedule;

(a) any public benefit organisation approved by the Commissioner under s 30, which provides funding solely to a

public benefit organisation contemplated in (a) above;

The deduction is limited to 10% of the taxable income (excluding any retirement fund lump sum benefit and

retirement fund lump sum withdrawal benefit) of the taxpayer as calculating before allowing any deduction under

this s 18A.

Section 18A certificate

Any claim for a deduction must be supported by a receipt from the organisation or agency disclosing—

the reference number and name of the public benefit organisation, institution, board or body or authority

concerned which received the donation;

the name and address of the donor and the date of the receipt of the donation;

the amount of the donation (or its nature if in kind) and a certification that the receipt is issued for

purposes of s 18A and that it will be used exclusively as required in terms of the section.

Where the donation is otherwise than in cash, s 18A(3) sets out the specific method for the calculation of the

donation.

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VALUE ADDED TAX

DEEMED SUPPLIES

Certain events are treated as deemed supplies for VAT purposes (sections 8,8A and 18(3)). Important deemed

supplies are as follows:

A person ceases to be a vendor (section 8(2)).

o When a person ceases to be a vendor he is deemed to have supplied the goods (excluding

those for which an input tax deduction was denied in terms of section 17(2)) or rights that form

part of the assets of his enterprise. He must therefore account for output VAT on the lower of

their original cost or market value at the time when he ceases to be a vendor (section 10(5)).

The output VAT must be accounted for in the tax period immediately before he ceases to be a

vendor.

o If a person (who ceases to be a vendor) disposes of any goods or rights after the cancellation

of his registration (and thus after the deemed supply has been accounted for), the person will

not carry on an enterprise for VAT purposes and no VAT will be due on the supply of the goods

or rights.

o Where the assets, forming part of a vendor‘s enterprise, are, prior to cessation of registration,

distributed to shareholders as a dividend in specie, no VAT will be payable, as the supply will

be made for no consideration. Should the recipient, however, be a connected person in

respect of the vendor and not be entitled to a full input tax credit had VAT been payable, VAT

will have to be levied on the open market value of the dividend in specie (i.e. the value of

supply rule for connected persons). The distribution of assets by a person in the form of a

dividend in specie subsequent to the cessation of registration has no VAT implication, as the

supply has not been made in the course or furtherance of an enterprise, the enterprise having

ceased. The supply will therefore not be a taxable supply.

o The general rules for deregistration (for VAT purposes) will not apply where a person ceases to

be a vendor as a result of death or insolvency, provided the enterprise is thereafter continued

by or on behalf of his executor or trustee.

o When ceasing to be a vendor outstanding creditor balances, on which input tax were claimed,

are treated as follows:

Outstanding for longer than 12 months – no adjustment for VAT on these balances

when ceasing to be a vendor, since section 22(3) requires that a VAT vendor are

required to account for output tax if he has not paid the full consideration for a supply

within 12 months. This liability for output tax is therefore as a result of the non-

payment of the creditor for 12 months and not as a result of the cessation of the

enterprise. If the vendor has however not yet accounted for the output tax on

cessation, the adjustment should be made at that time.

Outstanding for less than 12 months – on the date of the cessation of the enterprise

output tax is payable on outstanding creditor balances that is not older than 12

months. The value of these supplies is the outstanding balance of the creditor

(section 22(3) (proviso (ii)(bb)).

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Indemnity awards (section 8(8)).

o Short-term insurance premiums are subject to VAT and are deductible as input tax in relevant

circumstances. Long-term insurance premiums are, however, a financial service, which is an

exempt service.

o A deemed supply arises when a payment is received by a vendor from an insurer or when a

vendor is indemnified by the payment of money to another person by the insurer, to the extent

that the vendor makes taxable supplies.

o The deemed supply provision does not apply to an indemnity payment received by a vendor for

the total reinstatement of goods stolen or damaged beyond economic repair, and for which he

was denied an input tax credit. This would be, for example, when a motor car is completely

destroyed or stolen.

o The vendor must determine the output VAT payable by applying the tax fraction (14 / 114) to

the payment received and account for the output VAT in the tax period when the payment was

received.

Further important deemed supplies include the following:

Trading stock taken out of the business for private use (see ―change of use‖);

Amounts received in excess of consideration charged (section 8(27))

o The excess consideration charged will attract output VAT at 14% if the excess is not refunded within

four months. The excess portion will be deemed to be a supply of services performed by the

vendor. In the event that the excess amount is refunded on a date after output VAT has been

accounted for, the vendor will become entitled to claim an input VAT credit. The supply is deemed to

happen on the last day of the VAT period during which the four month period ends.

Fringe benefits (section 8(4) and section 18(3)).

Fringe benefits

A deemed supply arises when a vendor grants a benefit or advantage to an employee or office holder that is

included in gross income in terms of paragraph (i) of the definition of ‗gross income‘ read with the Seventh Schedule

of the Income Tax Act.

Specifically excluded from the fringe benefit deemed supply provision are exempt supplies, zero-rated supplies, a

supply of entertainment, a fringe benefit provided in the course of making exempt supplies and supplies when an

input tax credit is denied.

Value of supply of fringe benefits (other than the use of a motor vehicle)

Section 10(13) provides that the consideration(an amount deemed to include VAT) for the purposes of

determining the output VAT is the cash equivalent in terms of the Seventh Schedule to the Income Tax Act. The

cash equivalent value, ie the consideration for the deemed supply, must therefore be multiplied by the VAT

fraction in order to determine the output VAT.

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For the right of use of motor vehicles the consideration per month is as follows:

―Motor cars‖: Determined value × 0,3% if employer was denied an input tax credit.

Vehicles other than ―motor cars‖: Determined value × 0,6% if employer obtained an input tax credit.

The determined value is the original cost in an arm‘s length transaction excluding finance charges, interest, sales

tax or VAT.

If the employee bears the full cost of repairs and maintenance (and no compensation in the form of an allowance

or reimbursement is paid to him) the consideration determined monthly is reduced by the lesser of R85 or the

amount of the consideration determined monthly.

Output vat raised on a fringe benefit is a deductible expense under the general deduction formula (section 11(a)

and section 23(g) of the Income Tax Act).

The following table shows if a benefit or advantage granted to an employee or office holder constitutes a deemed

supply for the purposes of section 18(3):

Taxable benefit Deemed supply Reason

Asset given to employee Yes

(unless an input tax

deduction was denied to

the employer)

Seventh Schedule fringe benefit.

Use of asset Yes Seventh Schedule fringe benefit.

Use of company car Yes Seventh Schedule fringe benefit.

Free or cheap services Yes Seventh Schedule fringe benefit.

Release of an employee from a debt

owed to his employer

Yes Seventh Schedule fringe benefit. This is not

an exempt supply because it is not the issue

of a debt security.

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ADJUSTMENTS

Debit and Credit notes

A debit note will normally be issued by the supplier when the tax invoice for the supply has already been issued

and the previously agreed consideration is subsequently increased.

Conversely, a credit note will normally be issued by the supplier when the tax invoice for the supply has already

been issued and the previously agreed consideration is subsequently reduced. A credit note is also issued by the

original supplier when faulty goods are returned by the customer.

Debit and credit notes therefore provide a mechanism to support the necessary VAT adjustments required or

allowed where an event has the effect of altering the original consideration agreed upon for a past taxable supply,

after the tax invoice has already been issued, or the vendor has accounted for the supply on a VAT return.

When must a debit note or credit note be issued?

The following are the circumstances under which it will be necessary to issue a debit note or credit note:

•Where a supply of goods or services is cancelled.

•Where the nature of the supply of goods or services has been fundamentally varied or altered.

•Where the previously agreed consideration for the supply of the goods or services is being altered by

agreement with the recipient (including a discount).

•Where part of, or all the goods or services supplied are returned to the supplier (including any

returnable container returned to the supplier).

This will, however, only be necessary if in respect of any of the above circumstances the supplier has

either –

•issued a tax invoice and the tax charged is incorrect; or

•furnished a VAT return in which the incorrect amount of output tax was accounted for.

The debit or credit note must be issued, whether or not the supplier accounts for tax on an invoice or payments

basis. The issue of a credit note is not required when a prompt payment (settlement) discount is the reason for

the reduction in the consideration, providing the terms of that discount are clearly shown on the tax invoice.

Adjustments

The VAT Act makes provision for debit and credit notes to be issued in respect of a single supply. Remember

that the consideration for a supply can only be altered by means of a debit or credit note – it is not correct to

merely issue another tax invoice. Note also that it is illegal to issue more than one tax invoice per taxable supply.

Binding General Ruling No. 6 clarifies the VAT treatment of discounts, rebates and incentives in the production,

distribution as well as marketing of the packaged consumer goods industry.

Debit and credit notes must be reflected on the VAT 201 return as follows:

Field 12– Output tax – debit notes issued and credit notes received.

Field 18 – Input tax – credit notes issued and debit notes received.

Credit notes issued may not be set off against the sales made to the same vendor, and similarly, debit notes may

not be set off against purchases unless the debit or credit note concerned is issued in the same tax period in

which the supply has taken place.

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Theft

Where it is discovered that the cash relating to a transaction has been stolen or misappropriated, this does not

entitle the vendor to issue a credit note and deduct input tax thereon. The VAT Act does not provide for a

deduction or adjustment in such cases.

Bad debts

A vendor who writes off a bad debt is entitled to claim a deduction equal to the VAT portion of the consideration

written off as an input tax deduction (section 22(1)). But if the debt originated from a zero-rated supply, an input tax

deduction of ‗nil‘ arises.

Recovery of bad debts

If a debt is wholly or partly recovered for which an input tax deduction was claimed in terms of section 22(1), output

tax must be accounted for on the amount recovered during the tax period when it is recovered (section 22(2)).

Long-outstanding creditors (more than 12 months)

When a vendor (who accounts for VAT on the invoice basis) has made a deduction of input tax, and has not paid the

full consideration within twelve months after the expiry of the tax period when the input tax deduction was made, he

must, in terms of section 22(3), account for output tax in the next tax period, equal to the tax fraction of the

consideration not paid.

If the vendor subsequently settles the creditor, then he may claim an input tax deduction equal to the tax fraction of

the amount paid (section 22(4)).

Change of use adjustments

Section 18(1) provides that when goods or services are acquired for making taxable supplies and are

subsequently applied wholly for private (eg: removal of trading stock from enterprise for private use purposes),

exempt or another non-taxable use, they are deemed to be supplied in the course of the vendor‘s enterprise.

Output tax is payable by the vendor based on the market value at that time.

Value (section 10(7)): 14 / 114 × open market value.

Time: Tax period when the change of use occurs.

Example 1

Adam Black, a vendor, purchased trading stock for R228 (vat inclusive). He donated this trading stock rather

than selling it for R456 (R400 plus vat of R56).

Suggested solution

He must raise output vat on its open market value as follows:

R456 × 14 / 114 = R56

In terms of section 16(3)(h), if a full input tax credit was not claimed on its acquisition, then the vendor is also

entitled to an input tax adjustment equal to the lesser of the cost (including vat) and market value × % input

credit not claimed × 14 / 114.

85

NB: See exception provided for residential property developers in terms of section 18B

Increase of decrease in taxable use

Sections 18(2) and 18(5) deal with a decrease or increase in the extent of the taxable use or application of capital

goods (the adjusted costs of which is R40 000 or greater excluding VAT) by a vendor.

In the event of a reduction in the extent of taxable use, by more than 10%, a deemed supply arises, resulting in

output tax on the portion of use that is no longer for use in the making of taxable supplies.

An increase in the extent of taxable use, will give rise to an input tax deduction:

Value (section 10(9)): 14 / 114 × lesser of adjusted cost (including VAT) and open market value × % by

which the taxable use has changed (decreased or increased).

Time: End of the vendor‘s year of assessment (or February).

Non-taxable to taxable use

Section 18(4) applies to goods or services acquired

prior to the introduction of VAT (30 September 1991) wholly for non-taxable purposes, or

acquired new or second-hand, on or after 30 September 1991 and no input tax credit was deducted.

If these goods or services are subsequently applied to a taxable purpose the vendor would be entitled to an input

tax claim as follows:

Value: Input tax adjustment: 14 / 114 × lesser of adjusted cost (including VAT) and open market value × %

taxable use.

Time: Tax period when the change of use occurs.

If the intended use is 95% or more it is deemed to be 100%, that is the full amount of input tax is deductible.

Use of going concern to make exempt supplies

Section 18A provides that when a vendor acquires an enterprise (or part of it) as a going concern (a zero-rated

supply) and then uses some of the assets wholly or partly for purposes other than the making of a taxable supply, he

will be deemed to have supplied these goods and will have to account for output tax.

Value: Output tax adjustment: adjusted cost × % of non-taxable use × 14%.

Time: Tax period when the supply is made.

If the intended use is 95% or more it is deemed to be 100%, that is, the full amount of input tax is deductible.

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Complete the amount refunded /discharged under “Specify the portion of the amount so refunded / discharged as was previously allowed by SARS as a rebate” field.

PARTNERSHIPS/ JOINT VENTURES 10.2.35

This section of the return will only display if the question “Is the company a partner in a partnership?” in the “Information to create this income tax return” is “Yes”

Note:

The Partnerships section will repeat according to the numeric value entered in the question “How many partnerships” on the “Information to create this income tax return” page.

If 5 Partnerships sections were created, it is mandatory that all 5 must be completed. If incorrectly created, refer back to the “Information to create this income tax return” to rectify.

The following fields must be completed for each Partnerships section

Partnership Name: Free text field (maximum length is 53 blocks) Specify the company’s profit / loss sharing % during the year of assessment:

Numeric field – complete the percentage Indicate if the company derived a profit / loss from this partnership during the

year of assessment: Select “Profit” or “Loss” Indicate if this information is in respect of a local or a foreign partnership:

Select “Local” or “Foreign”.

11 ANNEXURE D – MEDIUM TO LARGE BUSINESS If a company is not classified as a body corporate / share block company / micro business or small business, it will be classified as a Medium to Large Business.

11.1 INFORMATION TO CREATE THIS INCOME TAX RETURN

All questions on this page must be completed. Depending on the answer provided to each question, subsequent questions might be displayed on this page. Please ensure that all questions on this page are completed before commencing with completion of the return.

Note: If any of the questions on this page are changed after the commencement of the completion of the return (refer to section “Completion of return”), it may result in the following: Existing sections on the return may be removed/deleted. The form will display a

warning message to alert the taxpayer of any potential loss of data captured Additional sections may be displayed on the return for completion.

Representative taxpayers/tax practitioners who are not registered eFilers and have online access to this guide and prefer to, prior to visiting the nearest branch, print a manual copy of the ITR14 for completion, should prepare the necessary information and supporting material specified in this guide.

Each question in the ITR14 must be carefully reviewed to ensure that all the relevant information is ready for capturing by a SARS agent at the SARS branch and that the necessary supporting material specified in this guide is at hand in order to finalise the capturing.

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DORMANT 11.1.1

Is the company dormant? Yes” or “No” must be selected. If “Yes” is selected, the company will be classified as a dormant company and Annexure B will not be applicable to the company. The Company Representative / Public Officer must refer to Annexure A if the company is dormant. If “No” is selected, the Company Type and Tax Credits sections on the “Information to create this income tax return” page will display additional questions for customisation of the income tax return.

COMPANY TYPE 11.1.2

Is the company a body corporate / share block company as referred to in s10(1)(e)? Yes” or “No” must be selected. If “Yes” is selected, the Company Representative / Public Officer must refer to Annexure B for a Body Corporate / Share Block Company. If “No” is selected, the next question will be displayed.

Specify the gross income (sales / turnover plus other income) in respect of the year of assessment? Complete the gross income in Rands. The gross income referred to in this question must be calculated as the sum of “Sales / Turnover” declared under “Gross Profit / Loss” and all income items declared under “Income Items” in the Income Statement.

Specify the total assets (current and non-current) of the company in respect of the year of assessment? If the gross income specified in the previous question exceeds R14 million for the financial year ending prior to 30 April 2013 and R20 million for the financial year ending after 30 April 2013 and / or the total assets exceed R10 million, then the company is classified as a Medium to Large Business. If the values entered for gross income and total assets do not meet the Medium to Large Business criteria, please refer to section 3 to determine the correct classification. For Medium to Large Business:

The Company Information section on the “Information to create this income tax

return” page will display additional questions for customisation of the income tax return.

If the gross income specified previously does not exceed R14 million if the financial year end is prior to 20130430 or R20 million if the financial year end is from 20130430 and onwards the Small Business Corporation section on the “Information to create this income tax return” page will display additional questions for customisation of the income tax return.

The content of the income tax return will also be expanded to display the following sections for completion: Additional Assessment Information, Shares, Balance sheet, Income Statement, Tax Computation, Tax Allowances / Limitations, and Corporate Rules.

CAPITAL GAIN / LOSS TRANSACTIONS 11.1.3

Did the company have any transactions or events which resulted in a locally

sourced capital gain or loss? “Yes” or “No” must be selected. If “Yes” is selected, the section for ‘Schedule of Local Capital Gains and Losses in respect of the disposal of assets’ will be displayed for

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completion.

Did the company have any transactions or events which resulted in a foreign sourced capital gain or loss? “Yes” or “No” must be selected. If “Yes” is selected, the section for ‘Schedule of Foreign Capital Gains and Losses in respect of the disposal of assets’ will be displayed for completion.

Has any debt been reduced for no consideration which has the effect of reducing the company’s assessed capital loss under paragraph 12A(4) of the Eighth schedule? This field is only applicable from 2015 onwards “Yes” or “No” must be selected. If “Yes” is selected the following questions will be displayed ‘Was the reduction for a local asset?’ and ‘Was the reduction for a foreign assets?’

Was the reduction for a local asset? This field is only applicable from 2015 onwards “Yes” or “No” must be selected. If “Yes” is selected, the following section will be displayed for completion ‘Reduction of Local Assessed Capital Loss due to Debt Reduction’.

Was the reduction for a foreign asset? This field is only applicable from 2015 onwards “Yes” or “No” must be selected. If “Yes” is selected, the following section will be displayed for completion ‘Reduction of Foreign Assessed Capital Loss due to Debt Reduction’

VOLUNTARY DISCLOSURE PROGRAMME 11.1.4

Does any declaration in this return relate to an application made under the SARS Voluntary Disclosure Programme? Yes” or “No” must be selected. If “Yes” is selected, the Voluntary Disclosure Programme section in the income tax return will be displayed for completion. VENTURE CAPITAL COMPANY INVESTMENT 11.1.5

Did the company invest in SARS approved Venture Capital Companies in exchange

for the issue of shares during the year of assessment? Yes” or “No” must be selected. If “Yes” is selected, then ’Specify the number of investments made in SARS approved Venture Capital Companies’ will be displayed for completion.

Specify the number of investments made in SARS approved Venture Capital Companies This field will require you to complete the number of investments made. Complete any number between 1 and 99. A section on the income tax return will be displayed named ‘Investments in Venture Capital Companies (VCC): s12J’. This section may be repeated on the return to a maximum of 10 times. The Representative/Public Officer is required to complete in the fields provided, on the investments made. If he/she captured that the number of investments made to an approved VCC does not exceed ten, he/she must complete on the return required information on the investments made. Otherwise the Representative/Public Officer is required to complete information of the top ten investments made.

DONATIONS 11.1.6

Does the company want to claim donations made to an approved public benefit

organisation (PBO) in terms of s18A? “Yes” or “No” must be selected. If “Yes” is selected, the following question will be displayed for completion ‘Is the company a collective investment scheme’.

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Is the company a collective investment scheme? “Yes” or “No” must be selected. If “No” is selected, then ‘How many Public Benefit Organisations (PBO) did the company donate to?’ will be displayed for completion. If “Yes” is selected, then the income tax return will display the following section for completion, ‘Donations allowable in terms of s18A to approved Public Benefit Organisations (PBO) in respect of a Collective Investment Scheme’

How many Public Benefit Organisations (PBO) did the company donate to? Complete any number between 1 and 99 which indicates the number of PBO’s the company donated to. This will display on the income tax return a section to be completed named ‘Donations allowable in terms of s18A to approved Public Benefit Organisations (PBO)’. In this section complete the details of the PBOs to whom donations were made.

TAX CREDITS 11.1.7

Will the company be claiming any PAYE credits reflected on an IRP5 tax certificate? Yes” or “No” must be selected. If “Yes” is selected, complete the next question.

Specify the number of IRP5 tax certificates This field accepts numeric values between 1 and 20. Based on the numeric value entered in this field, the PAYE Credits Available section in the income tax return will repeatedly be displayed for completion (e.g. if the numeric value 5 was entered then 5 PAYE Credits Available sections will display in the return for completion).

Will the company be claiming any Foreign Tax credits not relating to Capital Gain transactions in terms of s6quat and /or treaty? Yes” or “No” must be selected. If “Yes” is selected, the Foreign Tax credits: Taxable Foreign Sourced Income of Resident Companies – s6quat (excluding foreign capital gain/loss) section in the income tax return will be displayed for completion.

Will the company be claiming any Foreign Tax credits not relating to Capital Gain transactions in terms of s6quin? “Yes” or “No” must be selected. If “Yes” is selected, the Foreign Tax credits: Taxable South African Sourced Income – s6quin (already included in taxable income) section in the income tax return will be displayed for completion.

Were any foreign tax credits refunded / discharged during the year of assessment for which a rebate was allowed during a previous year of assessment in terms of s6quin? “Yes” or “No” must be selected. If “Yes” is selected, the Foreign Tax Credits Refunded / Discharged by the government of a foreign county in respect of rebate allowed by SARS in previous year – s6quin will be displayed for completion.

COMPANY INFORMATION 11.1.8

Is the company a partner in a partnership/ joint venture? “Yes” or “No” must be selected. If “Yes” is selected, complete the next question.

How many partnerships/ joint venture? This field accepts numeric values between 1 and 99. Based on the numeric value entered in this field, the Partnerships section in the income tax return will repeatedly be displayed for completion (e.g. if the numeric value 50 was entered then 50 Partnership sections will display in the return for completion).

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Is the company a Personal Service Provider as defined in the Fourth Schedule? “Yes” or “No” must be selected. If “Yes” is selected, the Personal Service Provider section in the income tax return will be displayed for completion.

Is the company resident in South Africa for income tax purposes? “Yes” or “No” must be selected. If “No” is selected, the Non-Residency section in the income tax return will be displayed for completion. If “Yes” is selected, complete the next question.

How many different classes of shares have been issued by the company? This field accepts numeric values between 1 and 100. Based on the numeric value

entered in this field, the Contributed Tax Capital section in the income tax return will repeatedly be displayed for completion (e.g. if the numeric value 5 was entered then 5 Contributed Tax Capital sections will display in the return for completion).

For Close Corporations, the definition of a “share” (any unit into which the proprietary interest in the company is divided) according to the Companies Act includes the members’ interests in a close corporation. Members’ interest therefore must be regarded as a class of share.

The distinction between different types of shares (e.g. ordinary, preference, redeemable etc.) must be declared separately. Furthermore, if the company has only issued one class of ordinary shares (for example) then a general description would be in order. However, if classes A, B and N ordinary shares have been issued then each class of ordinary share must be specified separately i.e. if there are shares with different rights for the different shareholders they must be declared separately.

Did the company qualify for an Urban Development Zone deduction in terms of s13quat? “Yes” or “No” must be selected. If “Yes” is selected, the Urban Development Zone (s13quat) section in the income tax return will be displayed for completion.

Did the company enter into any reportable arrangement in terms of s34 – 39 of the Tax Administration Act or s80M – S80T of the Income Tax Act? “Yes” or “No” must be selected. If “Yes” is selected, complete the next question.

Specify the number of reportable arrangements This field accepts numeric values between 1 and 100. Based on the numeric value entered in this field, the Reportable Arrangement section in the income tax return will be expanded to display a field for each reportable arrangement number for completion (e.g. if the numeric value 4 was entered then 4 Reportable Arrangement Numbers will display for completion in the Reportable Arrangement section of the return).

Were any dividends declared during the year of assessment? “Yes” or “No” must be selected. If “Yes” is selected, the Dividends Declared section in the income tax return will be displayed for completion.

Does the company elect to be a headquarter company in terms of s9I? “Yes” or “No” must be selected. If “Yes” is selected, the Headquarter Company System section in the income tax return will be displayed for completion.

Specify the main industry code A pop-up list with all the Standard Industry Codes (SIC) will be displayed on eFiling

and when the agent captures the information in the SARS branch. For non-eFilers, the Company Representative / Public Officer completing the ITR14 manually can access the Standard Industry Codes (SIC) available on www.statssa.gov.za.

If the main industry code starts with 05, 06, 07, 08 or 09: The Industry Related Information: Mining and Quarrying section in the income tax return will be displayed for completion

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If the main industry code starts with 41, 42 or 43: The Industry Related Information: Construction section in the income tax return will be displayed for completion

If the main industry code starts with 45, 46 or 47: The Industry Related Information: Wholesale and Retail Trade section in the income tax return will be displayed for completion

If the main industry code starts with 64, 65 or 66: The Industry Related Information: Financial and Insurance Activities section in the income tax return will be displayed for completion.

Is the company a subsidiary of a group of companies as defined in s1? “Yes” or “No” must be selected. If “Yes” is selected, the Company Structure section in the income tax return will be displayed for completion.

Did the company receive / accrue any foreign income or incur any foreign expenditure or pay any royalties, interest, dividends or consulting fees to a non-resident? “Yes” or “No” must be selected. If “Yes” is selected, the International section in the income tax return will be displayed for completion and the below question must be answered. For years of assessment commencing on or after 1 April 2012 (for prior years

refer to guide), did the company enter into any transaction, operation, scheme, agreement or understanding as set out in section 31 (1)(a)?

If” Yes” is selected, the following question will be displayed on the return, Furthermore the following sub-questions will also be displayed for completion Did the company receive / accrue income? “Yes” or “No” must be selected. If “Yes” is selected, the Transfer Pricing Received /

Receivable section and the Transfer Pricing Supporting Information container in the income tax return will be displayed for completion

Did the company incur expenditure? “Yes” or “No” must be selected. If “Yes” is selected, the Transfer Pricing Paid / Payable

section in the income tax return will be displayed for completion.

Significant amendments have been made to section 31 of the Income Tax Act 58 of 1962 (“ITA”), which relates to transfer pricing. The amended section 31 came into operation on 1 April 2012 and applies in respect of years of assessment commencing on or after that date. The “version” of section 31 applicable to year of assessment commencing before 1 April 2012 is referred to in this guide as the “old section 31”.

The data that needs to be provided in the transfer pricing sections of the return depends on the legislation that applies to the particular year of assessment. Therefore, the year of assessment in respect of which the return is being completed, will determine which “version” of section 31 will apply and therefore what data should be provided in the transfer pricing sections of the return.

For example: If the company’s financial year commences on 1 January 2012 , the first year of assessment to which the amended section 31 will apply, will be the 2013 tax year. For the 2012 tax year (i.e. the financial year ending 31 December 2012), the provisions of the “old section 31” will apply.

For years of assessment commencing before 1 April 2012:

For years of assessment commencing before 1 April 2012, the “old section 31” applies which reads as follows: “31 (2) Where any supply of goods or services has been effected- (a) Between –

(i)(aa) A resident (bb) Any other person who is not a resident (ii)(aa) A person who is not a resident

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(bb) A permanent establishment in the Republic of any other person who is not a resident (iii) (aa) A person who is a resident (bb) A permanent establishment outside the Republic of any other person who is a resident

(b) Between those persons who are connected persons in relation to one another (c) At a price which is either –

(i) Less than the price which such goods or services might have been expected to fetch if the parties to the transaction had been independent persons dealing at arm’s length (such price being the arm’s length price

(ii) Greater than the arm’s length price the Commissioner may, for the purposes of this Act in relation to either the acquirer or supplier, in the determination of the taxable income of either the acquirer or supplier, adjust the consideration in respect of the transaction to reflect an arm’s length price for the goods or services.”

During years of assessment commencing before 1 April 2012, where the company was party to a supply of goods or services (as defined in section 31(1) of the “old section 31”) between persons (as described in section 31(2)(a) and (b) of the “old section 31”) that resulted in the company:

For years of assessment commencing after 1 April 2012:

For years of assessment commencing after 1 April 2012, the “old section 31” applies which reads as follows: “31 (2) Where- (a) Any transaction, operation, scheme, agreement or understanding constitutes an

affected transaction (b) Any term or condition of that transaction, operation, scheme, agreement or

understanding – (i) Is a term or condition contemplated in paragraph (b) of the definition of

“affected transaction”, and (ii) Results or will result in any tax benefit being derived by a person that is a

party to that transaction, operation, scheme, agreement or understanding, the taxable income or tax payable by any person contemplated in paragraph (b) (ii) that derives a tax benefit contemplated in that paragraph must be calculated as if that transaction, operation, scheme, agreement or understanding had been entered into on the terms and conditions that would have existed had those persons been independent persons dealing at arm’s length”

During years of assessment commencing after 1 April 2012, where the company was party to a supply of goods or services (as defined in section 31(1)) between persons (as described in section 31(2)(a) and (b)) that resulted in the company:

11.2 COMPLETION OF RETURN

Once all the questions on the “Information to create this income tax return” page of the ITR14 have been completed, the return information must be completed as follows:

If the taxpayer is an eFiler, the fields listed in this section must be captured electronically on eFiling

If the taxpayer is a not a registered eFiler and obtained an ITR14 example copy from the SARS website, the fields listed in this section must be completed on the example copy of the return and once all fields have been completed, visit the nearest branch to have these fields captured by a SARS agent

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If the taxpayer is a not a registered eFiler and is using this guide to prepare the information required for capturing at the nearest SARS branch without printing an example copy of the ITR14, the fields as listed in this section must be used in preparation for capturing. Once all the fields have been prepared, the taxpayer must visit the nearest branch with all the prepared information to have these fields captured by a SARS agent.

COMPANY / CLOSE CORPORATION PARTICULARS AND TAX PRACTITIONER 11.2.1DETAILS

Note:

The following read only fields will be pre-populated on the return: Tax Reference Number Year of Assessment Registered Name Trading Name Company / CC registration number Financial year end (CCYYMMDD).

Please complete the following fields: Is this return in respect of a branch / permanent establishment / agency of a

foreign company? Select “Yes” or “No”

Please indicate where the majority of the company’s taxable income / loss is derived from (mark only one box) Select the relevant option from the following list: Eastern Cape Free State Gauteng KwaZulu Natal Limpopo Mpumalanga North West Northern Cape Western Cape International.

Source code of the main industry A pop-up list with all the Standard Industry Codes (SIC) will be displayed on eFiling and when the agent captures the information in the SARS branch. For non-eFilers, the Company Representative / Public Officer completing the ITR14 manually, can access the Standard Industry Codes (SIC) booklet on www.statssa.gov.za

State the profit code of your main source of income A pop-up list with all the main source of income codes will be displayed to select on eFiling. If the company is dormant this field will be pre-populated with code 9994 and locked. For non eFilers that are not dormant, the Company Representative/Public Officer completing the ITR14 manually, can access the following the main source codes by entering “Find a source code” on the SARS website www.sars.gov.za.

If the profit code is “other not specified”, please provide a description If the profit code of your main source of income ends with ‘98’, this is a mandatory free text field and the length is 56 blocks.

TAX PRACTITIONER DETAILS (IF APPLICABLE) 11.2.2

Registration No. Complete the tax practitioner’s registration number (alphanumeric field of 9 blocks).

Tel No. Complete the Telephone number (numeric field of 15 blocks)

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Tax Practitioner Email address Complete the email address (free text field of 52 blocks)

Mark here with an “X” if you declare that you do not have an email address If you don’t have an email address, indicate this by selecting the field “Mark here with an ‘X’ if you declare that you do not have an email address”. The email address field will be locked and greyed out.

DECLARATION 11.2.3

Note: Complete the date in the format (CCYYMMDD) The Company Representative / Public Officer’s login will serve as the authentication

for the ITR14 submission on eFiling. The Public Officer / Representative must sign the signature pad when the ITR14 is

submitted at a SARS branch. The ITR14 is a legal declaration to SARS and by signing you agree that the

reconciled information is accurate. You are obliged to ensure that a full and accurate disclosure is made of all relevant

information as required in the ITR14. Misrepresentation, neglect or omission to submit a declaration or supplying false information may result in prosecution.

VOLUNTARY DISCLOSURE PROGRAMME 11.2.4

This section will only display on the return if the question “Is this declaration or any part thereof made in respect of a VDP agreement with SARS?” in the “Information to create this income tax return” page is “Yes”

Please indicate the VDP application no. issued by SARS Complete the alphanumeric field of 10 blocks. The first three characters must start with “VDP”. No spaces or dashes should be entered when completing the VDP Application No.

INTERNATIONAL 11.2.5

This section will only display on the return if the question “Did the company receive / earn any foreign income or incur any foreign expenditure or pay any royalties, interest, dividends or consulting fees to a non-resident?” in the “Information to create this income tax return” is “Yes”

Note:

All foreign dividends are taxable in the hands of South African residents unless one of the exemptions set out below applies. Amounts received by a resident from a source outside of South Africa could be subject to the provisions of a tax treaty.

Section 10(1)(k)(ii) exempts foreign dividends received by or accruing to a person in any one of the following four situations: “(aa) To the extent that the profits out of which the dividend has been declared have

been taxed in South Africa or arose from dividends declared by a South African company to the company declaring the dividend.

(bb) If the dividend is declared by a foreign company which is listed both in South Africa and in a foreign country and more than 10% of the equity share capital is at the time of the declaration collectively held by the residents.

(cc) To the extent that the dividend does not exceed the profits that have been taxed in the shareholders hands in terms of s9D.

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(dd) If the shareholder holds at least 20% of the foreign company’s equity share capital and voting rights”.

Section 10(1)(k)(ii) is deleted with effect from the following dates: For natural persons, deceased and insolvent estates, and trusts – 1 March 2012 For other taxpayers (companies, etc) – 1 April 2012.

Section 10B came into effect on the above dates and this section applies to foreign dividends as well as dividends from headquarter companies. It exempts certain dividends totally from tax and some dividends in part, so that a South African resident either pays no income tax on foreign dividends received (where the 10% participation exemption applies), or tax at a lesser rate. Residents will pay tax at an effective rate not exceeding 15%.

Par 64B of the Eight Schedule disregards the capital gain or capital loss made by a South African resident on the disposal of an interest in the share capital of a foreign company if certain conditions are met. This is called the “participation exemption”. It also applies to the disposal of shares in a headquarter company.

Note: With effect from 1 January 2012 the definition of “foreign company” is removed from par 64B. The result is that the sale in a headquarter company will no longer be exempt in terms of this participation exemption if the sale is made by South African resident taxpayers.

The capital gain or capital loss on the disposal of shares in a foreign company is disregarded if the person disposing of the asset held at least 10% of the equity shares and voting rights in that foreign company immediately before and for at least 18 months prior to the disposal; and The disposal is to a non-resident (not being a controlled foreign company); or The disposal is a deemed disposal as a result of the company ceasing to be a

controlled foreign company or a person ceasing to be a resident; or The disposal is to a controlled foreign company of that person, or a controlled foreign

company that forms part of the same group of companies as the person.

A headquarter company must disregard any capital gain or capital loss determined in respect of the disposal of any equity share in any foreign company (other than an interest contemplated in paragraph 2(2)) if that headquarter company (whether alone or together with any other person forming part of the same group of companies as that headquarter company) immediately before that disposal held at least 10% of the equity shares and voting rights in that foreign company.

Note: With effect from 1 April 2012 the words “at least 20%” are replaced with “at least 10%”. This means that the participation exemption is accessible to more South African shareholders of foreign companies.

Select “Yes” or “No” for the following questions: Does the company own any foreign assets or investments? Did the company receive any income subject to foreign taxes paid / payable? Were any payments made to a non-resident person in compensation for the

rendering of services in South Africa? This field is applicable from 2015 onwards

If “Yes” the next field will be displayed “Total payments made” for completion.

FOREIGN EXCHANGE GAINS / LOSSES 11.2.6

Select “Yes” or “No” to the following questions:

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Is the foreign exchange gain / loss incurred in respect of an exchange item where the counterparty is a connected person?

If “Yes” is selected, the following question will be displayed for completion If “Yes”, was the foreign exchange gain / loss realised during this year of

assessment?

Is the company a domestic treasury management company as defined in section 1? This question is applicable for tax years 2015 and onwards If the answer is “Yes”, then the following fields will not be editable and all inputs will

be cleared: Income Statement, Income Items, Foreign Exchange Gain Income Statement, Expense Items Foreign Exchange Loss

If the answer is “No” then the following fields will be editable Income Statement, Income Items, Foreign Exchange Gain Income Statement, Expense Items Foreign Exchange Loss

FOREIGN DIVIDENDS 11.2.7

Did the company receive any foreign dividends? Select “Yes” or “No”

Has the company claimed an exemption for any foreign dividends as referred to in s10(1)(k)(ii)(dd) or s10B(2)(a)? Select “Yes” or “No”

Where any of the foreign dividends subject to the participation exemption? Select “Yes” or “No” CAPITAL GAINS 11.2.8

Has the company claimed an exemption for any amounts relating to the disposal of equity shares in a foreign company, as contemplated in par 64B of the Eight Schedule? Select “Yes” or “No”

SA WITHHOLDING TAX 11.2.9

Was any tax withheld against royalties, interest or dividends? Select “Yes” or “No”

CONTROLLED FOREIGN COMPANY 11.2.10

Select “Yes” or “No” for the following question and if “Yes”, complete the relevant “schedule”

Does the company together with any connected person in relation to the company hold more than 10% of the participation rights in any CFC? If “Yes”, complete the applicable schedule (IT10A/B)

A Controlled Foreign Company should complete the applicable IT10A/B Controlled Foreign Company CFC return available on www.sars.gov.za.

DOUBLE TAXATION 11.2.11

Did the company earn any income from a foreign source that was exempt from tax in accordance with a double taxation agreement? Select “Yes” or “No” to the following question:

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REPORTABLE ARRANGEMENT 11.2.12

This section will only display on the return if the question “Did the company enter into any reportable arrangement in terms of s34 – 39 of the Tax Administration Act or s80M-s80T of the Income Tax Act?” in the “Information to create this income tax return” page is “Yes”

Note:

The list of reportable arrangements has been significantly extended. Arrangements that constitute or would have constituted hybrid debt instruments (s8F) or hybrid equity instruments (s8E) remain reportable arrangements, but the prescribed period for determining this has been extended to ten years. Arrangements where the calculation of interest, finance costs, fees or other charges is wholly or partly dependent on the tax treatment of the arrangement also remain reportable arrangements. However, the requirement that provision be made for the variation thereof has been removed.

Arrangements will constitute reportable arrangements if any tax benefit is derived by virtue of the arrangement and should the arrangement contain any of the following characteristics:

The quantification of any finance costs or other charges are partially or fully

dependent on the tax benefits derived by the arrangement The transaction results in round tripping of funds (a defined term), involving an

accommodating or tax indifferent party (a defined term) or contains elements that have the effect of offsetting or cancelling each other

The transaction gives rise to a liability for generally accepted accounting purposes, but not for income tax purposes

The transaction does not result in a reasonable expectation of a pre-tax profit for any participant

The present value of the tax benefit exceeds the present value of the non-tax benefits derived by the participants.

Specify the reportable arrangement number: This alphanumeric field of length 12 will be repeated based on the numeric value entered in the field “Specify the number of reportable arrangements” in the “Information to create this Income Tax Return” page. Each field is mandatory for completion.

In each of the following questions a “Yes” or “No” must be completed Is the company a participant in any arrangements which have the following features?

Round trip financing (s80D)? Elements that have the effect of offsetting or cancelling each other (s80C)? Presence of an accommodating or tax-indifferent party (s80E)? DIVIDENDS DECLARED 11.2.13

This section will only display on the return if the question “Were any dividends declared during the year of assessment?” in the “Information to create this income tax return” is “Yes”

Note:

Dividends tax replaced Secondary Tax on Companies (STC) on 01 April 2012. The final dividend cycle for all companies ended on 31 March 2012, and any STC credit remaining at the end of the final cycle may be carried forward until 31 March 2015 to be utilised against the dividends tax liability.

Dividends tax operates from the principle that the liability for dividends tax is triggered by the payment of the dividend and the tax liability on cash dividends falls on the recipient (i.e. beneficial owner) of the dividend. However, dividends tax is administered on the basis of

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withholding the applicable tax from the cash dividend payment by either the company declaring the dividend or, where relevant, regulated intermediaries.

All currency fields (15 blocks) listed below must be completed. If a specific field is not applicable to the company, a zero (0) must be completed for the field. Specify the total dividends declared consisting of the following:

Total dividends subject to STC ( Dividends declared before 1 April 2012) Total dividends subject to dividends tax (Dividends declared and paid on or

after 1 April 2012) Total dividends exempt from dividends tax Total dividends subject to double taxation relief Total dividends in specie declared.

STC CREDITS 11.2.14

Note:

The dividends tax provisions allow a company which has STC credits to apply such credits to dividends declared and paid by it on or after 1 April 2012. To the extent that certain requirements are met, dividends to which STC credits are applied will not be subject to dividends tax.

In order for a company to apply any STC credits which it may have to dividends declared and paid by it, the balance of STC credits will firstly need to be quantified. The STC credit of a company is reduced by the dividends declared and paid by the company to the extent that the dividends are paid by the company on or after 1 April 2012.

In applying the STC credits which a company has, section 64J states that a dividend paid by a company will not be subject to dividends tax to the extent that:

The dividend does not exceed the STC credit of the company The company has by the date of payment notified the person to whom the dividend

is paid of the amount by which the dividend reduces the STC credit of the company.

Select “Yes” or “No” for the following question: Were any STC credits (s64J) utilised against the total dividends declared and paid? If “Yes” was selected, all currency fields (15 blocks) listed below must be completed. If a specific field is not applicable to the company, a zero (0) must be completed for the field: STC Credits opening balance Plus: STC credits received Less: STC credits utilised STC credits closing balance.

NON-RESIDENCY 11.2.15

This section will only display on the return if the question “Is the company resident in South Africa for income tax purposes?” in the “Information to create this income tax return” is “No”

Note:

A company will be a non-resident if it is not incorporated, established or formed in South Africa and does not have its place of effective management in South Africa. The place of effective management in the case of a company is the place where it is managed on a regular or day-to-day basis by the directors or senior managers of the company, irrespective of where the overriding control is exercised, or where the board of directors meets.

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Management by these directors or senior managers refers to the execution and implementation of policy and strategy decisions made by the board of directors. It can also be referred to as the place of implementation of the entity’s overall group vision and objectives.

Is the company resident outside South Africa due to:

Foreign incorporation (and not being effectively managed in SA)? By virtue of a treaty to avoid double taxation?

HEADQUARTER COMPANY SYSTEM 11.2.16

This section of the return will only display if the question “Does the company elect to be a headquarter company in terms of s9I?” in the “Information to create this income tax return” is “Yes”

Note:

The Headquarter Company (HQ) regime in terms of S9I of the Income Tax Act is intended to provide tax rules that promote South Africa (“SA”) as the regional financial hub for Africa. Consequently, the purpose of HQ Company tax regime is to ensure that the existing tax system does not hinder the use of South Africa by foreign multinationals as the regional economic hub for investments into Africa.

The current tax benefits enjoyed by HQ Companies include the following:

Dividends paid by HQ Companies not being subject to dividends tax Exemption from normal tax on dividends received or accrued from a HQ Company The attribution rules under the provisions of section 9D not applying to a HQ

Company The transfer pricing and thin capitalisation rules being relaxed on financial

assistance provided by and to a HQ Company and on back to back licensing of intellectual property through the use of a HQ Company. This result in net losses incurred on interest and royalties being ring-fenced

Exemption from withholding tax on royalties in respect of royalties paid by a HQ Company to a foreign person under specified circumstances

Exemption from withholding tax on interest in respect of interest paid by a HQ Company to a foreign person in specified circumstances.

In order to qualify as a HQ Company, a resident company must meet all of the following criteria as set out in Section 9I of the Act: Each holder of shares in the HQ company (whether alone or together with any other

company forming part of the same group of companies as that holder) must hold at least 10% of the HQ Company’s equity shares and voting rights. This requirement need not be complied with during any period during a year of assessment before the HQ Company commenced the carrying on of a trade

The HQ Company’s asset cost base must comprise at least 80% in foreign companies in which it holds (whether alone or together with a company forming part of the same group of companies as the HQ Company) at least 10% of the equity shares and voting rights (that is, any interest in equity shares, debt and intellectual property). This requirement need not be met in a year of assessment that the HQ Company did not at any time during that year of assessment own assets with a total market value not exceeding R50 000

If the income of the HQ exceeds R5 million per annum, at least 50% of the HQ Company’s gross income (excluding certain exchange differences) must be derived from the aforementioned asset base.

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The 10% holder of shares test in a HQ Company must be satisfied for the relevant year of assessment that it elects to be a HQ Company. The 80% asset test must be satisfied for the relevant year of assessment, as well as all prior years of assessment in which that company existed, that is, “the always qualification rule”. In contrast, the 50% gross income test needs to be satisfied only in respect of the relevant year of assessment. In addition the HQ Company must file an annual election to become (and remain) a HQ company.

A company that elects to be a Headquarter Company must complete the RCH01 Schedule for companies electing to be a Headquarter Company available on www.sars.gov.za. The completed RCH01 and all relevant material requested in the RCH01 must be attached as relevant material to the ITR14.

Select “Yes” or “No” for the following questions:

Does the company comply with the requirement that each of its holders of shares (alone or together with any other company that forms part of the same group of companies as the holders of shares) holds at least 10% of the equity shares and voting rights in the company throughout the year of assessment?

Does the company comply with the requirements that at least 80% of the cost of its total assets (excluding cash and bank deposits payable on demand) is attributable to assets as listed in s9I(2)(b)?

Does the company comply with the requirements that where its gross income (excluding exchange differences determined in terms of s24I) exceeds R5 million, at least 50% of that gross income consists of amounts described in s9I(2)(c)?

PERSONAL SERVICE PROVIDER 11.2.17

This section of the return will only display if the question “Is the company a Personal Service Provider as defined in the Fourth Schedule?” in the “Information to create this income tax return” is “Yes”

Note:

A Personal Service Provider is any company or trust where services are rendered on behalf of such company or trust to a client of a company or trust is rendered personally by any connected person (usually the shareholder, a relative of the shareholder or beneficiary in the case of a trust) as defined in s1 of the Income Tax Act in relation to such company and: The person rendering the service would be regarded as an employee of the client,

had such service been performed directly to the client; or The person or company or trust rendering the service is subject to the control and

supervision of the client as to the manner in which the duties are performed in rendering such service and must be mainly performed at the premises of the client; or

More than 80% of the income of the company or trust is directly or indirectly derived during the tax year from one client of the company or trust or any associated institution as defined in the Seventh Schedule of the Income Tax Act; or

If the company or trust throughout the year of assessment employs three or more full-time employees who are on a full-time basis engaged in the business of such company of rendering any such service, other than any employee who is a shareholder or member of the company or is a connected person in relation to such person will not be regarded as a personal service provider.

S23(k) is applicable to a Personal Service Provider and prohibits a deduction of the following expenses incurred: Legal expenses Bad debts

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Employers contribution to pension funds, provident funds or benefit funds Refunds of any amount, including voluntary awards, that are received or accrued for

services rendered or to be rendered or any amount received or accrued for or by virtue of any employment or the holding of any office as was included in the taxable income of that person

Refunds of restraint of trade payments Expenses in respect of premises Expenses for premises, finance charges, insurance, repairs and fuel and

maintenance cost for assets where the premises or assets are used wholly or exclusively for the purposes of trade.

Was any service rendered on behalf of the company rendered by a connected person in relation to the company? “Yes” or “No” must be selected. If “No” is selected, the company will not be regarded as a Personal Service Provider and the below error message will be displayed. If “Yes” is selected, complete the next question.

How many full-time employees are on a full-time basis engaged in rendering any service of the company, excluding those who are shareholders or members or are connected to such shareholder or member? If this value is greater than two, the company will not be regarded as a Personal

Service Provider and the below error message will be displayed. If this value is not in excess of two, complete the next question.

Note: For all the questions below “Yes” or “No” must be selected. If any of the following three questions is “No”, the company will not be regarded as a Personal Service Provider and the below error message will be displayed.

Would the person who is personally rendering the service have been regarded as an employee of the client if the service was rendered directly to the client and not through the company?

Must the person who is rendering the service, perform the duties mainly at premises of the client, and if so, is that person subject to the control or supervision of the client as to the manner in which the duties are performed or are to be performed?

Does more than 80% of the income from services rendered by the company consist of or is likely to consist of amounts directly or indirectly received from any one client or from any associated institution in relation to the client”?

Were the necessary adjustments made in respect of expenses not allowable in terms of s23(k)? A “Yes” or “No” must be selected.

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ADDITIONAL ASSESSMENT INFORMATION 11.2.18

For each of the following questions, a “Yes” or “No” must be selected: Do you give consent that SARS can provide the attached financial statements

to the Companies and Intellectual Property Commission (CIPC)? If “Yes” is selected, the intent from SARS is to make the AFS available

to the CIPC. Have the financial statements been audited? Have the financial statements been reviewed?

If “Yes” is selected in either two questions above, the following field must be completed:

If “Yes”, provide the name of the entity that conducted the audit/review: Free text field

Note that “No” can be selected to both the questions ‘Have the financial statements been audited’ and Have the financial statements been reviewed’ The following question will be available to answer if “Yes” was selected on the

question “Have the financial statements been audited”, Have the financial statements been qualified? Select “Yes” or “No”.

o If “Yes” is selected, the following question must be completed: o If “Yes”, does this have any tax effects? Select “Yes” or “No”

Did the company generate a capital gain / loss or revenue gain / loss in respect of the early termination of a foreign instrument?

Did the company prematurely terminate / unwind a hedge position where the tax value differs in relation to the economic value?

Did the company enter into any sale and leaseback agreement? Select “Yes” or “No”

Is the company a beneficiary of a trust? Select “Yes” or “No”. If “Yes” is selected, the following question must be completed: If “Yes”, how many trusts? Numeric value (3 blocks)

Does the company exercise any control of a trust? Select “Yes” or “No” Is the company a founder /settler / beneficiary to a foreign trust? Select “Yes”

or “No” Did the company make any donations to a foreign trust? Select “Yes” or “No” Is the company a REIT (Real Estate Investment Trust as defined in section 1)?

Select “Yes” or “No”.

CONTRIBUTED TAX CAPITAL 11.2.19

This section of the return will only display if the question “How many different classes of shares have been issued by the company?” in the “Information to create this income tax return” is “Yes”

Note:

Companies must have a Contributed Tax Capital (CTC) register in place for each class of share, which reflects its CTC balance as at 1 January 2011. CTC consists of a company’s pure share capital and share premium. This excludes any capitalised reserves as at 1 January 2011, but includes any consideration received after that date for the issue of shares, reduced by any subsequent distribution of CTC.

Your company’s CTC opening balance as at 1 January 2011 must have been calculated as follows:

The value of your company’s share capital and share premium prior to 1 January

2011 The above result must have been reduced by so much of the share capital and

share premium as would have constituted a dividend (as defined before 1 Jan 2011), had that share capital been distributed immediately before that date.

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The definition (applicable from 1 January 2011) of a dividend is linked to the CTC concept. If a company is distributing an amount to shareholders, an important question is whether the amount is a dividend or a reduction of CTC. A reduction of CTC will not constitute a dividend.

In terms of the definition any buy-back of shares or distribution by a company will constitute a dividend unless the amount transferred:

Reduces the CTC Constitutes shares in that company Is a buy-back of listed shares Constitutes a redemption in an interest of certain off-shore investment schemes

Description of class of shares Complete the description of class of shares in the 3 rows of 17 blocks each provided. For Close Corporations, the definition of a “share” (any unit into which the proprietary

interest in the company is divided) according to the Companies Act includes the members’ interests in a close corporation. Members’ interest therefore must be regarded as a class of share. The distinction between different types of shares (e.g. ordinary, preference, redeemable etc.) must be declared separately. Furthermore, if the company has only issued one class of ordinary shares (for example) then a general description would be in order. However, if classes A, B and N ordinary shares have been issued then each class of ordinary share must be specified separately i.e. if there are shares with different rights for the different shareholders they must be declared separately.

Complete the following currency fields (15 blocks) in Rands (No cents): Amount of contributed tax capital: (a) Immediately before 1 January 2011; or (b) Where the company became a resident since 1 January 2011 Add: Consideration received of accrued for the issue of shares by the company Deduct: Amounts transferred to holders of shares Deduct: Reduction as a result of the application of s42 Deduct: Reduction as a result of the application of s44 Deduct: Reduction as a result of the application of s 46

Balance of contributed tax capital at the end of the year of assessment: This field will automatically be calculated on eFiling or for non-eFilers when the SARS agent captures the return in the branch. The balance can never be a negative value.

URBAN DEVELOPMENT ZONE (s13quat) 11.2.20

This section of the return will only display if the question “Did the company qualify for an Urban Development Zone deduction (s13quat)?” in the “Information to create this income tax return” is “Yes”

Note:

A deduction in respect of the Urban Development Zone (UDZ) allowance will be allowed in the determination of the taxable income of a person that constructed, improved or purchased a building from a developer, provided all the requirements are complied with. When claimed, the tax incentive reduces the taxable income. The incentive is not limited to the taxable income and can create an assessed loss. This allowance (the UDZ allowance) is applicable in respect of the: Erection, extension or improvement of or addition to an entire building

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Erection, extension, improvement or addition of part of a building representing a floor area of at least 1 000 m²

Purchase of such a building or part of a building directly from a developer on or after 8 November 2005, provided that certain requirements are met.

A person will only qualify for the UDZ allowance in respect of a building or part of the building constructed, improved or purchased directly from a developer within an urban development zone (UDZ), if the building or that part of the building is used solely for the purposes of that person’s trade and was brought into use for these purposes on or before 31 March 2020. For more information on the “UDZ refer to the Guide to the Urban Development Zone (UDZ) Tax Incentive (Issue 4)” available on SARS website www.sars.gov.za.

The following questions must be completed with a “Yes” or “No”:

Is the building for which the company is claiming an allowance in an approved demarcated zone? If “No” is selected, the error message below will tell you that an UDZ allowance

cannot be claimed.

Did the company receive a certificate issued by the municipality confirming that the building for which the company is claiming an allowance is in an urban development zone? If “No” is selected, the error message below will tell you that an UDZ allowance

cannot be claimed. If “Yes” is selected, the company must be obligated to keep a certificate issued from

the municipality as relevant material for a period of five years in terms of section 29 of the Tax Administration Act.

Did the company erect, extend, add or improve the building for which the company is claiming an allowance with the sole purpose of disposing thereof directly on completion? If “Yes” is selected, the error message below will tell you that an UDZ allowance

cannot be claimed If “No” is selected, the following currency field (15 blocks) must be completed in

Rands (No Cents) If No, state the total amount incurred for the erection, extension, addition or

improvement of the building.

Did the company purchase the building or part thereof from a developer? If “Yes” is selected, the following currency field (15 blocks) must be completed in

Rands (No Cents): If Yes, state the purchase price of the building or part thereof State the amount of the purchase price deemed to be cost incurred by the

company in terms of s13quat(3B)

Did the company use the building erected, extended, improved or added on to in use solely for the trade of the company during the year of assessment? If “No” is selected, the error message below will tell you that an UDZ allowance

cannot be claimed.

Did the company incur costs for the erection, extension or addition relating to low cost housing (s13quat(3A))?

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SHARES 11.2.21

Was there any change in shareholder’s interest during the year of assessment (excluding listed companies)? Select “Yes” or “No”: COMPANY STRUCTURE 11.2.22

This section of the return will only display if the question “Is the company a subsidiary of a group of companies as defined in s1?” in the “Information to create this income tax return” is “Yes”

Specify the name of the ultimate holding company: Complete the free text field

Is the ultimate holding company resident outside South Africa? Specify “Yes” or “No”.

If Yes, specify the tax residency country code of the ultimate holding company: If the user clicks on this field, a popup is displayed which contains a list box containing a list of valid country names. The popup also contains two buttons: “Ok” and “Cancel”. Alternatively refer to Annexure F for a list of all the valid country names.

If “No” is selected, complete the following field: If No, specify the income tax reference number of the ultimate holding

company: Enter the income tax number

Select “Yes” or “No” to the following questions: Is the company a partner in an unincorporated joint venture? Is the company part of a group of companies with a group consolidated

turnover greater than R1 billion or is the company a financial services, mining or multinational enterprise?

BALANCE SHEET 11.2.23

The figures to be used for completion are the figures reflected in the annual financial statements of the Company (not the group or consolidated annual financial statements).

All fields listed in this section are compulsory for completion. If a specific field is not applicable to the company, a zero (0) must be completed for the field.

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Non-current assets

The following currency fields (15 blocks) must be completed in Rands (No Cents):

Fixed property Fixed assets (plant and equipment) Fixed assets - other Goodwill and intellectual property Investments in subsidiaries Long-term loans – interest free: Connected (Local) Long-term loans – interest free: Non-Connected (Local) Long-term loans – interest free: Connected (Foreign) Long-term loans – interest free: Non-Connected (Foreign) Long-term loans – interest bearing: Connected (Local) Long-term loans – interest bearing: Non-Connected (Local) Long-term loans – interest bearing: Connected (Foreign) Long-term loans – interest bearing: Non-Connected (Foreign) Deferred tax assets Other non-current assets.

Please provide descriptions relating to other non-current assets listed above: This free text field must only be completed if a value exceeding R0 (zero) was entered in the field “Other non-current assets”. The maximum length is 3 rows of 17 blocks

Total non-current assets: This currency field (15 blocks) will be calculated by SARS

Current Assets

The following currency fields (15 blocks) must be completed in Rands (No Cents): Gross inventory (incl. spare parts and consumables and work in progress) Less: Provisions for inventory write off Gross trade and other receivables (excl. debtors) Less: Provisions for trade and other receivables (excl. debtors) Gross debtors (excl. trade debtors) Less: Provisions for debtors (excl. trade debtors) Prepayments Group companies current accounts Short-term investments SA Revenue Service Cash and cash equivalents Other current assets.

Please provide descriptions relating to other current assets listed above: This free text field must only be completed if a value exceeding R0 (zero) was entered in the field “Other current assets”. The maximum length is 3 rows of 17 blocks

Total current assets: This currency field (15 blocks) will be calculated by SARS

Capital and Reserves Credit balances

The following currency fields (15 blocks) must be completed in Rands (No Cents): Share capital Share premium Non-distributable reserves for credit balances

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Distributable reserves (excl. retained profit / accumulated loss) Retained profit Other capital and reserves.

Please provide descriptions relating to other capital and reserves (credit balances) listed above: Free text field – The maximum length is 3 rows of 17 blocks

Please provide descriptions relating to other capital and reserves (credit balances) listed above: This free text field must only be completed if a value exceeding R0 (zero) was entered in the field “Other capital and reserves”. The maximum length is 3 rows of 17 blocks.

Debit balances

The following currency fields (15 blocks) must be completed in Rands (No Cents): Accumulated loss Other capital and reserves for debit balances.

Please provide descriptions relating to other capital and reserves (debit balances) listed above: This free text field must only be completed if a value exceeding R0 (zero) was entered in the field “Other capital and reserves for debit balances”. The maximum length is 3 rows of 17 blocks.

Total Capital and Reserves: This field will automatically be calculated on eFiling or for non-eFilers, when the SARS agent captures the return in the branch.

Non-Current Liabilities

The following currency fields (15 blocks) must be completed in Rands (No Cents): Long-term loans – interest free: Connected (Local) Long-term loans – interest free: Non-Connected (Local) Long-term loans – interest free: Connected (Foreign) Long-term loans – interest free: Non-Connected (Foreign) Long-term loans – interest bearing: Connected (Local) Long-term loans – interest bearing: Non-Connected (Local) Long-term loans – interest bearing: Connected (Foreign) Long-term loans – interest bearing: Non-Connected (Foreign) Deferred tax liability Other non-current liabilities.

Please provide descriptions relating to other non-current liabilities listed above: This free text field must only be completed if a value exceeding R0 (zero) was entered in the field “Other non-current liabilities”. The maximum length is 3 rows of 17 blocks.

Total non-current liabilities: This currency field (15 blocks) will be calculated by SARS

Current Liabilities

The following currency fields (15 blocks) must be completed in Rands (No Cents): Gross trade and other payables (Not older than 3 years) Gross trade and other payables (Older than 3 years) Provisions – excluding inventory and trade receivables Deposits and funds received in advance (excl. contract progress payments) Group companies current accounts Contract progress payments received in advance

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Current portion of interest bearing borrowings Current portion of interest free borrowings Overdraft and interest bearing short-term borrowings SA Revenue Service Shareholders for dividend / proposed dividend Other current liabilities.

Please provide descriptions relating to other current liabilities listed above: This free text field must only be completed if a value exceeding R0 (zero) was entered in the field “Other current liabilities”. The maximum length is 3 rows of 17 blocks.

Total current liabilities: This currency field (15 blocks) will be calculated by SARS

INCOME STATEMENT 11.2.24

The figures to be used are the figures reflected in the annual financial statement of the Company (not the group or consolidated annual financial statements).

When completing the Gross Profit / Loss part of the return, the normal accounting meaning attached to the terms reflected in the tax return must be followed. In the event that a company does not have any cost of sales, for example a property rental company, the turnover and gross profit will be the same amount.

All fields listed in this section are compulsory for completion. If a specific field is not applicable to the company, a zero (0) must be completed for the field.

Gross Profit / Loss

The following currency fields (15 blocks) must be completed in Rands (No Cents): Gross Sales (excl. credit notes) – Foreign: Connected Gross Sales (excl. credit notes) – Other than foreign connected Less: Opening stock Less: Credit notes on sales Less: Purchases – Foreign: Connected (excl. rebates) Less: Purchases – Other than foreign connected (excl. rebates) Add: Rebates Add: Closing stock (Gross excl. adjustments) Add: Inventory adjustments (Previous year stock provision reversed) Less: Inventory adj. (Current year stock provision (obsolete / slow-moving stock)).

Gross profit – subtotal: This currency fields (15 blocks) will be calculated by SARS. Either a gross profit or gross loss applies. If a gross profit applies, the gross loss field is not applicable. If the net figure is R0 (zero), then this value applies to the gross profit field.

Gross loss – subtotal: This currency fields (15 blocks) will be calculated by SARS. Either a gross profit or gross loss applies. A loss is indicated as a positive value in the gross loss field.

Income Items (Only credit amounts)

The following currency fields (15 blocks) must be completed in Rands (No Cents):

Admin, secretarial, rentals, guarantee fees and other services – Connected (Local) Admin, secretarial, rentals, guarantee fees and other services – Connected (Foreign) Admin, secretarial, rentals, guarantee fees and other services – Non-connected Bad and doubtful debts recovered

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Dividends – local Dividends – foreign REIT dividends received Foreign exchange gain Interest – Financial institutions Interest – Connected Interest – Non-connected Accounting profit on disposal of fixed assets and / or other assets Gross royalties and license fees Indemnity payments: Only applicable from year of assessment 2015 onwards Levy income Reversal of impairment loss recognised in profit or loss Other income.

Please provide descriptions relating to other income listed above: This free text field must only be completed if a value exceeding R0 (zero) was entered in the field “Other income”.

Control Total: This currency field (15 blocks) will be calculated by SARS.

Expense Items (Only debit amounts)

The following currency fields (15 blocks) must be completed in Rands (No Cents): Accommodation and travel expenses: Local Accommodation and travel expenses: Foreign Accounting loss on disposal of fixed assets / other assets Admin, secretarial, rentals, guarantee fees and other services – Connected (Local) Admin, secretarial, rentals, guarantee fees and other services – Connected (Foreign) Admin, secretarial, rentals, guarantee fees and other services – Non-connected Alterations and improvements (excluding repairs and maintenance) Bad debts written off Capital improvements – farming operations (par 12 of the First Schedule) Commission paid Compensation for loss of office Consulting, legal and professional fees Depreciation Directors’ / members’ remuneration Donations – (s18A) Donations – other Expenditure incurred directly or indirectly in effecting BEE and / or BBEEE

compliance Expenditure incurred in respect of company restructuring: Only applicable from year

of assessment 2015 onwards Employee expenses: Wages and salaries (excluding medical, provident and

pension) Employee expenses: Group life insurance Employee expenses: UIF contributions and SDL Employee expenses: Pension and Provident fund contributions Employee expenses: Medical scheme contributions Employee expenses: Membership of a professional body Employee expenses: Training Foreign exchange loss Impairment loss recognised in profit or loss Interest – financial institutions Interest – Connected (Local) Interest – Connected (Foreign) Interest – Non-connected Interest and penalties paid to SARS

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Insurance (excluding s37A payments) Insurance premium in respect of rehabilitation obligations (s37A) Key man insurance (s11(w)) Operating lease payments - Connected Operating lease payments – Non-connected Lease payments other than operating leases Management fees - Connected Management fees – Non-connected Partnership / Joint venture loss - Foreign Partnership / Joint venture loss - Local Provision for doubtful debts Repairs and maintenance Research and development costs (s11B): Only applicable from Year of Assessment

2003 onwards Research and development costs (s11D): Only applicable from Year of Assessment

2007 onwards Restraint of trade Royalties and license fees (excluding payments in terms of mineral and petroleum

resources royalties) – Local Royalties and license fees (excluding payments in terms of mineral and petroleum

resources royalties) – Foreign Royalty payments in respect of mineral and petroleum resources royalties – Local Royalty payments in respect of mineral and petroleum resources royalties – Foreign Small items and loose tools Other expenses.

Please provide descriptions relating to other income listed above: This free text field must only be completed if a value exceeding R0 (zero) was entered in the field “Other income”. The maximum length is 3 rows of 17 blocks

Control Total: This currency field (15 blocks) will be calculated by SARS.

Net Profit / Loss

Net Profit – Subtotal: This currency fields (15 blocks) will automatically be calculated on eFiling or for non-eFilers when the SARS agent captures the return in the branch. Either a net profit or net loss applies. If a net profit applies, the net loss field is not applicable. If the net figure is R0 (zero), then this value applies to the net profit field.

Net Loss – Subtotal: This currency fields (15 blocks) will automatically be calculated on eFiling or for non-eFilers when the SARS agent captures the return in the branch. Either a net profit or net loss applies. A loss is indicated as a positive value in the net loss field.

TAX COMPUTATION 11.2.25

In all instances where the accounting and tax treatment of items are different, the full accounting amount must be reversed and similarly the full tax treatment amount disclosed.

For example: Prepayment is claimed for accounting purposes on the income statement but is limited by section. 23H. The portion that is limited (not allowed) must be added back as a credit adjustment. If the relevant payment is on the balance sheet, then only the qualifying portion must be indicated under the ”Special allowances not claimed” section.

Please take note of the following provisions in the Income Tax Act, 1962 (Act No. 58 of 1962):

Section. 11(B) was effective for years of assessment commencing on or after 1 January 2004. The section applied to costs related to research and development conducted by a

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taxpayer. This section was repealed on 2 November 2006 and replaced by section 11D, however the capital allowances (in s11B) in respect of buildings, plant, machinery, implements, utensils and articles brought into use prior to 2 November 2006 continue to apply to those assets.

Section. 12J - Any person can invest in an approved Venture Capital Company (VCC), in exchange for investor certificates. However there are certain limitations that apply to an investor for tax purposes when investing into an approved VCC, namely:

Where any loan or credit is used to finance the expenditure in acquiring a venture

capital share and remains owing at the end of the year of assessment, the deduction is limited to the amount for which the taxpayer deemed to be at risk.

No deduction will be allowed where the taxpayer is a connected person to the Venture Capital Company at or immediately after the acquisition of any venture capital share in that Venture Capital Company.

The tax deduction is recouped if an investor disposes of the VCC shares to the extent of the initial VCC investment (under the general recoupment rules of section 8(4) of the Income Tax Act).

Section 12M allows as a deduction an amount paid by an employer as a lump sum to a former employee who retired on the grounds of old age, ill health, or infirmity or to a dependant of that former employee or under a policy of insurance taken out with an insurer solely in respect of one or more former employees who retired on the grounds of old age, ill health, or infirmity, or their dependants, but only to the extent that the lump sum is to be used to make contributions to a medical scheme or fund registered under the Medical Schemes Act, or under a similar provision in another country The payment to the individual has to be that he or she can pay the future medical scheme payments. Where the payment is to an insurer, the policy must be only for the retired employee and his or her dependants. If the policy only relates partly to medical scheme coverage, only that part of the premium is deductible. No deduction is allowed if the employer or a connected person to the employer has any further obligation or retains any further obligation (even a contingent obligation) to pay any other amount in respect of any shortfall under the policy.

Section 12O provides a 100% tax exemption (with effect from 1 January 2012) in respect of all receipts and accruals in respect of films of which principal photography commences on or after 1 January 2012, but before 1 January 2022.

Section 24F provides a 100% deduction in respect of the cost of production and purchase of films. It will no longer apply to films in respect of which the principal photography commenced on or after 1 January 2012, and to any film after 31 December 2012.

Section 24K provides that any amount contemplated in the definition of “interest rate agreement” is deemed to have been incurred (if it is an expense) or accrued (if it is income) on a day to day basis over the period in respect of which it is calculated.

Section 24K defines an “interest rate agreement” basically as an agreement in terms of which:

A person acquires the right to receive an amount calculated with reference to an

interest rate or rates on a notional amount or even a fixed amount; and That same person becomes liable to pay an amount calculated with reference to an

interest rate or rates or a fixed amount.

The interest rate agreement applies where a rate of interest is applied to a notional amount. In other words, a real loan does not exist.

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There are two parties to an interest rate swap. Interest rate swaps effectively allows a person to swap floating rates of interest for fixed rates of interest or vice versa in order to introduce certainty or make a profit out of potential change in the interest rates.

In terms of Section 18A, a deduction (subject to a 10% limit of taxable income) is allowed in respect of the sum of bona fide donations of cash or property in kind made by a taxpayer during the year of assessment to any: Public benefit organisation (PBO) approved by the Commissioner under s. 30; Institution, board or body contemplated in s. 10(1)(cA)(i) PBO approved by the Commissioner under s. 30 which provides funds or assets to

any other approved PBO, or to any institution, board or body contemplated in s10(1)(cA)(i)

Agency as contemplated in the definition of “specialised agency” in s. 1 of the Convention on the Privileges and Immunities of the Specialised Agencies, 1947, set out in Schedule 4 to the Diplomatic Immunities and Privileges Act, 2001 (Act 37 of 2001)

Department of government in the national, provincial or local sphere as contemplated in s 10(1)(a).

DEBIT ADJUSTMENTS (DECREASE NET PROFIT / INCREASE NET LOSS) NON-11.2.26TAXABLE AMOUNTS CREDITED TO THE INCOME STATEMENT

Only complete the relevant currency fields (15 blocks) where the adjustment is applicable to the company in Rands (no cents). On eFiling and in the branch, a pop-up selection box will display from which only those adjustments relevant to the company must be selected and completed: Accounting interest received / receivable Accounting profit on disposal of fixed and / or other assets Adjustments to comply with IFRS: Accounting: Only applicable from Year of

Assessment 2006 onwards Adjustments to comply with IFRS: Fair value: Only applicable from Year of

Assessment 2006 onwards Amounts previously taxed as received in advance Exempt foreign dividends (s10(1)(k)(ii)) Exempt foreign dividends (s10B) Exempt income received or accrued in respect of government grants (s12P): Only

applicable from year of assessment 2015 onwards. Exempt local dividends Income (other than foreign dividends) exempt from tax – s10 (excluding s10(1)(e)) Income exempt in respect of ships used for international shipping (s12Q): Only

applicable from year of assessment 2015 onwards Income not taxable by virtue of double taxation agreement Receipts and / or accruals of a capital nature Reversal of provisions Other.

Please provide descriptions relating to ‘other’ consolidated above: This free text field (maximum length of 3 rows with 17 blocks) must only be completed if a value exceeding R0 (zero) was entered in the field “Other”. On eFiling and in the branch, this field will only display if “Other” was checked on the selection list.

Control Total: This currency field (15 blocks) will be calculated by SARS.

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SPECIAL ALLOWANCES NOT CLAIMED IN THE INCOME STATEMENT 11.2.27

Only complete the relevant currency fields (15 blocks) where the special allowances are applicable to the company in Rands (no cents). On eFiling and in the branch, a pop-up selection box will display from which only those special allowances relevant to the company must be selected and completed: Restraint of trade (s11(cA)): Only applicable from Year of Assessment 2000

onwards Wear and tear allowance (s11(e)) Lease premium allowance (s11(f)) Improvement to leasehold premises (s11(g)) Doubtful debt allowance (s11(j)) Amortisation of lump sum contributed to retirement / benefit funds (s11(l)) Broad-based employee share plan (deduction this year) (s11(lA)): Only applicable

from Year of Assessment 2005 onwards Depreciable asset allowance (s11(o)) Expenditure before commencing trade (s11A) Deduction against Foreign Dividends (s11C): Only applicable from Year of

Assessment 2005 onwards Research and development deduction (s11B): Only applicable from Year of

Assessment 2003 onwards Research and development deduction (s11D) – Only applicable from Year of

Assessment 2007 onwards Machinery, plant, implements, utensils and articles deduction (s12B) Manufacturers, hotelkeepers, aircraft, ship, storage and packing of agricultural

products deduction (s12C) Pipelines, transmission and rail deduction (s12D): Only applicable from Year of

Assessment 2000 onwards Rolling stock (s12DA): Only applicable from Year of Assessment 2008 onwards Plant and machinery where company qualifies as a SBC (s12E): Only applicable

from Year of Assessment 2002 onwards Airport and port assets (s12F): Only applicable from Year of Assessment 2008

onwards Industrial assets used for qualifying industrial policy projects (s12G): Only applicable

from Year of Assessment 2002 onwards Learnership agreements registered / in effect (s12H): Only applicable from Year of

Assessment 2002 onwards Registered learnership agreements completed in current year (s12H): Only

applicable from Year of Assessment 2002 onwards Industrial policy projects: Brownfield projects (s12I): Only applicable from Year of

Assessment 2009 onwards Industrial policy projects: Greenfield projects (s12I): Only applicable from Year of

Assessment 2009 onwards Expenditure incurred in exchange for the issue of Venture Capital Company shares

(s12J): Only applicable from year of assessment 2010 onwards Energy efficiency savings deduction (s12L) Certified emission reductions exemption (s12K): Only applicable from Year of

Assessment 2009 onwards Deduction for medical lump sum payments (s12M): Only applicable from Year of

Assessment 2010 onwards Improvements not owned by the company (s12N): Only applicable from year of

assessment 2015 onwards. Improvements on property of which government holds a right of use or occupation

(s12NA): Only applicable from year of assessment 2015 onwards. Exemption in respect of films (s12O): Only applicable from YOA 2015 onwards Deduction in respect of buildings in special economic zones (s12S): only applicable

to year of assessment 2014 onwards. Deduction of buildings used in a manufacturing process (s13)

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Hotel building deduction (s13bis) Residential building deduction (s13ter) UDZ (s13quat) - erection of a new building this year: Only applicable from Year of

Assessment 2005 onwards UDZ (s13quat) - improvements this year: Only applicable from Year of Assessment

2005 onwards Commercial building deduction (s13quin): Only applicable from Year of Assessment

2008 onwards Residential unit deduction (s13sex): Only applicable from Year of Assessment 2009

onwards Low cost residential unit deduction (s13sept): Only applicable from Year of

Assessment 2009 onwards Reversal of closing values of work in progress (s 22(2A)) - previous year: Only

applicable from Year of Assessment 2003 onwards Reversal of closing values of consumable stock and spare parts (previous year):

Only applicable from Year of Assessment 2000 onwards Prepaid expenditure not limited by s23H: Only applicable from Year of Assessment

2000 onwards Allowance for future expenditure (s24C) Credit agreement and debtors allowance (hire-purchase) (s24) Interest incurred (s24J and s24JA) Film allowance (s24F) Deductions in respect of co-operatives (s27) Environment asset deduction (s37B): Only applicable from Year of Assessment

2000 onwards Environmental conservation and maintenance deduction (s37C) Lease payments on capitalised leased assets Other.

Please provide descriptions relating to ‘other’ consolidated above: This free text field

(maximum length of 3 rows with 17 blocks) must only be completed if a value exceeding R0 (zero) was entered in the field “Other”. On eFiling and in the branch, this field will only display if “Other” was checked on the selection list.

Control Total: This currency field (15 blocks) will be calculated by SARS.

CREDIT ADJUSTMENTS (INCREASE NET PROFIT / DECREASE NET LOSS): NON-11.2.28DEDUCTIBLE AMOUNTS DEBITED TO THE INCOME STATEMENT

Only complete the relevant currency fields (15 blocks) where the adjustments are applicable to the company in Rands (no cents). On eFiling and in the branch, a pop-up selection box will display from which only those special allowances relevant to the company must be selected and completed: Accounting interest paid / payable Accounting losses derived from foreign sources (excluding CFC): Only applicable

from Year of Assessment 2000 onwards Accounting loss on disposal of fixed and / or other assets Adjustments to comply with IFRS: Accounting: Only applicable from Year of

Assessment 2006 onwards Adjustments to comply with IFRS: Fair value: Only applicable from Year of

Assessment 2006 onwards Amortisation of lease premiums and improvements to leasehold premises Capital expenditure and / or losses Capital Improvement - Farming operations (par 12 of the First Schedule) Depreciation according to financial statements Donations (s18A) Donations - Other Expenses attributable to exempt income - Local

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Expenses attributable to exempt income - Foreign Expenses not actually incurred in the production of income (s11(a)) Financial assistance (s31) Interest paid in respect of capitalised leased assets Interest non-deductible in terms of s23K: Only applicable from Year of Assessment

2011 onwards Interest, penalties paid in respect of taxes (s23(d)) Interest not allowed in respect of debts owed to person(s) not subject to tax (s23M) :

Only applicable from year of assessment 2015 onwards Financial assistance (s31): Only applicable from 2015 YOA onwards Lump sum contributions to retirement and / or benefit funds Prepaid expenditure not allowed under s23H: Only applicable from Year of

Assessment 2000 onwards Limitation of interest deduction under s23N: only applicable from Year of

Assessment 2014 onwards. Provision for doubtful debt not deductible in current year Provisions not deductible current year (excluding doubtful debt) Short term insurance policy premiums not allowable (s23L): Only applicable from

year of assessment 2015 onwards Transfer pricing adjustments (excluding thin capitalisation adjustments) Other.

Please provide descriptions relating to ‘other’ consolidated above: This free text field must only be completed if a value exceeding R0 (zero) was entered in the field “Other”. On eFiling and in the branch, this field will only display if “Other” was checked in the selection list.

Control Total: This currency field (15 blocks) will be calculated by SARS.

ALLOWANCES / DEDUCTIONS GRANTED IN PREVIOUS YEARS OF 11.2.29ASSESSMENT AND NOW REVERSED

Only complete the relevant currency fields (15 blocks) where the adjustments are applicable to the company in Rands (no cents). On eFiling and in the branch, a pop-up selection box will display from which only those special allowances relevant to the company must be selected and completed: Allowance for future expenditure (s24C) Credit agreements and debtors allowance (hire-purchase) (s24) Doubtful debt allowance (s11(j)) Other.

Please provide descriptions relating to ‘other’ consolidated above: This free text field (maximum length of 3 rows with 17 blocks) must only be completed if a value exceeding R0 (zero) was entered in the field “Other”. On eFiling and in the branch, this field will only display if “Other” was checked in the selection list.

Control Total: This currency field (15 blocks) will be calculated by SARS. AMOUNTS NOT CREDITED TO THE INCOME STATEMENT 11.2.30

Only complete the relevant currency fields (15 blocks) where the adjustments are applicable to the company in Rands (no cents). On eFiling and in the branch, a pop-up selection box will display from which only those special allowances relevant to the company must be selected and completed: Amounts received in advance Amounts accrued but not received

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Closing value of consumable stock and spare parts Closing balance of stock values of work in progress - (s22(2A)): Only applicable from

Year of Assessment 2003 onwards Income deemed to be from a South African source Interest accrued (s24J and s24JA) Loans / advances granted by an insurer (par. (m) of def. of “gross income”) Transfer pricing adjustment (excluding financial assistance) Other.

Please provide descriptions relating to ‘other’ consolidated above: This free text field (maximum length of 3 rows with 17 blocks) must only be completed if a value exceeding R0 (zero) was entered in the field “Other”. On eFiling and in the branch, this field will only display if “Other” was checked in the selection list.

Control Total: This currency field (15 blocks) will be calculated by SARS.

RECOUPMENT OF ALLOWANCES / EXPENSES PREVIOUSLY GRANTED 11.2.31

Only complete the relevant currency fields (15 blocks) where the adjustments are applicable to the company in Rands (no cents). On eFiling and in the branch, a pop-up selection box will display from which only those special allowances relevant to the company must be selected and completed: Bad debts Lease charges (s8(5)) Wear and tear (s8(4)) Amount recouped in respect of VCC shares sold for which a tax deduction was

allowed: Only applicable from year of assessment 2015 onwards. Reduction of Debt (s19): – Only applicable from year of assessment 2015 onwards. Other.

Please provide descriptions relating to ‘other’ consolidated above: This free text field (maximum length of 3 rows with 17 blocks) must only be completed if a value exceeding R0 (zero) was entered in the field “Other”. On eFiling and in the branch, this field will only display if “Other” was checked in the selection list.

Control Total: This currency field (15 blocks) will be calculated by SARS.

AMOUNTS TO BE INCLUDED IN THE DETERMINATION OF TAXABLE INCOME 11.2.32BEFORE S18A DONATIONS (EXCLUDING ASSESSED LOSSES BROUGHT FORWARD AND CAPITAL GAINS / LOSSES)

From 2015 year of assessment onwards, the following note will be displayed: Note: Allowable s18A donations and related carry overs will be calculated by SARS

Calculated profit excluding net income from CFC: This currency field (15 blocks) will automatically be calculated on eFiling or for non-eFilers when the SARS agent captures the return in the branch. Either a calculated profit or calculated loss applies. If a calculated profit applies, the calculated loss field and associated source code is not applicable. If the net figure is R0 (zero), then this value applies to the calculated profit.

Source Code: If a calculated profit applies, this source code is compulsory for completion. Numeric field, a pop-up list will be displayed on eFiling or for non-eFilers when the SARS agent captures the return in the branch.

Calculated loss: This currency field (15 blocks) will automatically be calculated on eFiling or for non-eFilers when the SARS agent captures the return in the branch. Either a calculated profit or calculated loss applies. If a calculated loss applies, the calculated profit field and

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associated source code is not applicable. A loss is indicated as a positive value in the calculated loss field.

Source Code: If a calculated loss applies, this field is compulsory for completion. Otherwise this field is not applicable. Numeric field, a pop-up list will be displayed on eFiling or for non-eFilers when the SARS agent captures the return in the branch. Alternatively the source code booklet is available on www.sars.gov.za.

Imputed net income from CFC: This currency field (15 blocks) must be completed in Rands (No Cents)).

TAX ALLOWANCES / LIMITATIONS 11.2.33

Did the company make any contributions to the benefit of the employees to any pension, provident or medical fund in excess of 20% of the approved remuneration (s11(l))? This field must only be completed if the field Amortisation of lump sum contributed to retirement / benefit funds (s11(l)) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”.

Was the doubtful debt allowance as referred to in s11(j) based on a fixed percentage of all debtors as at year end in respect of the current year of assessment? This field must only be completed if the field Doubtful debt allowance (s11(j)) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”. This question enquires whether a doubtful debt allowance as referred to in section 11(j) was claimed and whether the allowance was based on a fixed percentage of total debtors.

Did the company complete IT180’s for learnership agreements in respect of s12H? This field must only be completed if the field Learnership agreements registered / in effect (s12H) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”.

Note: A company can claim a deduction for registered learnership agreements in

terms of the provisions of section 12H of the Income Tax Act. The agreement must be registered with the relevant Sector Education Training

Authority (SETA) in the prescribed manner. For more information refer to the following publications on the SARS website:

o Guide on Learnership Agreements o Interpretation Note: No. 20 (Issue 4) – Section 12H – Additional

Deduction For Learnership Agreements Note: The following relevant material must be made available on request by

SARS: o A copy of the learnership agreement o Confirmation of the SETA registration, o The employment contract; and o Adequate proof that the learnership has been completed successfully or

a confirmation from the SETA (if obtained within that year of assessment).

Did the company obtain a certificate issued by SANEDI in respect of energy efficiency savings for the purposes of claiming a s12L deduction? This field must only be completed if the field ‘Energy efficiency savings deduction (s12L)’ was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”. Applicable from 2015 YOA onwards

Does the company carry on any business as a hotelkeeper (s13bis)? This field must only be completed if the field Hotel building deduction (s13bis) was

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completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”.

Was the allowance claimed in respect of s13ter for the erection of at least 5 residential units? This field must only be completed if the field Residential building deduction (s13ter) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”.

Does the company use a building in the production of income in respect of trade other than the provision of residential accommodation (s13quin)? This field must only be completed if the field Commercial building deduction (s13quin)

was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”.

Did the company incur any insurance premiums on the lives of employees or directors? This field must be completed with a “Yes” or “No”.

If “Yes” is selected, the following currency field (15 blocks) must be completed in

Rands (No Cents): If Yes, state the total amount of insurance premiums incurred during the year

of assessment:

These fields must only be completed if the field Research and development deduction (s11D) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”. Did the company incur any expense on scientific or technological research and

development for the purpose of: The discovery of non-obvious information of a scientific and technological

nature? The creating of any inventions, any design or computer programme of

knowledge. Did the company incur any capital expenditure on buildings, machinery, plant,

implements or utensils? Did the company receive a government grant for the purpose of scientific of

technological research and development? Did the company complete an application and submit it to the Department of Science

and Technology?

According to section 29 of Tax Administration Act all the relevant material relating to the Research and Development claimed must be retained for a period of five years from the date on which ITR14 return is submitted to SARS. The relevant material must contain the following information regarding the claimed expenditure under section 11D: Proof that the research and development is approved by the Minister of Science and

Technology in terms of section 11D (9) Proof that the expenditure was incurred on or after the date of receipt of the

application by the Department of Science for approval of the research and development

Did the company enter into an instalment sale agreement as referred to in s12DA to

use the rolling stock as an asset to generate income? This field must only be completed if the field Rolling stock (s12DA) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”.

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Was the allowance claimed in terms of s12F only in relation to assets used directly in the production of income? This field must only be completed if the field Airport and port assets (s12F) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”.

Was the strategic industrial project for which an allowance was claimed approved by the Minister of Trade and Industry (s12G)? This field must only be completed if the field Industrial assets used for qualifying industrial policy projects (s12G) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”.

Did the company obtain approval from the Department of Science and Technology as contemplated in s11D? This field must only be completed if the field ‘Research and development deduction (s11D)’ in the Income Statement was completed. Select “Yes” or “No”. If the response to this question is “No”, a s11D deduction will not be allowed. Applicable for the 2015 YOA onwards

Was the industrial policy project for which an allowance was claimed approved by the Minister of Trade and Industry (s12I)? This field must only be completed if the field Industrial policy projects: Brownfield projects (s12I) or Industrial policy projects: Greenfield projects (s12I) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”.

Did the company receive a certificate from the venture capital company for which a deduction as claimed (s12J)? – Only applicable to years prior to 2015 year of assessment This field must only be completed if the field Deduction in respect of Venture Capital Company shares (s12J) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”.

Is the company the owner of the film as contemplated in s12O? This field must only be completed if the field Exemption in respect of films (s12O) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”.

Is the building for which an allowance is claimed used in the process of manufacturing (s13)? This field must only be completed if the field Deduction for buildings used in a manufacturing process (s13) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”.

Is the company the owner of the film as contemplated in s24F? This field must only be completed if the field Film allowance (s24F) was completed in the Tax Computation: Special Allowances Not Claimed in the Income Statement. Select “Yes” or “No”. DONATIONS ALLOWABLE IN TERMS OF S18A TO APPROVED PUBLIC BENEFIT 11.2.34

ORGANISATIONS (PBO)

This section will be displayed if the Representative/Public Officer selected “Yes” to the

question ‘Does the company want to claim donations made to an approved Public Benefit Organization (PBO) in terms of s18A?’

Total amount donated during the year assessment Complete the amount in rand value donated to all approved PBO’s. If 10 or less PBO’s were donated to, this field will be auto-calculated by SARS.

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Complete the details of the Public Benefit Organisation(s) to whom donations were made If the answer to the question ‘How many Public Benefit organisations did the company donate to?’ is ten or less, complete the details (reference number and amount donated to this PBO) of all the Public Benefit Organisations to whom donations were made.

Complete the details of the Public Benefit Organisations to whom the top 10 donations were made If the answer to the question ‘How many Public Benefit organisations did the company donate to?’ is more than ten, complete the details of the top ten Public Benefit Organisations to whom donations were made.

Reference number Complete the reference number (PBO number).

Amount donated to this PBO Complete in rand value the amount donated to the relevant PBO during the year of assessment.

DONATIONS ALLOWABLE IN TERMS OF S18A TO APPROVED PUBLIC BENEFIT 11.2.35

ORGANISATIONS (PBO) IN RESPECT OF A COLLECTIVE INVESTMENT SCHEME

This section will be displayed if the Representative/ Public Officer selected “Yes” to the questions ‘Is the company a collective investment scheme?’ and ‘Does the company want to claim donations made to an approved Public Benefit Organisation (PBO0 in terns of s18A?’.

Total amount donated during the year of assessment

Complete the total amount donated in rand value to approved PBO’s.

Average value of aggregate of all participatory interests held by investors in the portfolio Complete the average value of all participatory interest held by investors in the portfolio in rand value.

INVESTMENTS IN VENTURE CAPITAL COMPANIES (VCC) 11.2.36

Government has implemented a tax incentive for investors in selected enterprises through

a Venture Capital Company (VCC) regime. VCCs are intended to be a marketing vehicle to attract retail investors. An investor is any taxpayer who qualifies to invest in an approved Venture Capital Company. There are no special tax benefits for the VCC, only standard tax rules will apply.

From 1 January 2009, investors can claim expenditure incurred in exchange for the issue of VCC shares as a deduction from income. This deduction will not be subject to recoupment if the VCC shares are held for longer than five years. Secondary trades in VCC shares will not avail the investor of the same tax benefit.

The list of all approved VCCs can be found on the SARS website at www.sars.gov.za

Please note: Persons who intend to or who make investments in SARS approved VCCs, may not request a tax directive for purposes of section 12J under paragraph 11 of the Fourth Schedule to the Income Tax Act, in order to reduce his or her tax liability.

The section 12J deduction is claimed in the Tax Computation – Special Allowances not claimed in the Income Statement section of the return. If the shares for which a s12J deduction was claimed are sold within a period of 5 years, the recoupment must be

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declared in the Tax Computation – Recoupment of Allowances / Expenses previously granted.

This section will be displayed if the company indicated that it made investments in VCC by selecting ‘Yes’ to the following question ‘Did the company invest in SARS approved Venture Capital Companies in exchange for the issue of shares during this year of assessment?’

Please note: Only the expense incurred in exchange for the issue of shares will entitle the investor to the tax benefit. Where that original investor sells these shares to another person the tax benefit will NOT apply.

Note that this section will be repeated in line with your answer to the question ‘Specify the number of investments made in SARS approved Venture Capital Companies’.

Where your answer to the question ‘Specify the number of investments made in SARS approved Venture Capital Companies’ is greater than 10, complete only the top 10 investments made on the return.

Name of SARS approved VCC

Complete the name of the SARS approved VCC

VCC number

Complete the VCC number

Date of issue of VCC shares

Complete the date of issue of the VCC shares.

Amount invested in Venture Capital Company in exchange for the issue of shares

during the year of assessment Complete the amount in rand value invested in the VCC in exchange for the issue of shares during the year of assessment.

CORPORATE RULES 11.2.37

Select “Yes” or “No” to the following questions:

Was the company a party to any of the following transactions during the year of assessment:

Asset-for-share transactions as defined in s42? Amalgamation transaction as defined in s44? Intra-group transaction as defined in s45? Unbundling transaction as defined in s46? Liquidation, winding-up or deregistration distribution as defined in s47?

CAPITAL GAINS / LOSSES 11.2.38

Determining a capital gain or a capital loss

Use the financial information relating to any disposals or deemed disposals to complete this section. The Proceeds (selling price of the asset - Part VI of the Eighth Schedule) and the Base Cost (which includes the acquisition cost, improvement cost and direct cost in respect of the acquisition and disposal of the asset - Part V of the Eighth Schedule) must be completed to calculate the capital gain or loss.

Since the return does not make provision for the separate disclosure of “Roll over base cost” and “Exclusions/Adjustments (excluding annual exclusion rate)”, a manual calculation

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must be performed to calculate the correct capital gain or loss per main asset. The result of the manual calculation must be captured in the Capital Gain/Loss field against the applicable asset. Should there be more than one transaction for a specific asset type the amounts must be added together per asset type therefore the reason for the column "Number of Transactions".

Note: Refer to Annexure E for the main asset type source codes. The amount declared must be prior to the application of the inclusion rate as this will

programmatically be applied by SARS during the assessment process. Even numbered codes refer to gains and uneven numbered codes refer to losses.

SCHEDULE OF LOCAL CAPITAL GAINS AND LOSSES IN RESPECT OF ASSETS 11.2.39

The “Schedule of Local Capital Gains and Losses in respect of the disposal of assets” will only display on the return if the question “Did the company have any transactions or events which resulted in a locally sourced capital gain or loss?” in the “Information to create this income tax return” is “Yes”

Schedule of Local Capital Gains and Losses in respect of the disposal of assets

Note: At least one row in this schedule must be completed. If one of the fields in a row is completed with a value, then all the fields in that specific row must be completed.

The following currency fields (15 blocks) must be completed in Rands (No Cents): Proceeds Base Cost Capital Gain/Loss.

Number of Transactions: Numeric field, complete the number of transactions

Main Asset Type Source Code: Refer to Annexure E - Local Assets to complete this numeric field. A source code ending in an even number represents a capital gain and a source code ending in an uneven number represents a capital loss.

A person's capital loss determined in respect of the disposal of an asset to a connected person is treated as a ‘clogged’ loss. In other words, the capital loss is ring-fenced and may be set off only against capital gains arising from disposals to the same connected person. Whether a capital loss will be ring-fenced will depend on the relationship between the parties and the timing of that relationship.

A person must disregard any capital loss determined in respect of the disposal of an asset to a connected person. Capital losses of this nature are ‘clogged’ (ring-fenced). One of the reasons for determining the relationship immediately after the disposal is that in some cases the relationship is established only after the transaction. This situation typically occurs, for example, in an asset-for-shares swap under which one person disposes of an asset to a company in exchange for shares in that company.

Add: Adjustment for clogged losses included in amounts listed above to be carried forward (par 39 of the Eight Schedule): This field is mandatory from 2014 onwards. For prior years it is optional. If this field is not applicable to the company, complete the field with R0 (zero rand). This currency field (15 blocks) must be completed with the relevant amount. Note that clogged losses are not assessed losses carried forward by the SARS system.

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Less: Allowable deduction i.r.o prior year clogged losses carried forward on capital gain(s) to connected person(s) (par 39 of the Eighth Schedule): This field is mandatory from 2014 onwards. For prior years it is optional. If this field is not applicable to the company, complete the field with R0 (zero rand). This currency field (15 blocks) must be completed with the relevant amount.

Note that a clogged loss brought forward from a previous year may be set off only against capital gains arising in the current year with the same connected person. In addition the clogged loss must be limited to the amount of such capital gains. If the clogged loss exceeds the gain the excess must be carried forward.

Aggregate Gain: This currency field (15 blocks) will be calculated by SARS by subtracting all capital losses (Capital gain/loss with asset source code ending in an uneven number) from capital gains (Capital gain/loss with asset source code ending in an even number). Either an aggregate gain or aggregate loss applies. If an aggregate gain applies, the aggregate loss field is not applicable. If the net figure is R0 (zero), then this value applies to the aggregate gain field.

Aggregate Loss: This currency field (15 blocks) will be calculated by SARS by subtracting all capital losses (Capital gain/loss with asset source code ending in an uneven number) from capital gains (Capital gain/loss with asset source code ending in an even number). Either an aggregate gain or aggregate loss applies. If an aggregate loss applies, the aggregate gain field is not applicable.

SCHEDULE OF FOREIGN CAPITAL GAINS AND LOSSES IN RESPECT OF THE 11.2.40DISPOSAL OF ASSETS

The “Schedule of Foreign Capital Gains and Losses in respect of the disposal of assets” will

only display on the return if the question “Did the company have any transactions or events which resulted in a foreign sourced capital gain or loss?” in the “Information to create this income tax return” is “Yes”

Schedule of Foreign Capital Gains and losses in respect of the disposal of assets

Note: At least one row in this schedule must be completed. If one of the fields in a row is completed with a value, then all the fields in that specific row must be completed.

The following currency fields (15 blocks) must be completed in Rands (No Cents):

Proceeds Base Cost Capital Gain/Loss.

Number of Transactions: Numeric field, complete the number of transactions

Main Asset Type Source Code: Refer to Annexure E – Foreign Assets to complete this numeric field. A source code ending in an even number represents a capital gain and a source code ending in an uneven number represents a capital loss.

A person's capital loss determined in respect of the disposal of an asset to a connected person is treated as a ‘clogged’ loss. In other words, the capital loss is ring-fenced and may be set off only against capital gains arising from disposals to the same connected person. Whether a capital loss will be ring-fenced will depend on the relationship between the parties and the timing of that relationship.

A person must disregard any capital loss determined in respect of the disposal of an asset to a connected person. Capital losses of this nature are ‘clogged’ (ring-fenced). One of the

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reasons for determining the relationship immediately after the disposal is that in some cases the relationship is established only after the transaction. This situation typically occurs, for example, in an asset-for-shares swap under which one person disposes of an asset to a company in exchange for shares in that company.

Add: Adjustment for clogged losses included in amounts listed above to be carried forward (par 39 of the Eight Schedule): This field is mandatory from 2014 onwards. For prior years it is optional. If this field is not applicable to the company, complete the field with R0 (zero rand). This currency field (15 blocks) must be completed with the relevant amount.

Less: Allowable deduction i.r.o. prior year clogged losses carried forward on capital gain(s) to connected person(s) (par 39 of the Eighth Schedule): This field is mandatory from 2014 onwards. For prior years it is optional. If this field is not applicable to the company, complete the field with R0 (zero rand). This currency field (15 blocks) must be completed with the relevant amount.

Note that a clogged loss brought forward from a previous year may be set off only against capital gains arising in the current year with the same connected person. In addition the clogged loss must be limited to the amount of such capital gains. If the clogged loss exceeds the gain the excess must be carried forward.

Aggregate Gain: This currency field (15 blocks) will be calculated by SARS by subtracting all capital losses (Capital gain/loss with asset source code ending in an uneven number) from capital gains (Capital gain/loss with asset source code ending in an even number). Either an aggregate gain or aggregate loss applies. If an aggregate gain applies, the aggregate loss field is not applicable. If the net figure is R0 (zero), then this value applies to the aggregate gain field.

Aggregate Loss: This currency field (15 blocks) will be calculated by SARS by subtracting all capital losses (Capital gain/loss with asset source code ending in an uneven number) from capital gains (Capital gain/loss with asset source code ending in an even number). Either an aggregate gain or aggregate loss applies. If an aggregate loss applies, the aggregate gain field is not applicable.

Foreign tax credit in respect of Capital Gains (Rand value only): This currency field (15 blocks) must only be completed if a value exceeding R0 (zero) was calculated in the field Aggregate Gain or Aggregate Loss.

REDUCTION OF LOCAL ASSESSED CAPITAL LOSS DUE TO DEBT REDUCTION 11.2.41

This section will be displayed if “Yes” was selected on the return to the question ‘Was the

reduction for a local asset?’

Amount of debt reduction If an amount is entered into field next to code 4254, the Local Assessed Capital Loss Carry Over amount on ITS will programmatically be reduced with the amount entered and limited to the amount available for Local Assessed Capital Loss Carry Over. REDUCTION OF FOREIGN ASSESSED CAPITAL LOSS DUE TO DEBT 11.2.42

REDUCTION

This section will be displayed if “Yes” was selected on the return to the question ‘Was the

reduction for a foreign asset?’

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Amount of debt reduction If an amount is entered into field next to code 4254, the Local Assessed Capital Loss Carry Over amount on ITS will programmatically be reduced with the amount entered and limited to the amount available for Local Assessed Capital Loss Carry Over.

PAYE CREDITS (excluding provisional tax) 11.2.43

This section of the return will only display if the question “Will the company be claiming any PAYE credits reflected on an IRP5 tax certificate issued to the Company?” in the “Information to create this income tax return” is “Yes”

Note:

The PAYE credits Available section will be repeated according to the numeric value completed in the question “Specify the number of IRP5 certificates” field on the “Information to create this income tax return” page.

The following fields must be completed for each PAYE Credits Available section:

IRP5 certificate number: This field is prepopulated from 2015 YOA onwards PAYE Credit: Enter the PAYE credit amount. This field is applicable from 2015

YOA onwards

FOREIGN TAX CREDITS: Taxable Foreign Sourced Income of Resident 11.2.44Companies – s6quat (excluding foreign capital gain / loss)

This section of the return will only display if the question “Will the company be claiming any Foreign Tax credits not relating to Capital Gain transactions in terms of s6quat and/or a treaty?” in the “Information to create this income tax return” is “Yes”

During the assessment process the information in this section is used when calculating the allowable amount in foreign tax credits in terms of s6quat.

Relief from double taxation A South African resident is subject to normal tax on income derived worldwide (i.e.

income derived from sources within and outside of the Republic of South Africa). However, any income which is derived by a resident from a foreign source may have been or may be subjected to tax in a foreign country, resulting in double taxation on this amount. S6quat grants relief from any potential double taxation, in that any foreign taxes payable in respect of income derived from a foreign source which is included in the taxable income of a resident, may (subject to certain conditions) be allowed as a rebate against normal income tax payable in South Africa by the resident.

Conditions governing the granting of a rebate The sum of foreign taxes payable may qualify for a rebate against the normal income

tax payable by a resident if the following condition is met: The taxes must be taxes payable on income

Please note: Capital gains are included in taxable income (s26A) and the tax payable thereon is regarded as a tax on income. The taxes have to be imposed in terms of the laws of a foreign country,

whether it be at national, state, local or other level of government; The taxes should be proved to be payable, i.e. a legal obligation to pay must

exist; The taxes must be payable without any right of recovery by any person (other

than a right of recovery in terms of an entitlement to carry back losses arising during any year of assessment to a prior year of assessment); and

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The taxes ought to be payable in respect of amounts included in that resident’s taxable income.

Qualifying amounts of income derived from foreign sources

In order to qualify for a rebate in terms of s6quat, the foreign taxes must be payable in respect of any of the following items of income , provided it was included in the resident’s taxable income: Any income received by or accrued to a resident, excluding foreign dividends),

from an actual (real) source outside the Republic, which is not deemed to be from a source within the Republic (s6quat(1)(a)(i))

Any portion of the net income of a controlled foreign company (CFC) as contemplated in section 9D which is attributed to a resident that holds participation rights in that CFC under section 9D(2) (s6quat(1)(b)).

Any foreign dividends (s6quat(1)(d)) Any taxable capital gain as contemplated in s26A from a foreign source which

is not deemed to be from a source in the Republic (s6quat(1)(e)) Any amount dealt with above which is received by or accrued to a particular

person, for example, a trust, but which is deemed to be derived by another person (the resident) (s6quat(1)(f)(i) and (ii))

Any amount dealt with above which forms part of the capital of a trust established in a foreign country, which is regarded as being derived by a resident for either income tax or capital gains tax purposes (s6quat(1)(f)(iii)).

Limitation on the amount of the rebate

The amount of foreign taxes which qualify for the s6quat rebate is limited to a pro rata amount calculated in accordance with the following formula:

Taxable income derived from all foreign sources (A) × Normal tax payable on (B)

Taxable income derived from all sources (B)

The carry forward of an excess amount of foreign tax credits Where the sum of foreign taxes payable exceeds the amount of the rebate, the

excess amount may be carried forward to the immediately succeeding year of assessment. This excess amount will be ranked as a foreign tax credit available for set off against the normal tax payable in that year of assessment, in respect of foreign taxable income after the qualifying foreign taxes for that year have been taken into account.

Instances where no rebate is forthcoming

No foreign tax relief will be granted where the foreign taxes do not qualify for the rebate, for example if the actual source of the amount is located in South Africa. In such instances the amount may qualify as a deduction in terms of s6quat(1C) in determining taxable income for a particular year of assessment. The foreign taxes must have been incurred in respect of the resident’s trading operations and must be proved to be payable without a right of recovery. A resident may not elect to claim the foreign taxes either as a rebate or alternatively as a deduction. Only those foreign taxes that do not qualify for a rebate may be considered as a deduction.

If a resident elects for the relief provided in a tax treaty which does not refer to the s 6quat method of relief, none of the provisions of s6quat will apply. It should be noted that the carry forward of excess tax credits is only allowed in terms of the s6quat method of relief. None of South Africa’s double taxation agreements provide for the carry forward of excess tax credits.

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All fields listed in this section are compulsory for completion. If a specific field is not applicable to the company, a zero (0) must be completed for the field.

Net losses: This currency field (15 blocks) must be completed in Rands (No Cents) for Foreign income.

The following currency fields (15 blocks) for Foreign income and Imputed net income CFC must be completed in Rands (No Cents):

Taxable Income Foreign Tax Credits.

Foreign Tax Credits: This currency field (15 blocks) will automatically be calculated on eFiling or for non-eFilers when the SARS agent captures the return in the branch as the sum of Foreign Tax Credits.

How many of the above Foreign Tax Credits is being claimed in terms of a treaty? This field is only applicable from 2015 onwards. The currency must be completed in Rand value (No cents) (15 blocks)

FOREIGN TAX CREDITS: SOUTH AFRICAN SOURCED INCOME – S6QUIN 11.2.45(ALREADY ELSEWHERE INCLUDED IN THIS RETURN) – S6QUIN (RANDS ONLY, UNLESS CENTS SPECIFIED)

This section of the return will only display if the question “Will the company be claiming any Foreign Tax credits not relating to Capital Gain transactions in terms of s6quin?” in the “Information to create this income tax return” is “Yes”

Section 6quin provides for a rebate for foreign taxes paid on income derived by a taxpayer from services rendered in South Africa.

The return of foreign tax withheld (FTW01) and the relevant material in respect of foreign tax withheld must be sent to SARS within 60 days from the date the tax was withheld or paid. The declaration must be sent to 6quin@sars.gov.za

The return of Foreign Tax Withheld (FTW01) can be downloaded from the SARS website on www.sars.gov.za

The amount of income must be from a source within the Republic and received by or accrued to a resident for services rendered.

With the submission of the ITR14 the currency must be translated to the currency of the Republic at the last day of the year of assessment by applying the average exchange rate for the year of assessment.

The tax credit may be in respect of an amount of tax levied by any sphere of the government of any country

Other than the Republic With which the Republic has concluded a Double Tax Agreement (DTA).

Where a DTA is not concluded between the Republic and the other country a tax credit may also be in respect of the amount of tax imposed in terms of the laws of that country.

The following currency fields (15 blocks) must be completed in Rands (No Cents):

Taxable Income from services rendered in South Africa taxed outside the RSA

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Select “Y” or “N” to the question “Was the declaration of foreign tax withheld (FTW01) submitted to the Commissioner within 60 days? Select “Y” if the submission was made to the Commissioner within 60 days

Select “Y” or “N” to “Please confirm that this amount was not claimed as a deduction in terms of s6quat (1C)?”, Select “Y” if the amount was not claimed as a deduction in terms of s6quat(1C)

Foreign Tax Credits.

FOREIGN TAX CREDITS REFUNDED / DISCHARGED BY THE GOVERNMENT OF A 11.2.46FOREIGN COUNTRY IN RESPECT OF A REBATE ALLOWED BY SARS IN A PREVIOUS YEAR – S6QUIN

This section will display if “Y” was selected to “Were any foreign tax credits refunded / discharged during the year of assessment for which a rebate was allowed during a previous year of assessment in terms of s6quin?”

Complete the amount refunded /discharged under “Specify the portion of the amount so

refunded / discharged as was previously allowed by SARS as a rebate” field.

PARTNERSHIPS/JOINT VENTURES 11.2.47

This section of the return will only display if the question “Is the company a partner in a partnership/joint venture?” in the “Information to create this income tax return” is “Yes”

Note:

The Partnerships section will repeat according to the numeric value entered in the question “How many partnerships” on the “Information to create this income tax return” page.

If 5 Partnerships sections were created, it is mandatory that all 5 must be completed. If incorrectly created, refer back to the “Information to create this income tax return” to rectify.

The following fields must be completed for each Partnerships section

Partnership Name: Free text field (maximum length is 53 blocks) Specify the company’s profit / loss sharing % during the year of assessment:

Numeric field – complete the percentage Indicate if the company derived a profit / loss from this partnership during the year of

assessment: Select “Profit” or “Loss” Indicate if this information is in respect of a local or a foreign partnership: Select

“Local” or “Foreign”.

TRANSFER PRICING: RECEIVED / RECEIVABLE 11.2.48

This section of the return will only display if the question “Referring to legislation applicable to years of assessment commencing on or after 1 April 2012 (refer to guide for years of assessment prior to 1 April 2012), did the company enter into an affected transaction, as set out in s31(1) “affected transaction” (a), where the company: Received / earned foreign income?” in the “Information to create this income tax return” is “Yes”

Note:

Transfer pricing happens whenever two related companies – that is, a parent company and a subsidiary, or two subsidiaries controlled by a common parent – trade with each other, as when a US-based subsidiary of Company X, for example, buys something from a South African-based subsidiary of Company X. When the parties establish a price for the transaction, they are engaging in transfer pricing.

If two unrelated companies trade with each other, a market price for the transaction will generally result. This is known as “arms-length” trading, because it is the product of

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genuine negotiation in a market. This arm’s length price is usually considered to be acceptable for tax purposes.

For years of assessment commencing before 1 April 2012, the data to be provided in the Transfer pricing Received and Receivable section of the return is for direct transactions between persons (as described in section 31(2)(a) and (b) of the “old section 31”). Reference to the words ‘operation, scheme, agreement or understanding directly or indirectly entered into’ should be ignored.

All fields listed in this section are compulsory for completion. If a specific field is not applicable to the company, a zero (0) must be completed for the field.

Note: Where one field in a line (row) is completed, all columns fields in that row must be completed

The following currency fields (15 blocks) must be completed in Rands (No Cents) for each column:

Sale of goods Commission received / receivable Interest received / receivable Royalties or license fees received / receivable Admin, secretarial fees, rentals received / receivable Insurance premiums received / receivable Other finance charges received / receivable Research & Development fees received / receivable Other income received / receivable.

The columns are subdivided into the following categories:

Foreign Connected Total Aggregate Value – Complete the aggregate value for the relevant

transaction. No of Jurisdictions - Indicate the number of jurisdictions (enter a number

between 0 and 999) for each of the currency fields mentioned above. This field must be completed with a zero (0) if the Total Aggregate Value for the relevant transaction is R0. If the number of jurisdictions captured is between 1 and 5, the fields ‘Top 5 Jurisdictions (Country Code)’ and ‘Transaction Value – Foreign Connected per country’ will be repeated based on the number of jurisdictions indicated. If the value captured is greater than 5, the fields ‘Top 5 Jurisdictions (Country Code)’ and ‘Transaction Value – Foreign Connected per country’ will be repeated a maximum of 5 times and the top 5 jurisdictions with the highest transaction value must be completed.

Top 5 Jurisdictions (Country Code) – capture the relevant country codes as reflected in Appendix F (limited to the top 5 jurisdictions).

Transaction Value: Foreign connected per country – capture the relevant transaction value per country code (limited to the top 5 jurisdictions).

Foreign: Non- Connected Total Aggregate Value – Complete the aggregate value for the relevant

transaction. No of Jurisdictions - Indicate the number of jurisdictions (enter a number

between 0 and 999) for each of the currency fields mentioned above. This field must be completed with a zero (0) if the Total Aggregate Value for the relevant transaction is R0. If the number of jurisdictions captured is between 1 and 5, the fields ‘Top 5 Jurisdictions (Country Code)’ and ‘Transaction Value – Foreign Connected per country’ will be repeated based on the

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number of jurisdictions indicated. If the value captured is greater than 5, the fields ‘Top 5 Jurisdictions (Country Code)’ and ‘Transaction Value – Foreign Connected per country’ will be repeated a maximum of 5 times and the top 5 jurisdictions with the highest transaction value must be completed.

Top 5 Jurisdictions (Country Code) – capture the relevant country codes as reflected in Appendix F (limited to the top 5 jurisdictions). Disclosure of the transaction value per country is not required for Foreign: Non-Connected.

TRANSFER PRICING: PAID / PAYABLE 11.2.49

This section of the return will only display if the question “Referring to legislation applicable to years of assessment commencing on or after 1 April 2012 (refer to guide for years of assessment prior to 1 April 2012), did the company enter into an affected transaction, as set out in s31(1) “affected transaction” (a), where the company: Incurred expenditure?” in the “Information to create this income tax return” is “Yes”

All fields listed in this section are compulsory for completion. If a specific field is not applicable to the company, a zero (0) must be completed for the field.

For years of assessment commencing before 1 April 2012, the data to be provided in the Transfer Pricing Paid and Payable section of the return is for direct transactions between persons (as described in section 31(2)(a) and (b) of the “old section 31”). However, interest paid/ payable includes indirect financial transactions such as back to back arrangements. Reference to the words ‘operation, scheme, agreement or understanding directly or indirectly entered into’ should be ignored. Please refer to section 31(3) of the “old section 31” read together with Practice Note 2 of 14 May 1996 for further guidance relating to the calculation of the financial assistance to fixed capital ratio for years of assessment commencing prior to 1 April 2012.

Note: Where one field in a line (row) is completed, all columns fields in that row must be completed

The following currency fields (15 blocks) must be completed in Rands (No Cents) for each column:

Purchase of goods Commission payable Interest paid / payable Royalties or license fees paid / payable Admin, secretarial fees, rentals paid / payable Guarantee fees paid / payable Insurance premiums paid / payable Other finance charges paid / payable Research & Development fees paid / payable Other expenses paid / payable.

The columns are subdivided into the following categories:

Foreign Connected Total Aggregate Value – Complete the aggregate value for the relevant

transaction. No of Jurisdictions - Indicate the number of jurisdictions (enter a number

between 0 and 999) for each of the currency fields mentioned above. This field must be completed with a zero (0) if the Total Aggregate Value for the relevant transaction is R0. If the number of jurisdictions captured is between 1 and 5, the fields ‘Top 5 Jurisdictions (Country Code)’ and ‘Transaction Value – Foreign Connected per country’ will be repeated based on the

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number of jurisdictions indicated. If the value captured is greater than 5, the fields ‘Top 5 Jurisdictions (Country Code)’ and ‘Transaction Value – Foreign Connected per country’ will be repeated a maximum of 5 times and the top 5 jurisdictions with the highest transaction value must be completed.

Top 5 Jurisdictions (Country Code) – capture the relevant country codes as reflected in Appendix F (limited to the top 5 jurisdictions).

Transaction Value: Foreign connected per country – capture the relevant transaction value per country code (limited to the top 5 jurisdictions).

Foreign: Non- Connected Total Aggregate Value – Complete the aggregate value for the relevant

transaction. No of Jurisdictions - Indicate the number of jurisdictions (enter a number

between 0 and 999) for each of the currency fields mentioned above. This field must be completed with a zero (0) if the Total Aggregate Value for the relevant transaction is R0. If the number of jurisdictions captured is between 1 and 5, the fields ‘Top 5 Jurisdictions (Country Code)’ and ‘Transaction Value – Foreign Connected per country’ will be repeated based on the number of jurisdictions indicated. If the value captured is greater than 5, the fields ‘Top 5 Jurisdictions (Country Code)’ and ‘Transaction Value – Foreign Connected per country’ will be repeated a maximum of 5 times and the top 5 jurisdictions with the highest transaction value must be completed.

Top 5 Jurisdictions (Country Code) – capture the relevant country codes as reflected in Appendix F (limited to the top 5 jurisdictions). Disclosure of the transaction value per country is not required for Foreign: Non-Connected.

The following 3 fields are decimal fields that must be completed: Specify the financial assistance to fixed capital ratio

Mandatory field if a value of greater than zero rand was entered in the “Financial assistance (s31) field in the Tax Computation container. This question is only relevant if financial assistance was received by the company. If the year of assessment commenced prior to 1 April 2012, only complete if the company received financial assistance from a non-resident connected person or from an investor as defined in section 31(3), or else complete with a zero(0). This is the debt to equity ratio for years of assessment commencing on or after 1 April 2012 and should be calculated as follows: The debt is the debt determined in terms of International Financial Reporting

Standards (“IFRS”) during the year of assessment. Debt for purposes of arm’s length testing will therefore include, for example straightforward loans, advances and debts and items that are economically equivalent to debt such as finance leases, certain structured derivative financial instruments and components of hybrid instruments.

The equity amount to be used for the purposes of this calculation is all items that are treated as equity in terms of IFRS.

Specify the debt in relation to EBITDA (earnings, before interest, taxes, depreciation, and amortisation) ratio: This field must only be completed if the value of the field “Interest paid /

payable” exceeds R0 (zero). This question is only relevant for years of assessment commencing on or after 1

April 2012. For years of assessment commencing prior to 1 April 2012, complete with a zero (0).

The debt to EBITDA (earnings before interest, taxes, depreciation and amortisation) ratio should be calculated as follows: o The ratio to be calculated should be read as follows: Debt to EBITDA

and the reference to the words ‘interest paid’ should be ignored. o In determining the nature of debt the principles and treatment which

would be adopted in financial statements prepared in terms of IFRS

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should be used. Debt for purposes of arm’s length testing will therefore include, for example, straightforward loans, advances and debts and items that are economically equivalent to debt such as finance leases, certain structured derivative financial instruments and components of hybrid instruments.

o EBITDA should be determined in accordance with the principles and basis of recognition of its component parts as would be adopted in financial statements prepared in terms of IFRS.

Specify the EBITDA (earnings, before interest, taxes, depreciation, and amortisation) to finance cost ratio: This field must only be completed if the value of the field “Interest paid / payable” exceeds R0 (zero). This question is only relevant for years of assessment commencing on or after 1 April 2012. For years of assessment commencing prior to 1 April 2012, complete with a zero (0). This ratio should be calculated as follows EBITDA should be determined in accordance with the principles and basis

of recognition of its component parts as would be adopted in financial statements prepared in terms of IFRS.

The ‘interest paid’ must include interest, dividends and other charges paid and accrued on all items treated as debt in terms of IFRS. Items that are economically equivalent to debt such as finance leases, certain structured derivative financial instruments and components of hybrid instruments should also be taken into account.

The “interest” component, for purposes of ‘interest paid’ should be computed on a gross basis (excluding interest received and equivalent items in terms of IFRS).

This ratio should only be completed if the value of the field exceeds R0 (zero).

Specify the debt in relation to total tangible assets ratio: Only applicable from year of assessment 2015 onwards.

TRANSFER PRICING SUPPORTING INFORMATION 11.2.50

This section of the return will only display if the question “Did the company enter into an affected transaction as defined in s31 where the company: Received / earned foreign income?” in the “Information to create this income tax return” is “Yes”

Select “Yes” or “No” for the following questions:

Does the company have transfer pricing documentation that supports the pricing policy applied to each transaction between the company and the foreign connected person during the year of assessment as being at arm’s length? Please note that this question must be answered as “NO” if:

The transfer pricing documentation supporting the pricing policy applied does not

cover each transaction with the company and the foreign connected person; or Where such documentation is incomplete at the time of completing this return and is

not available for immediate submission to the SARS if requested.

Was there any change between the company and a non-resident connected person since the previous reporting period with respect to the transfer pricing methodologies/transaction, operation, scheme, agreement or understanding classification? – Only applicable to 2015 YOA onwards

Did the company conduct any outbound transaction, operation, scheme, agreement for no consideration with a connected person that is tax resident outside South Africa?

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Did the company transact with a connected person that is a tax resident in a country jurisdiction that has a corporate tax rate that is less than 18% or is a tax haven?

Did the company transact with a connected person that is tax resident in a country with which South Africa does not have a tax treaty? – Only applicable to 2015 YOA onwards

Did the company transact with a connected person that is tax resident in a tax haven / low tax jurisdiction? Please note that for the purposes of answering the question the term ‘tax haven/ low tax jurisdiction” means: any jurisdiction with an effective corporate tax rate that is less than 75% of South Africa’s statutory corporate tax rate.

Did the company make a year-end adjustment to achieve a guaranteed profit margin? Please note that this question must be answered “YES” if: A year end adjustment was made to achieve a guaranteed profit margin either for

the company itself OR for a foreign connected person.

Is the “tested party”, of the transaction operation, scheme, agreement or understanding, a tax resident outside South Africa? Select “Yes” or “No”, if “Yes” is selected the following question will be displayed for completion ‘How many tested party/parties of the transaction operation, scheme, agreement or understanding are resident outside South Africa?’ - Only applicable to year of assessment 2015 onwards

How many tested party/parties of the transaction operation, scheme, agreement or understanding are resident outside South Africa? Indicate the number of tested party/parties (enter a number between 1 and 99) of the transaction, operation, scheme, agreement or understanding that are resident outside of South Africa. Only applicable to year of assessment 2015 onwards

Did the company, on or after 1990, transfer, alienate or dispose of any South African developed (or previously South African registered) Intellectual Property to any non-resident connected person or any foreign branch of a South African resident? Select “Yes” or “No”. Only applicable to year of assessment 2015 onwards

MINING AND QUARRYING 11.2.51

This section of the return will only display if the main industry code starts with 05, 06, 07, 08 or 09 the in the “Information to create this income tax return”.

Select “Yes” or “No” for the following questions:

Did the company conduct mining operations in more than one separate and distinct mine?

Did the company acquire a mining operation as a going concern during the year of assessment?

Did the company acquire / dispose of mining property and equipment as envisaged in s37?

Specify the % of the company’s total turnover that relates to the buy-in of minerals.

Did the company conduct prospecting outside South Africa? Did the company conduct mining / mining operations where the company is not

the legal owner of the mining right?

Note: A company that conducted mining activities must complete the GEN-001 mining schedule available on www.sars.gov.za. The completed GEN-001 must be attached as a relevant material to the ITR14.

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CONSTRUCTION 11.2.52

This section of the return will only display if the main industry code starts with 41, 42 or 43 in the “Information to create this income tax return”.

Select “Yes” or “No” for the following questions:

Did the company have any creditor’s retentions with sub-contractors of services?

Did the company incur any losses on contract work in progress which is required to be declared as into trading stock in terms of s22(3A)?

WHOLESALE AND RETAIL TRADE 11.2.53

This section of the return will only display if the main industry code starts with 45, 46 or 47 in the “Information to create this income tax return.”

Did the company enter into an agreement to disclose the debtor’s book to a 3rd

party? Select “Yes” or “No”

FINANCIAL AND INSURANCE ACTIVITIES 11.2.54

This section of the return will only display if the main industry code starts with 64, 65 or 66 in the “Information to create this income tax return”.

Select “Yes” or “No” for the following questions:

If the company is a bank, has the company claimed a doubtful debt provision in excess of the amount agreed upon with SARS?

Has the company made a capital contribution or advanced a loan to any trust? Where the taxpayer has claimed a deduction for any provision related to claims

intimated but not reported or to outstanding claims, does such provision factor in an amount related to ex gratia payments?

Note: A company that conducted short term insurance activities must complete the ICS01 - short term insurance schedule available on www.sars.gov.za. The completed ICS01 and all relevant material requested in the ICS01 must be attached as relevant material to the ITR14.

1 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION

GUIDE ON HOW TO COMPLETE THE IT14SD

Supplementary Declaration

2013

2 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION

CONTENTS

1. INTRODUCTION 3

2. HOW WILL THE IT14SD BE ISSUED 3

3. HOW WILL THE IT14SD BE SUBMITTED 3

4. DOCUMENTATION REQUIRED TO COMPLETE YOUR IT14SD 3

5. MULTIPLE SUBMISSIONS OF IT14SD AND ITR14 DURING SARS VERIFICATION 4

6. PROGRESS OF VERIFICATION 5

7. COMPLETING THE IT14SD RETURN 5

8. COMPANY CLASSIFICATION 5

8.1 ANNEXURE A – OLD IT14 RETURN 7

8.2 ANNEXURE B – DORMANT COMPANY, BODY CORPORATE, SHARE BLOCK COMPANY and MICRO BUSINESS 17

8.3. ANNEXURE C – SMALL BUSINESS 27

8.4 ANNEXURE D – MEDIUM TO LARGE BUSINESS 37

3 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION

1. INTRODUCTION

• If a company is selected for verification, SARS will issue a letter - Verification of Income Tax Return - to the company.

• This letter will specify that the company has the option to either submit a revised company Income Tax Return (ITR14) or a

Company Income Tax Supplementary Declaration (IT14SD).

• The IT14SD is a supplementary declaration in which a company must reconcile Income Tax, Value-Added Tax (VAT), Pay-As-You-

Earn (PAYE) and Customs declarations after the initial submission of the Return of Income (IT14/ITR14) for the applicable financial

year end as specified in the verification letter.

• This guide is designed to assist with the completion and submission of the IT14SD return.

• For further information on the IT14SD return visit the SARS website www.sars.gov.za, your nearest SARS branch or call the SARS

Contact Centre on 0800 00 (SARS) 7277.

2. HOW WILL THE IT14SD BE ISSUED

• The IT14SD will be issued by SARS to the relevant company through the following channels:

» If the company is a registered eFiler, the IT14SD will be available on the company’s eFiling profile

» If the company is not a registered eFiler, the “Verification of Income Tax Return” letter, accompanied by the notice of

assessment (ITA34), will be posted to the company and will specify that the company must visit the nearest SARS branch to

obtain the IT14SD for completion.

NOTE: The IT14SD cannot be obtained via the Contact Centre, since there will be no posting or email option for request of the

IT14SD. The company has the option to register for eFiling, submit a revised Company Income Tax Return (ITR14) via the “Request

for Correction” button and if SARS requires a further verification, an IT14SD will automatically be available on the company’s eFiling

profile.

3. HOW MUST THE IT14SD BE SUBMITTED

• The IT14SD must be submitted by the due date specified in the “Verification of Income Tax Return” letter. The IT14SD can be

submitted through the following channels:

» If the Representative Taxpayer / Public Officer is a registered eFiler, the IT14SD can be completed and submitted electronically

on eFiling

» If the Representative Taxpayer / Public Officer is not a registered eFiler, he/she can visit the nearest SARS branch for submission.

Representative taxpayers that are not registered eFilers, and have access to this guide online but prefer to submit the IT14SD

at the nearest SARS branch may use the various fields as specified in this guide in preparation for submission

» Alternatively, the Representative Taxpayer / Public Officer can register as an eFiler, but MUST first submit a revised company

Income Tax Return (ITR14) via the “Request for Correction” button. Thereafter, if SARS requires further verification, an

IT14SD will automatically be available on the company’s eFiling profile.

NOTE: The SARS agent will only capture the relevant data specified in the guide and completed on the IT14SD. The agent will not

assist in the completion of any of the containers or in the interpretation of the financial statements.

4. DOCUMENTATION REQUIRED TO COMPLETE YOUR IT14SD

• Please note that although the documents listed below are used to complete the IT14SD, they must NOT be submitted as relevant

material when submitting the IT14SD to SARS.

• In order to complete the IT14SD, you must have the following previously submitted returns and declarations for the relevant

financial year end.

4 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION

» Company income tax return (IT14/ITR14)

» Value-Added Tax Declarations (VAT201s)

» Monthly Employer Declaration (EMP201s).

• Where the IT14SD is to be submitted manually at a SARS branch, ensure that the various totals from the VAT201’s submitted for

the relevant tax periods relating to the particular financial year end are added together:

» Total amount of output VAT as declared under field 13

» Total zero rated supplies as declared per field 2 and 2A

» Total exempt and non-supplies as declared per field 3

» Total VAT input claimed per the submitted VAT201s (field 19)

» Total goods exported as claimed per the VAT201s (field 2A)

» Total goods imported as per the VAT 201s (field 15A).

Monthly Employer Declaration (EMP201)

Where the IT14SD is to be submitted at a SARS branch, ensure that the total amount for PAYE calculated from all the EMP201s

submitted for the Financial year-end are added together.

Customs Declarations Form (SAD 500) and/or Voucher of Correction (SAD504s or SAD554s)

Where the IT14SD is to be submitted manually at a SARS branch ensure that the various totals from the SAD500s and/or SAD504s or

SAD554s submitted for the financial year-end are added together:

• Total customs value or total after correction of imported goods

» Total customs value or total after correction of exported goods.

NOTE: The SARS Branch agent will not calculate the totals required to be completed on the IT14SD.

• The following additional financial records for the relevant financial year end may also assist when completing the IT14SD:

» Annual Financial Statements together with required Schedules

» General Ledger

» Trial Balance.

5. MULTIPLE SUBMISSIONS OF IT14SD AND ITR14 DURING SARS VERIFICATION

• For the relevant financial year end specified in the verification letter:

» The company will on receipt of the initial verification letter for the relevant financial year end be given an option to submit

either the revised ITR14 or the IT14SD. However, if the company has selected to submit the revised ITR14 and SARS is not

satisfied with the revised ITR14 declaration, SARS will issue a subsequent verification letter stipulating that submission of

the IT14SD is mandatory.

• The company has one opportunity to submit a revised ITR14. Once the revised ITR14 declaration has been submitted, the

company will not be able to submit a subsequent revised ITR14. The company will not be allowed to submit a revised ITR14 after

submitting the IT14SD

• Multiple versions of the IT14SD can be submitted at a SARS branch provided that the company received a verification letter

requesting the company to submit an IT14SD. Once the verification is finalised, further submissions of the IT14SD will be

disallowed

• On eFiling, the IT14SD can be submitted in every instance where there is a verification letter published on the company’s eFiling

Income Tax work page requesting submission of the IT14SD. Once the IT14SD is submitted for the relevant verification letter

issued, the IT14SD submission will be de-activated until such time that SARS issues a subsequent verification letter requesting

the IT14SD.

5 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION

NOTE: The data from the first submitted IT14SD will not be pre-populated on the IT14SD for a subsequent submission for the

relevant financial year end.

• The company may be required to submit additional relevant material for the relevant financial year-end during a verification

process, but this does not absolve the company from the requirement to submit either a revised ITR14 or IT14SD.

6. PROGRESS OF VERIFICATION

• For information regarding the progress of a SARS verification, the channels specified below are available:

» For registered eFilers, view the progress of the IT14SD processing by clicking on the “Query SARS status” button and the

refund status by clicking on the “Dashboard” button on the Income Tax Work Page

» Call the SARS Contact Centre on 0800 00 (SARS)7277; or

» Visit the nearest SARS branch.

7. COMPLETING THE IT14SD RETURN

• All the fields in the Reconciliation Schedules are compulsory and must be completed.

• An error message will be displayed on eFiling as well as on SARS system at a branch when the agent is electronically capturing

the IT14SD if the captured information is incomplete or incorrect.

• Only Rand values must be declared. Fields that are not relevant must be completed with a R0.

8. COMPANY CLASSIFICATION

• The details in the IT14SD will be explained for the two Company Income Tax Return types, that is the IT14 in the old format and

the new ITR14 and various company types which became effective with the new ITR14.

• If the old IT14 format was submitted, the IT14SD for the old IT14 return must be submitted.

• To determine if the company submitted an old IT14 return, the following can be an indication:

» The income tax return displays IT14 in the right top corner on the first page; and

» The particulars of the Public Officer, Postal Address, Registered Address, Physical Address and Bank Account Details appear

on the first two pages of your company income tax return.

• ITR14 - If the ITR14 is displayed in the right top corner on the first page, then the ITR14 portion of the IT14SD together with the

company classification will be applicable, that is one of the following:

» ITR14 – DORMANT

A Dormant company is classified as a company that was not actively trading for the full financial year (i.e. if the company

partially traded during financial year, the company will not be regarded as a dormant company). On the “Information to

create this Income Tax Return” page of the ITR14, section “Dormant”, the field “Is the company dormant?” is “Yes”

» ITR14 – SHARE BLOCK COMPANY

A Share Block Company is a company which is defined in s1 of the Share Blocks Control Act, 1980 (Act 59 of 1980). On

the “Information to create this Income Tax Return” page of the ITR14, section “Company Type”, the field “Is the company

a body corporate / share block company as defined in s10(1)(e)?” is “Yes”.

» ITR14 - BODY CORPORATE

A Body Corporate is an entity such as a company or institution that is defined in Section 1 of the Sectional Titles Act, 1986

(Act 95 of 1986). On the “Information to create this Income Tax Return” page of the ITR14, section “Company Type”, the

field “Is the company a body corporate / share block company as defined in s10(1)(e)?” is “Yes”.

» ITR14 – MICRO BUSINESS

A Micro Business is classified as a company with a gross income (sales / turnover plus other income) not exceeding R1 million

6 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION

and total assets (current and non-current) not exceeding R 5million, and that is not classified as a Body Corporate / Share

Block Company. On the “Information to create this Income Tax Return” page of the ITR14, section “Company Type”, the

field “Specify the gross income (sales / turnover plus other income) in respect of the financial year end?” does not exceed

R1 million and the field “Specify the total assets (current and non-current) of the company in respect of the financial year

end?” does not exceed R5 million.

» ITR14 – SMALL BUSINESS

A Small Business is classified as a company with a gross income (sales / turnover plus other income) not exceeding R14

million and total assets (current and non-current) not exceeding R10 million, that is not classified as a Body Corporate /

Share Block Company or Micro Business.

o The classification of the total assets that must not be in excess of R10 million does not define a Small Business

Corporation (s.12E); this only serves as a classification to create this Income Tax Return for a small business.

Also note that a Small Business is not the same as a Small Business Corporation as defined in Section 12E.

» ITR14 – MEDIUM TO LARGE BUSINESS

A Medium to Large Business: If a company is not classified as a body corporate / share block company, micro business or

small business, it will be classified as a medium to large business (i.e. gross income (sales / turnover plus other income)

exceeding R14 million and / or total assets exceeding R10 million).

• After you have established the company type, refer to the Annexure applicable to the company type for completion of the

IT14SD return:

» Old IT14 Return – Annexure A

» Body Corporate /Share Block Company /Micro Business/ Dormant Company – Annexure B

» Small Business – Annexure C

» Medium to Large Business – Annexure D.

• TheIT14SDisdividedintothefollowingschedules:

» PAYE Reconciliation Schedule

» Income Tax Reconciliation Schedule

» VAT Reconciliation Schedule

» Customs Reconciliation Schedule

» Reconciling Items.

37 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION

8.4 ANNEXURE D – MEDIUM TO LARGE BUSINESS

• If the income tax return displays ITR14 in the right top corner on the first page on the first page and the company is classified

as a Medium to Large Business below:

» A Medium to Large Business: If a company is not classified as a body corporate / share block company, micro business or

small business, it will be classified as a medium to large business (i.e. gross income (sales / turnover plus other income)

exceeding R14 million and / or total assets exceeding R10 million).

• If the company does not comply with the criteria specified above, please refer to Section 8: Company Classification to determine

the annexure of this guide that is relevant to the company.

REGISTERED INFORMATION

• Please verify against the “Verification of Income Tax Return” letter that the Income Tax Ref No, Case No and Financial year end

details have been pre-populated correctly. The Financial year end cannot be before 1999. If the information is not pre-populated

correctly, please correct the information on the return.

PAYE RECONCILIATION SCHEDULE

• This section must reflect the total salaries and wages and employment expenses declared under the “Income Statement” on the

ITR14 and EMP201’s submitted to SARS pertaining to the relevant financial year end.

• The reconciliation must include all PAYE declarations connected to the entity.

» For example: If the company has branches that are registered separately for Employees Tax, the total declarations for all the

branches must reconcile with the salaries and wages and employment expenses declared on the ITR14.

38 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION

• Field 1: Directors’ / Members’ remunerations as per ITR14

» Capture the amount declared under “Directors’ / members’ remuneration” field on the ITR14

» Complete the amount declared under “Expense Items: Salaries and wages (incl. medical, pension, provident fund

contributions) as per ITR14.

• Field 2: Employee expenses: Pension and provident fund contributions as per ITR14

» Capture the “Employee expenses: Pension and Provident fund contributions” amount declared under the “Expense Items”

section in the “Income Statement” as per the ITR14.

• Field 3: Employee expenses: Medical scheme contributions as per ITR14

» Capture the “Employee expenses: Medical scheme contributions” amount declared under the “Expense Items” section in

the “Income Statement” as per the ITR14.

• Field 4: Employee expenses: Salaries and wages (excl. medical, pension, provident fund contributions) as per ITR14

» Capture the amount declared under “Employee expenses: Wages and salaries (excluding medical, provident and pension)”

amount declared under the “Expense Items” section in the “Income Statement” as per the ITR14.

• Field 5: Employee expenses: Group life insurance as per ITR14

» Capture the “Employee expenses: Group life insurance” amount declared under the “Expense Items” section in the “Income

Statement” as per the ITR14.

• Field 6: Employee expenses: UIF contributions and SDL as per ITR14

» Capture the “Employee expenses: UIF contributions and SDL” amount declared under the “Expense Items” section in the

“Income Statement” as per the ITR14.

• Field 7: Employee expenses: Membership of a professional body as per ITR14

» Capture the “Employee expenses: Membership of a professional body” amount declared under the “Expense Items” section

in the “Income Statement” as per the ITR14.

• Field 8: Employee expenses: Training as per ITR14

» Capture the “Employee expenses: Training” amount declared under the “Expense Items” section in the “Income Statement”

as per the ITR14.

• Field 9: Other employment cost per ITR14

» Add all other amounts related to employment cost on which PAYE liability was calculated included in the “Income Statement:

Expense Items” on the ITR14 excluding the specific amounts mentioned in Field 1 to 8 above.

• Field 10: Total employment cost

» Calculate this field as the total (sum) of the amounts completed for Field 1 to Field 9. This field will be calculated automatically

where the IT14SD is submitted online via eFiling or captured at a branch.

39 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION

• Field 11: Total PAYE paid as per EMP201s

» Capture the total amount of Pay-As-You-Earn (PAYE) paid as per the EMP201’s for the 12 months of the company financial

year

» Where a subsequent EMP501 was submitted for an additional amount paid/payable this must be added to the total amount

of the EMP201’s

» Where an amount was refunded/refundable due to an over payment on the EMP501 this amount should be deducted from

the total amount of the EMP201’s.

• Field 12: Total employment cost on which PAYE liability was calculated

» Calculate this field by consolidating the records on the payroll.

• Field 13: Reconciling differences (Provide details in the Reconciling Items section if applicable).

» Calculate this field as the positive difference (subtract lesser amount from greater amount) between the following two

fields:

o Field 10: Total employment cost

o Field 12: Total employment cost on which PAYE liability was calculated

» This field will be calculated automatically where the IT14SD is submitted online via eFiling or captured at a branch

» Where the value exceeds R100, reason(s) for reconciling differences and the related amount(s) must be completed in the

Reconciling items: PAYE Reason(s) schedule (refer to Reconciling Items section in the Annexure)

» Please note: that as the amounts for Skills Development Levy (SDL), Unemployment Insurance Fund (UIF), and training

allowances are included in the ITR14 portion of the reconciliation schedule this could result in a reconciling difference and

should be declared in the reconciling items.

INCOME TAX RECONCILIATION SCHEDULE

• This schedule should reflect the amounts declared under the “Tax Computation” section and the net profit or net loss declared

under the “Income Statement Information” sections of the ITR14.

40 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION

• Field 1: Net Profit or Loss

» Insert “X” in the applicable box to indicate whether the amount reflects a profit or a loss.

» Capture the “Net Profit – Subtotal” or “Net Loss – Subtotal” amount declared under the “Income Statement Information:

Net Profit/Loss” section on the ITR14.

• Field 2: Calculated Profit or Loss

» Insert “X” in the applicable box to indicate whether the amount reflects a profit or a loss

» Capture the “Calculated Profit excluding net income from CFC” or “Calculated Loss” amount declared under the “Tax

Computation: Amounts to be included in the determination of taxable income” (excluding assessed loss brought forward

and capital gains / losses)” section on the ITR14.

• Field 3: Difference: Net and Calculated Profit/Loss

» Calculate this field as the positive difference (subtract lesser amount from greater amount) between the amount for Field

1: “Net Profit/Loss” and Field 2: “Calculated Profit/Loss”.

» This field will be calculated automatically where the IT14SD is submitted online via eFiling or captured at a branch.

» For a company that is preparing the necessary information for capture at a SARS branch:

o If Net Profit and Calculated Profit - subtract the amounts to calculate the difference

o If Net Loss and Calculated Loss - subtract the amounts to calculate the difference

o If Net Profit and Calculated Loss – add the amounts to calculate the difference

o If Net Loss and Calculated Profit – add the amounts to calculate the difference

» Example: Manual calculation

o If there is a Net Profit and a Calculated Loss - add the amounts to calculate the difference:

Net Profit R4 000

(Add) Calculated Loss R5 800

Difference R9 800

• Field 4: Debit Adjustment: Non-Taxable amounts credited to the Income Statement

» Capture the “Control Total” amount of “Non-taxable amounts credited to Income Statement” declared under the “Tax

Computation: Debit Adjustments” section on the ITR14.

• Field 5: Debit Adjustment: Special allowances not claimed in the Income Statement

» Capture the “Control Total” amount of “Special allowances not claimed in the Income Statement” declared under the “Tax

Computation: Debit Adjustments” section on the ITR14.

• Field 6: Credit Adjustment: Non-deductible amounts debited to the Income Statement

» Capture the “Control Total” amount of “Non-deductible amounts debited to the Income Statement” declared under the

“Tax Computation: Credit Adjustments” section on the ITR14.

• Field 7: Credit Adjustment: Allowances/deductions granted in previous years of assessment and now reversed

» Capture the “Control Total” amount of “Allowances / Deductions granted in previous financial year end and now reversed”

declare under the “Tax Computation: Credit Adjustments” section on the ITR14.

• Field 8: Credit Adjustment: Amounts not credited to the Income Statement

» Capture the “Control Total” amount of “Amounts not credited to the Income Statement” declared under the “Tax

Computation: Credit Adjustments” section on the ITR14.

41 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION

• Field 9: Credit Adjustment: Recoupment of allowances previously grated

» Capture the “Control Total” amount of “Recoupment of allowances previously grated” declared under the “Tax

Computation: Credit Adjustments” section on the ITR14.

• Field 10: Total: Tax Adjustments

» Calculate this field as the positive difference (subtract lesser amount from greater amount) between all the Debit Adjustment

(sum of Field 4 and 5) and Credit Adjustment (sum of Field 6, 7, 8 and 9) amounts.

» This field will be calculated automatically where the IT14SD is submitted online via eFiling or captured at a branch.

• Field 11: Reconciling differences (Provide details in the Reconciling Items section if applicable).

» Calculate this field as the positive difference (subtract lesser amount from greater amount) between the following two

fields:

o Field 3: Difference: Net and Calculated Profit/Loss;

o Field 10: Total: Tax Adjustments.

» This field will be calculated automatically where the IT14SD is submitted online.

» Where the value exceeds R100, reason(s) for reconciling differences and the related amount(s) must be completed in the

Reconciling items: Income Tax Reason(s) schedule (refer to Reconciling Items section in this Annexure).

VAT RECONCILIATION SCHEDULE

• This section is divided into two parts:

» Output VAT declared for tax periods falling within the financial year end.

» Input VAT claimed for tax periods falling within the financial year end.

• This schedule should reflect the amounts declared in the “Income Statement Information” section of the ITR14 and the VAT

declared as per the VAT201’s previously submitted to SARS.

• If the Company submits the VAT201s for bimonthly tax periods or tax periods of six months, exclude all the supply for the next

or previous financial year.

42 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION

• Complete the following fields under Output VAT declared for tax periods falling within the year of assessment:

» Field 1: Total output VAT as per VAT201 tax periods (field 13)

o Capture the total amount of output VAT as declared under field 13 of the VAT201’s submitted to SARS within the

financial year end. Where the VAT periods differ from the financial period, the difference should be reflected under

the “Reconciling differences”

» Complete this field with a zero (R0) if the company is not registered for VAT, Field 2: Total supplies excl. zero rate /

exempt as per VAT201 tax periods: This value is calculated by dividing the Total Output VAT as per VAT201 tax

periods by 0.14

o Calculate this field by dividing the “Total output VAT as per VAT201 tax periods (field 13)” by 0.14.

Example:

If the amount declared under field 13 on the VAT201 is R8 000, the calculation will be as follows:

Field 13 = R 8000 = R 57 143

0.14 0.14

o This field will be calculated automatically where the IT14SD is submitted online via eFiling.

» Field 3: Total zero rate supplies as per VAT201 tax periods

o Capture the total zero rated supplies as declared per field 2 and 2A on the VAT201s for the financial year end

o Complete this field with a zero (R0) if the company is not registered for VAT.

» Field 4: Total exempt and non-supplies as per VAT201 tax periods

o Capture the total exempt and non-supplies as declared per field 3 on the submitted VAT201s for the financial year

end

o Note: If the company is not registered for VAT, complete this field with a zero (R0).

43 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION

» Field 5: Total VAT supplies as per VAT201 tax periods

o Calculate the total (sum) of the amounts entered for Field 2, 3 and 4

o This field will be calculated automatically where the IT14SD is submitted online via eFiling or captured at a branch.

» Field 6: Gross Sales (excl. credit notes) – Foreign Connected as per ITR14

o Capture the “Gross Sales (excl. credit notes) – Foreign Connected” amount declared under the “Gross Profit /

Loss” section in the “Income Statement” as per the ITR14.

» Field 7: Gross Sales (excl. credit notes) – Other than foreign connected as per ITR14

» Field 8: Total Gross Sales:Capture the “Gross Sales (excl. credit notes) – Other than foreign connected” amount declared

under the “Gross Profit / Loss” section in the “Income Statement” as per the ITR14.

o Calculate the total (sum) of Fields 6 and 7.

o This field will be calculated automatically where the IT14SD is submitted online via eFiling or captured at a branch.

» Field 9: Reconciling differences (Provide details in the Reconciling Items section if applicable)

o Calculate this field as the positive difference (subtract lesser amount from greater amount) between the following

two fields:

• Field 5: Total VAT supplies as per VAT201 tax periods

•Field 8: Total Gross Sales

o This field will be auto-calculated when IT14SD is submitted online

o If the value of this field exceeds R100, the Reconciliation Items: Output VAT Reason(s) container will be displayed

in order to explain the reasons for the difference (refer to Reconciling Items section in this Annexure).

• Complete the following fields under Input VAT claimed for tax periods falling within the year of assessment:

» Field 1: Total input VAT as per VAT tax periods (field 19)

o Calculate the total VAT input claimed per the submitted VAT201s (field 19) for the same periods

incorporated into the relevant year of assessment.

o Complete this field with a zero (R0) if the company is not registered for VAT.

» Field 2: Total acquisitions as per VAT201 tax periods. This value is calculated by dividing the total input VAT as

per VAT201 tax periods by 0.14

o Calculate the value for this field by dividing “Total input VAT as per VAT tax periods (field 19)” by 0.14.

» Example:

o If the amount declared under field 19 on the VAT201 is R184 929, the calculation will be as follows:

Field 19 = R25 890 = R184 929

0.14 0.14

o This field will be calculated automatically where the IT14SD is submitted online via eFiling or captured at a branch.

» Field 3: Opening stock as per ITR14

o Capture “Less: Opening stock” declared under the “Gross Profit / Loss” section in the “Income Statement” as per

the ITR14.

» Field 4: Add: Credit notes on sales as per ITR14

o Capture “Less: Credit notes on sales” declared under the “Gross Profit / Loss” section in the “Income Statement”

as per the ITR14.

» Field 5: Add: Purchases - Foreign: Connected (excl. rebates) as per ITR14

o Capture “Less: Purchases – Foreign: Connected (excl. rebates)” declared under the “Gross Profit / Loss” section in

the “Income Statement” as per the ITR14.

44 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION

» Field 6: Add: Purchases - Other than Foreign: Connected (excl. rebates) as per ITR14

o Capture “Less: Purchases – Other than foreign connected (excl. rebates)” declared under the “Gross Profit / Loss”

section in the “Income Statement” as per the ITR14.

» Field 7: Less: Rebates as per ITR14

o Capture “Add: Rebates” declared under the “Gross Profit / Loss” section in the “Income Statement” as per the

ITR14.

» Field 8: Less: Closing stock (Gross excl. adjustments) as per ITR14

o Capture “Add: Closing stock (Gross excl. adjustments)” declared under the “Gross Profit / Loss” section in the

“Income Statement” as per the ITR14.

» Field 9: Less: Inventory adjustments (Previous years stock provision reversed) as per ITR14

o Capture “Add: Inventory adjustments (Previous year stock provision reversed)” declared under the “Gross Profit /

Loss” section in the “Income Statement” as per the ITR14.

» Field 10: Add: Inventory adjustments (Current year stock provision (obsolete / slow-moving stock)) as per ITR14

o Capture “Less: Inventory adj. (Current year stock provision (obsolete / slow-moving stock))” declared under the

“Gross Profit / Loss” section in the “Income Statement” as per the ITR14.

» Field 11: Total Cost of Sales

o This field must be calculated as Field 3 add Field 4 add Field 5 add Field 6 less Field 7 less Field 8 less Field

9 add Field 10.

o This field will be calculated automatically where the IT14SD is submitted online via eFiling or captured at a branch.

» Field 12: Reconciling differences (Provide details in the Reconciling Items section if applicable)

o Calculate this field as the positive difference (subtract lesser amount from greater amount) between the following

two fields:

• Field 2: Total acquisitions as per VAT201 tax periods. This value is calculated by dividing the total input VAT

as per VAT201 tax periods by 0.14

•Field 11: Total Cost of Sales

o This field will be auto-calculated when IT14SD is submitted online

o If the value of this field exceeds R100, the Reconciliation Items: Input VAT Reason(s) container will be displayed in

order to explain the reasons for the difference (refer to Reconciling Items section in this Annexure).

DECLARATION

• If the company is a registered eFiler, the electronic signature (i.e. the Company’s log in) associated with an eFiler is deemed to

be the signature of the declarant.

• If the company is not a registered eFiler, the declaration must be signed on the electronic signature pad by the representative

taxpayer when submitting at the nearest SARS branch.

• The IT14SD is a legal declaration to SARS and by signing you agree that the reconciled information is accurate.

45 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION

• You are obliged to ensure that a full and accurate disclosure is made of all relevant information as required in the IT14SD.

Misrepresentation, neglect or omission to submit a declaration or supplying false information may result in prosecution.

VAT REGISTRATION NUMBERS

• A new requirement on the IT14SD is that the company must complete VAT registration numbers.

• Specify the total number of VAT registration number(s) for the company

» The field “Specify the total number of VAT registration numbers” must at least be 1 or more (maximum of 999) if either

one of the following conditions are met:

o Total input VAT as per VAT201 tax periods (field 19) exceeds R0

o Total output VAT as per VAT201 tax periods (field 13) exceeds R0

» Complete a zero for this field if the Company is not registered for VAT.

• VAT Registration Number(s): Based on the numeric value entered in the field “Specify the total number of VAT registration

number(s) for the company”, the VAT registration number fields will repeat on the IT14SD. Each VAT registration number field

(numeric field of 10 blocks) is mandatory for completion.

CUSTOMS RECONCILIATION SCHEDULE

• This section is divided into two parts:

» Imported Goods: Declare the total value of imported goods for the financial year-end

» Exported Goods: Declare the total value of exported goods for the financial year-end.

• This schedule should reflect the amounts included in terms of goods imported and exported in the “Income Statement

Information” section of the ITR14 and the amounts of goods imported and exported declared as per the SAD500s or/and

SAD554s or SAD504s and VAT201s’ previously submitted to SARS.

• Complete the following fields under Imported Goods:

» Field 1: Total Value of imported goods as per Customs declarations:

o Calculate the total value of imported goods according to the final Bill of Entry Declarations (SAD500’s or CD001’s )

for the relevant financial year end. Calculate the total value of imported goods according to the SAD500s or/and

SAD504s for the relevant financial year end.

•Calculatethetotalofimportamountasper(field42customsvalue)ofalltheSAD500s.

•IfthecustomvaluedeclaredonthepreviouslysubmittedSAD500changed,addthe“TotalafterCorrection”

amounts of all the SAD504s.

» Field 2: Total Imported goods included in Cost of Sales as per ITR14

o Complete the portion of the Total Imported goods declared that was included in the “Cost of Sales” on the ITR14.

o The Cost of Sales on the ITR14 must be calculated from the section “Income Statement – Gross Profit / Loss”

section on ITR14 (also refer to Total Cost of Sales on Input VAT reconciliation schedule of IT14SD) as follows:

•OpeningstockasperITR14

•Add:CreditNotesonSalesasperITR14

46 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION

•Add:Purchases–Foreign:Connected(excl.rebates)asperITR14

•Add:Purchases–OtherthanForeign:Connected(excl.rebates)asperITR14

•Less:RebatesasperITR14

•Less:ClosingStock(Grossexcl.adjustments)asperITR14

•Less:Inventoryadjustments(Previousyearsstockprovision)asperITR14

•Add:Inventoryadj.(Currentyearstockprovision(obsolete/slowmovingstock))asperITR14

» Field 3: Total goods imported by you as per VAT201s:

o Calculate the total goods imported as per the VAT 201’ (field 15A) for the same periods incorporated into the

relevant financial year end.

• Complete the following fields under Exported Goods:

» Field 1: Total Value of Exported goods as per Customs declaration

o Calculate the total value of exported goods according to the final SAD500s and/or SAD554s for the relevant

financial year end

o Calculate the total of export amount as per (field 42 customs value) of all the SAD500s

o If the customs value declared on the previously submitted SAD500s changed, add the “Total after Correction”

amounts of all the SAD554s.

» Field 2: Total Exported goods included in Sales as per ITR14

o Complete the portion of the Total Exported goods declared that was included in the “Sales (Turnover)” in the

Income Statement Gross Profit / Loss section on the ITR14

o The Sales on the ITR14 must be calculated from the section “Income Statement – Gross Profit / Loss” section on

ITR14 (also refer to Total Gross Sales on Output VAT reconciliation schedule of IT14SD) as follows:

•GrossSales(excl.creditnotes)–Foreign:ConnectedasperITR14

•GrossSales(excl.creditnotes)–OtherthanForeign:ConnectedasperITR14

» Field 3 Total goods exported by you as per VAT201’s

o Calculate the total goods exported by you as claimed per the VAT201 (field 2A) for the same periods incorporated

into the relevant financial year end.

RECONCILING ITEMS

• If the “Reconciling difference” field in the PAYE Reconciliation schedule exceeds R100, the PAYE Reason(s) container will

appear in the Reconciling items section as indicated below.

• If the “Reconciling difference” field in the Income Tax Reconciliation schedule exceeds R100, the Income Tax Reason(s)

container will appear in the Reconciling items section as indicated below.

• If the “Reconciling difference” field in the Output VAT declared for tax periods falling within the year of assessment

Reconciliation schedule exceeds R100, the Output VAT Reason(s) container will appear in the Reconciling items section as

indicated below.

• If the “Reconciling difference” field in the Input VAT claimed for tax periods falling within the year of assessment exceeds

R100, the Input VAT Reason(s) container will appear in the Reconciling items section as indicated below.

47 | GUIDE ON HOW TO COMPLETE THE IT14SD SUPPLEMENTARY DECLARATION

• If the positive difference (subtract lesser amount from greater amount) between any of the 3 fields in the Customs Imported

Goods Reconciliation schedule exceeds R100, the Customs: Imported Goods Reason(s) container will appear in the

Reconciling items section as indicated below.

Example:

If the” Total value of imported goods as per Customs declarations” is R2 000 and “Total imported goods included in Cost of Sales”

is R4 000, the reconciling difference will be R2 000. Capture the reasons for the difference under “Reconciling items: Customs:

Imported Goods reasons” field.

Field 1 R 6 000

(Less) Field 2 - (12 000)

= R 6 000

• If the positive difference (subtract lesser amount from greater amount) between any of the 3 fields in the Customs Exported

Goods reconciliation schedule exceeds R100, the Customs: Exported Goods Reason(s) container will appear in the

Reconciling items section as indicated below.

Example:

If the” Total value of exported goods as per Customs declarations” is R2 000 and “Total exported goods included in Sales” is R4

000, the reconciling difference will be R2 000. Capture the reasons for the difference under “Reconciling items: Customs: Exported

Goods Reason(s)” field.

Field 1 R 6 000

(Less) Field 2 - (12 000)

= R 6 000

• One row will display initially. At least one row is mandatory for completion. If a reason is entered, then the “Amount” field in

the relevant row becomes compulsory for completion and vice versa. Use the “+” button to add additional rows and the “-”

button to delete existing rows.

• Complete the detailed reasons for reconciling items as stated under each reconciliation schedule and ensure that amounts are

completed for each reason.

• The IT14SD will perform an online validation on efiling and in the branch to ensure that the sum of the “Amount” fields in every

row of the respective “Reason(s)” container is equal to the “Reconciling difference” in the respective Reconciliation schedules

listed above. The warning message below will display and the IT14SD form cannot be submitted until the fields balance.

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tion f

or a

local

asse

t?Y

N

Was

the r

educ

tion f

or a

foreig

n ass

et?Y

N

YN

Page

1 of

26

SARS

_201

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el_IT

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8Exa

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e

EX

AM

PLE

Year

of A

sses

smen

tIn

com

e T

ax R

eturn

for C

ompa

nies

(In

co

me

Tax A

ct,

No

. 58 o

f 19

62,

as a

men

ded

)Ta

xpay

er R

efere

nce N

umbe

rIT

R14

Part

icu

lars

Regis

tered

Na

me

Comp

any /

CC

Reg

No.

Regis

tratio

n No.

Tel N

o.

Pra

cti

tio

ner

Deta

ils (

if a

pp

licab

le)

PR

SIF

01

ITR14

L XX

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SV XXXX

CT XX

NO XXXXXXXXXX

P XXXXXX

Y XXXX

001/001

Tax P

racti

tione

r Em

ail ad

dres

s

Plea

se in

dica

te w

here

the m

ajorit

y of t

he co

mpa

ny’s

taxa

ble i

ncom

e / lo

ss is

der

ived

from

(mar

k onl

y one

box

)Is

this r

eturn

in re

spec

t of a

bran

ch / p

erma

nent

estab

lishm

ent /

agen

cy of

a for

eign c

ompa

ny?

YN

I dec

lare t

hat:

I am

the du

ly ap

point

ed P

ublic

Offic

er / R

epre

senta

tive o

f the c

ompa

nyTh

e info

rmati

on fu

rnish

ed in

this

retur

n is t

o the

best

of my

know

ledge

both

true a

nd co

rrect

I hav

e disc

losed

the g

ross

amou

nts of

all in

come

rece

ived a

nd / o

r acc

rued

to th

is co

mpan

y dur

ing th

e per

iod co

vere

d by t

his re

turn

I hav

e the

nece

ssar

y fina

ncial

reco

rds a

nd su

ppor

ting s

ched

ules t

o sup

port

all de

clara

tions

on th

is re

turn w

hich I

will

retai

n for

audit

purp

oses

.

Date

(CCY

YMMD

D)Fo

r enq

uiries

go to

www

.sars.

gov.z

a or

call 0

800 0

0 SAR

S (7

277)

XXXX

XXXX

XXXX

XXXX

XXX

XXXX

XXXX

XXXX

XXXX

XXX

Plea

se en

sure

you s

ign ov

er

the 2

lines

of “X

”s ab

ove

Wha

t is th

e rea

son

for do

rman

cy?

DE

CIF

01

Sour

ce co

de of

the m

ain in

dustr

y.St

ate th

e pro

fit co

de of

your

main

sour

ce of

inco

me.

If the

profi

t cod

e is “

other

not s

pecif

ied”,

pleas

e pro

vide a

desc

riptio

n

Easte

rn C

ape

Free

Stat

eKw

azulu

Nata

lGa

uteng

Limpo

poMp

umala

nga

North

Wes

t No

rther

n Cap

eW

ester

n Cap

eInt

erna

tiona

l

Plea

se in

dicate

the V

DP ap

plica

tion

no. is

sued

by S

ARS

VD

PIF

01

Trad

ing

Name

Det

ails

DO

CD

A0

1

Is the

comp

any a

cting

as, o

r car

rying

on th

e acti

vities

of, a

nomi

nee?

YN

Is the

comp

any a

party

to an

y con

tract

in ter

ms of

whic

h it h

as un

derta

ken t

o con

duct

any a

ctivit

y or

hold

any a

ssets

on be

half o

f ano

ther p

erso

n dur

ing th

e cur

rent

or a

futur

e yea

r of a

sses

smen

t?Y

N

Mark

here

with

an ‘X

’ if yo

u dec

lare t

hat y

ou do

not h

ave a

n ema

il add

ress

.

Finan

cial Y

ear E

nd

(CCY

YMMD

D)

If no V

DP ap

plica

tion w

as m

ade,

chan

ge yo

ur V

DP an

swer

to “N

o” on

the f

irst p

age

of thi

s retu

rn

Page

2 of

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e

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ITR14

L XX

b91c9121-0a17-4b26-a09d-d5980eb532db

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SV XXXX

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NO XXXXXXXXXX

P XXXXXX

Y XXXX

001/001

Decla

red

Spec

ify th

e tota

l divi

dend

s dec

lared

cons

isting

of th

e foll

owing

:

R

DID

EA

01

Wer

e any

STC

cred

its (s

64J)

utilis

ed ag

ainst

the to

tal di

viden

ds de

clare

d?Y

N

Spec

ify th

e rep

ortab

le ar

rang

emen

t num

ber:

RP

TA

A0

1

Does

the c

ompa

ny ow

n any

fore

ign as

sets

or in

vestm

ents?

YN

Did t

he co

mpan

y rec

eive a

ny in

come

subje

ct to

foreig

n tax

es pa

id /

paya

ble?

YN

Is the

fore

ign ex

chan

ge ga

in / lo

ss in

curre

d in r

espe

ct of

an ex

chan

ge

item

wher

e the

coun

terpa

rty is

a co

nnec

ted pe

rson?

YN

If Yes

, was

the f

oreig

n exc

hang

e gain

/ los

s rea

lised

durin

g this

ye

ar of

asse

ssme

nt?Y

N

Fo

reig

n E

xch

an

ge G

ain

s /

Lo

sses

Did t

he co

mpan

y rec

eive a

ny fo

reign

divid

ends

?Y

N

Fo

reig

n D

ivid

en

ds

Has t

he co

mpan

y clai

med a

n exe

mptio

n for

any a

moun

ts re

lating

to

the di

spos

al of

equit

y sha

res i

n a fo

reign

comp

any,

as co

ntemp

lated

in

par 6

4B of

the E

ighth

Sche

dule?

YN

Ca

pit

al

Ga

ins

Has t

he co

mpan

y clai

med a

n exe

mptio

n for

any f

oreig

n divi

dend

s as

refer

red t

o in s

10(1

)(k)(i

i)(dd

) or s

10B

(2)(a

) ?Y

N

Wer

e any

of th

e for

eign d

ivide

nds s

ubjec

t to th

e par

ticipa

tion

exem

ption

?Y

N

Co

ntr

olled

Fo

reig

n C

om

pan

y

Does

the c

ompa

ny to

gethe

r with

any c

onne

cted p

erso

n in r

elatio

n to

the co

mpan

y hold

mor

e tha

n 10%

of th

e par

ticipa

tion r

ights

in an

y CF

C? If

Yes,

comp

lete t

he ap

plica

ble sc

hedu

le (IT

10) (

refer

to gu

ide).

YN

INT

NA

01

Did t

he co

mpan

y ear

n any

inco

me fr

om a

foreig

n sou

rce th

at wa

s ex

empt

from

tax in

acco

rdan

ce w

ith a

doub

le tax

ation

agre

emen

t?Y

N

Do

ub

le T

axati

on

Is the

comp

any a

partic

ipant

in an

y arra

ngem

ents

which

has t

he fo

llowi

ng

featur

es:

Roun

d trip

finan

cing (

s80D

)?

Elem

ents

that h

ave t

he ef

fect o

f offs

etting

or ca

ncell

ing ea

ch

other

(s80C

)?

Pres

ence

of an

acco

mmod

ating

or ta

x-ind

iffere

nt pa

rty (s

80E)

?

YN

YN

YN

Total

divid

ends

subje

ct to

STC

(Befo

re 1

April

2012

)

Total

divid

ends

subje

ct to

divide

nds t

ax (F

rom

1 Apr

il 201

2)

Total

divid

ends

exem

pt fro

m div

idend

s tax

R R R

Total

divid

ends

subje

ct to

doub

le tax

ation

relie

f

Total

divid

ends

in sp

ecie

decla

red

R

If Yes

, spe

cify t

he fo

llowi

ng:

R

Total

paym

ents

made

Plus

: STC

cred

its re

ceive

d

R

RLess

: STC

cred

its ut

ilised

STC

cred

its cl

osin

g ba

lance

R

ST

C C

red

its

ST

CC

T0

1

Wer

e any

paym

ents

made

to a

non-

resid

ent p

erso

n in c

ompe

nsati

on fo

r the

rend

ering

of se

rvice

s in S

outh

Afric

a?Y

N

Is the

comp

any a

dome

stic t

reas

ury m

anag

emen

t com

pany

as de

fined

in

Secti

on 1?

YN

SA

Wit

hh

old

ing

Ta

x

INT

NB

01

Was

any t

ax w

ithhe

ld ag

ainst

roya

lties,

inter

esto

rdivi

dend

s?Y

N

STC

credit

s ope

ning b

alanc

e

R

Page

3 of

26

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ITR14

L XX

b91c9121-0a17-4b26-a09d-d5980eb532db

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SV XXXX

CT XX

NO XXXXXXXXXX

P XXXXXX

Y XXXX

001/001

Have

the f

inanc

ial st

ateme

nts be

en au

dited

?Y

N

Have

the f

inanc

ial st

ateme

nts be

en qu

alifie

d?Y

N

If Yes

, doe

s this

have

any t

ax ef

fects?

YN

If Yes

, pro

vide t

he na

me of

the e

ntity

that c

ondu

cted t

he au

dit/re

view

Info

rma

tio

nO

TH

GA

01

(a) I

mmed

iately

befor

e 1 Ja

nuar

y 201

1; or

R

(b) W

here

the c

ompa

ny be

came

a re

siden

t sinc

e 1 Ja

nuar

y 201

1

R Add:

Con

sider

ation

rece

ived o

r acc

rued

for t

he is

sue o

f sha

res b

y the

comp

any

R Dedu

ct:A

moun

ts tra

nsfer

red t

o hold

ers o

f sha

res

R Dedu

ct: R

educ

tion a

s a re

sult o

f the a

pplic

ation

of s4

2

R Dedu

ct: R

educ

tion a

s a re

sult o

f the a

pplic

ation

of s4

4

R

Cap

ita

lC

CT

IF0

1

Amou

nt of

contr

ibuted

tax c

apita

l:

Desc

riptio

n of c

lass o

f sha

res

Note

: As

the c

ompa

ny el

ected

to be

a he

adqu

arter

comp

any i

n ter

ms of

s9I, p

lease

comp

lete t

he

appli

cable

sche

dule

(refer

to gu

ide).

Does

the c

ompa

ny co

mply

with

the re

quire

ment

that e

ach o

f its

shar

ehold

ers (

alone

or to

gethe

r with

any o

ther c

ompa

ny th

at for

ms

part

of the

same

grou

p of c

ompa

nies a

s the

shar

ehold

ers)

hold

at lea

st 10

% of

the e

quity

shar

es an

d voti

ng rig

hts in

the c

ompa

ny

throu

ghou

t the y

ear o

f ass

essm

ent a

nd al

l pre

vious

year

s of

asse

ssme

nt?

HQ

CIF

01

Does

the c

ompa

ny co

mply

with

the re

quire

ment

that a

t leas

t 80%

of th

e co

st of

its to

tal as

sets

(exc

luding

cash

and b

ank d

epos

its pa

yable

on

dema

nd) is

attrib

utable

to as

sets

as lis

ted in

s9I(2

)(b)?

YN

Does

the c

ompa

ny co

mply

with

the re

quire

ment

that w

here

its gr

oss

incom

e (ex

cludin

g exc

hang

e diffe

renc

es de

termi

ned i

n ter

ms of

s24I)

ex

ceed

s R5 m

illion

, at le

ast 5

0% of

that

gros

s inc

ome c

onsis

ts of

amou

nts de

scrib

ed in

s9I(2

)(c)?

YN

YN

Pro

vid

er

How

many

full-t

ime e

mploy

ees a

re on

a ful

l-time

basis

enga

ged i

n re

nder

ing an

y ser

vice o

f the c

ompa

ny, e

xclud

ing th

ose w

ho ar

e sh

areh

older

s or m

embe

rs or

arec

onne

cted t

o suc

h sha

reho

lder o

r me

mber

?

PE

SP

A0

1

Wou

ld the

perso

n who

is pe

rsona

lly re

nder

ing th

e ser

vice h

ave b

een

rega

rded

as an

emplo

yee o

f the c

lient

if the

servi

ce w

as re

nder

ed

direc

tly to

the c

lient

and n

ot thr

ough

the c

ompa

ny?

YN

Must

the pe

rson w

ho is

rend

ering

the s

ervic

e, pe

rform

the d

uties

ma

inly a

t the p

remi

ses o

f the c

lient,

and i

f so,

is tha

t per

son s

ubjec

t to

the co

ntrol

or su

pervi

sion o

f the c

lient

as to

the m

anne

r in w

hich t

he

dutie

s are

perfo

rmed

or ar

e to b

e per

forme

d?

YN

Does

mor

e tha

n 80%

of th

e inc

ome f

rom

servi

ces r

ende

red b

y the

co

mpan

y con

sist o

f or is

likely

to co

nsist

of am

ounts

dire

ctly o

r ind

irectl

y rec

eived

from

any o

ne cl

ient, o

r fro

m an

y ass

ociat

ed

institu

tion i

n rela

tion t

o the

clien

t?

YN

Is the

comp

any r

eside

nt ou

tside

Sou

th Af

rica d

ue to

:

NR

SY

A0

1

Fore

ign in

corp

orati

on (a

nd no

t bein

g effe

ctive

ly ma

nage

d in S

A)?

YN

By vi

rtue o

f a tr

eaty

to av

oid do

uble

taxati

on?

YN

Did t

he co

mpan

y gen

erate

a ca

pital

gain

/ loss

or re

venu

e gain

/ los

s in

resp

ect o

f the e

arly

termi

natio

n of a

fore

ign in

strum

ent?

YN

Did t

he co

mpan

y pre

matur

ely te

rmina

te / u

nwind

a he

dge p

ositio

n wh

ere t

he ta

x valu

e diffe

rs in

relat

ion to

the e

cono

mic v

alue?

YN

Is the

comp

any a

bene

ficiar

y of a

trus

t?Y

N

If Yes

, how

man

y tru

sts?

Co

rpo

rati

on

State

the g

ross

inco

me, a

s defi

ned i

n s1 o

f the I

ncom

e Tax

Act,

of the

comp

any

R

Does

the c

ompa

nyde

clare

that

not m

ore t

han 2

0% of

the t

otal o

f all

rece

ipts a

nd ac

cruals

(othe

r tha

n of a

capit

al na

ture)

and a

ll ca

pital

gains

of th

e com

pany

cons

ists c

ollec

tively

of in

vestm

ent

incom

e and

inco

me fr

om re

nder

ing a

perso

nal s

ervic

e?

YN

Does

the c

ompa

ny de

clare

that

the co

mpan

y is n

ot a P

erso

nal

Servi

ce P

rovid

er as

defin

ed in

the F

ourth

Sch

edule

?Y

N

Does

the c

ompa

nyde

clare

that

all of

the s

hare

holde

rs /

memb

ers w

ere n

atura

l per

sons

(indiv

iduals

) thr

ough

out th

e yea

r of

asse

ssme

nt?Y

N

Does

the c

ompa

nyde

clare

that

none

of th

e sha

reho

lders

/mem

bers

of the

comp

any h

eldsh

ares

/ inte

rests

in an

other

clos

e cor

pora

tion,

comp

any o

r co-

oper

ative

othe

r tha

n tho

se sp

ecifie

d in

s12E

(4)(a

)(ii)?

YN

SM

CP

A0

1

YN

Wer

e the

nece

ssar

y adju

stmen

ts ma

de in

resp

ect o

f exp

ense

s not

allow

able

in ter

ms of

s23(

k)?

Was

any s

ervic

e ren

dere

d on b

ehalf

of th

e com

pany

rend

ered

by a

conn

ected

perso

n in r

elatio

n to t

he co

mpan

y?

YN

Do yo

u give

cons

ent th

at SA

RS ca

n pro

vide t

he at

tache

d fina

ncial

sta

temen

ts to

the C

ompa

nies a

nd In

tellec

tual P

rope

rty C

ommi

ssion

(C

IPC)

? Y

N

Is the

comp

any a

REI

T (R

eal E

state

Inves

tmen

t Tru

st as

defin

ed in

Se

ction

1)?

YN

Did t

he co

mpan

y ente

r into

any s

ale an

d lea

seba

ck ag

reem

ent?

YN

Have

the f

inanc

ial st

ateme

nts be

en re

viewe

d?Y

N

Does

the c

ompa

ny ex

ercis

e any

contr

ol of

a tru

st?

YN

Is the

comp

any a

foun

der /

settle

r / be

nefic

iary o

f a fo

reign

trus

t?Y

N

Did t

he co

mpan

y mak

e any

dona

tions

to a

foreig

n tru

st?Y

N

Page

4 of

26

SARS

_201

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el_IT

R14_

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mpl

e

EX

AM

PLE

Was

ther

e any

chan

ge in

shar

ehold

er’s

inter

est d

uring

the y

ear o

f as

sess

ment

(exc

luding

listed

comp

anies

)?Y

N

Is the

ultim

ate ho

lding

comp

any r

eside

nt ou

tside

Sou

th Af

rica?

Str

uctu

re

YN

Is the

comp

any a

partn

er in

an un

incor

pora

ted jo

int ve

nture

?Y

N

Spec

ify th

e nam

e of th

e ultim

ate ho

lding

comp

any

If Yes

, spe

cify t

he ta

x res

idenc

y cou

ntry c

ode o

f the u

ltimate

holdi

ng

comp

any

If No,

spec

ify th

e inc

ome t

ax re

feren

ce nu

mber

of th

e ultim

ate ho

lding

co

mpan

y

CO

MS

T01

CO

SH

R0

1

ITR14

L XX

b91c9121-0a17-4b26-a09d-d5980eb532db

FV V2010.XX.XX

SV XXXX

CT XX

NO XXXXXXXXXX

P XXXXXX

Y XXXX

001/001

Zo

ne (

s13

qu

at)

Is the

build

ing fo

r whic

h the

comp

any i

s clai

ming

an al

lowan

ce in

an

appr

oved

dema

rcated

zone

?Y

N

Did t

he co

mpan

y rec

eive a

certif

icate

issue

d by t

he m

unici

pality

co

nfirm

ing th

at the

build

ing fo

r whic

h the

comp

any i

s clai

ming

an

allow

ance

is in

an ur

ban d

evelo

pmen

t zon

e?Y

N

Did t

he co

mpan

y ere

ct, ex

tend,

add t

o or im

prov

e the

build

ing fo

r wh

ich th

e com

pany

is cl

aiming

an al

lowan

ce w

ith th

e sole

purp

ose o

f dis

posin

g the

reof

direc

tly on

comp

letion

?Y

N

If No,

state

the to

tal am

ount

incur

red f

or th

e ere

ction

, exte

nsion

, ad

dition

or im

prov

emen

t of th

e buil

ding

Did t

he co

mpan

y pur

chas

e the

build

ing or

part

there

of fro

m a

deve

loper

?Y

N

If Yes

, stat

e the

purch

ase p

rice o

f the b

uildin

g or p

art th

ereo

f

State

the a

moun

t of th

e pur

chas

e pric

e dee

med t

o be c

ost in

curre

d by t

he

comp

any i

n ter

ms of

s13q

uat(3

B)

Did t

he co

mpan

y use

the b

uildin

g ere

cted,

exten

ded,

impr

oved

or

adde

d on t

o sole

ly for

the t

rade

of th

e com

pany

durin

g the

year

of

asse

ssme

nt?Y

N

Did t

he co

mpan

y inc

ur co

sts fo

r the

erec

tion,

exten

sion o

r ad

dition

relat

ing to

low

cost

hous

ing (s

13qu

at(3

A))?

YN

UR

DE

A0

1

R R R

Is the

comp

any p

art o

f a gr

oup o

f com

panie

s with

a gr

oup c

onso

lidate

d tur

nove

r gre

ater t

han R

1 billi

on or

is th

e com

pany

a fin

ancia

l ser

vices

, mi

ning o

r mult

inatio

nal e

nterp

rise?

YN

Dedu

ct: R

educ

tion a

s a re

sult o

f the a

pplic

ation

of s4

6

R Balan

ce of

contr

ibuted

tax c

apita

l at th

e end

of th

e yea

r of a

sses

smen

t

R

Cap

ital

(co

nti

nu

ed

)

Page

5 of

26

SARS

_201

5_Lo

okFe

el_IT

R14_

v201

5.00.2

8Exa

mpl

e

EX

AM

PLE

As

sets

Curre

nt as

sets

–Inv

entor

y and

wor

k in p

rogr

ess (

net a

fter p

rovis

ions)

RNon-

curre

nt as

sets

–Pro

perty

, plan

t and

equip

ment

RNon-

curre

nt as

sets

–Lon

g-ter

m loa

ns

R

BS

ISM

01

RTota

l ass

ets

Othe

r ass

ets

R Curre

nt lia

bilitie

s -Tr

ade a

nd ot

her p

ayab

les (in

cludin

g acc

ruals

)

RCurre

nt as

sets

–Tra

de an

d othe

r rec

eivab

les (n

et aft

er pr

ovisi

ons)

R Non-

curre

nt lia

bilitie

s –Lo

ng-te

rm lo

ans &

prov

ision

s

R ITR14

L XX

b91c9121-0a17-4b26-a09d-d5980eb532db

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NO XXXXXXXXXX

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Y XXXX

001/001

Total

Equ

ity (C

apita

l and

rese

rves)

R Othe

r equ

ity an

d liab

ilities

REq

uit

y a

nd

Lia

bilit

ies

RTota

l equ

ity an

d Li

abilit

ies

Sales

(Tur

nove

r)

R Gros

s pro

fit –

subt

otal

R Gros

s los

s –su

btot

al

RGro

ss

Pro

fit

/ L

os

s

Less

: Cos

t of s

ales

R Inter

est r

eceiv

ed

R Acco

untin

g pro

fit on

disp

osal

of fix

ed as

sets

and /

or ot

her a

ssets

R Bad a

nd do

ubtfu

l deb

ts re

cove

red

RInc

om

e I

tem

s (

On

ly c

red

it a

mo

un

ts)

Othe

r inco

me

R Cont

rol T

otal

R RExp

en

se I

tem

s (

On

ly d

eb

it a

mo

un

ts)

Bad d

ebts

writte

n off

R

Acco

untin

g los

s on d

ispos

al of

fixed

asse

ts / o

ther a

ssets

Depr

eciat

ion

R

Curre

nt as

sets

–Cas

h and

cash

equiv

alents

R

Levy

inco

me

R

Prov

ision

for d

oubtf

ul de

bts

R Salar

ies an

d wag

es (in

cl. di

recto

rs’ / m

embe

rs’ re

mune

ratio

n)

R RRepa

irs, m

ainten

ance

,insu

ranc

e,alt

erati

ons a

nd im

prov

emen

ts

Trav

elling

expe

nses

R Othe

r exp

ense

s

R Cont

rol T

otal

RRMunic

ipal c

harg

es (e

lectric

ity, w

ater,

sewe

rage

, refu

se, r

ates &

taxe

s)

RDona

tions

-Ot

her

Net P

rofit

-Su

btot

al

R Net L

oss -

Subt

otal

RNet

Pro

fit

/ L

oss

Exp

en

se I

tem

s(O

nly

deb

it a

mo

un

ts)

(Co

nti

nu

ed

)

REIT

divid

ends

rece

ived

R

The

se c

onta

iners

are

fo

r M

icro

Bu

sin

ess /

Bo

dy C

orp

ora

te / S

ha

re B

lock C

om

pan

ies

RDona

tions

(s18

A)

Page

6 of

26

SARS

_201

5_Lo

okFe

el_IT

R14_

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5.00.2

8Exa

mpl

e

EX

AM

PLE

ITR14

L XX

b91c9121-0a17-4b26-a09d-d5980eb532db

FV V2010.XX.XX

SV XXXX

CT XX

NO XXXXXXXXXX

P XXXXXX

Y XXXX

001/001

(Co

nti

nu

ed

)

Ad

justm

en

ts:

Ad

de

d B

ack

Acco

untin

g inte

rest

paid

/ pay

able

R Acco

untin

g los

s on d

ispos

al of

fixed

and /

or ot

her a

ssets

R Capit

al ex

pend

iture

and /

or lo

sses

R RDepr

eciat

ion ac

cord

ing to

finan

cial s

tatem

ents

R R Othe

r Adju

stmen

ts: A

dded

Bac

k

R Doub

tful d

ebts

R

Expe

nses

attrib

utable

to ex

empt

incom

e and

not a

ctuall

y inc

urre

d in p

rodu

ction

of in

come

R Cont

rol T

otal

R

R

Non-

dedu

ctible

prov

ision

s

R

R

RReve

rsal o

f pre

vious

year

allow

ance

s / de

ducti

ons g

rante

d

Taxa

ble am

ounts

not d

eclar

ed in

Inco

me S

tatem

ent (

incl. r

ecou

pmen

ts)

R RAd

jus

tme

nts

: A

llo

wa

ble

RLoca

l divi

dend

s exc

luding

divid

ends

men

tione

d in s

8E, s

8EA

and s

103(

5)

RReve

rsal o

f pro

vision

s

RRece

ipts a

nd / o

r acc

ruals

of a

capit

al na

ture

RAcco

untin

g pro

fit on

disp

osal

of fix

ed an

d / or

othe

r ass

ets

R Doub

tful D

ebt A

llowa

nce:

s11(

j)

Depr

eciab

le As

set A

llowa

nce:

s 11(

o)

Plan

t and

mac

hiner

y whe

re co

mpan

y qua

lifies

as a

SBC:

s12E

Othe

r Adju

stmen

ts: A

llowa

ble

Cont

rol T

otal

(Co

nti

nu

ed

)(C

on

tin

ued

)T

XC

PT

01

R RLevy

exem

ption

in te

rms o

f s10

(1)(e

)(i) (

refer

to gu

ide)

Othe

r inco

me ex

empti

on (e

xclud

ing le

vy) in

term

s of s

10(1

)(e)(i

i) (re

fer to

guide

)

Wea

r and

tear

: s11

(e)

Calcu

lated

Pro

fit ex

cludin

g net

incom

e fro

m CF

C

Am

ou

nts

to

be

In

clu

de

d i

n t

he

De

term

ina

tio

n o

f T

ax

ab

le I

nc

om

e

befo

re s

18A

Do

nati

on

s (

Exc

lud

ing

as

se

ss

ed

lo

ss

es

bro

ug

ht

forw

ard

an

d

ca

pit

al

ga

ins /

lo

ss

es

)

Calcu

lated

Loss

Impu

ted ne

t inco

me fr

om C

FCR

4276

R R

Sour

ce co

de

Sour

ce co

de

R

The

se c

onta

iners

are

fo

r M

icro

Bu

sin

ess /

Bo

dy C

orp

ora

te / S

ha

re B

lock C

om

pan

ies

RDona

tions

-Ot

her

RDona

tions

(s18

A)

No

te:

Allow

able

s18A

dona

tions

and r

elated

carry

over

s will

be ca

lculat

ed by

SAR

S.

Page

7 of

26

SARS

_201

5_Lo

okFe

el_IT

R14_

v201

5.00.2

8Exa

mpl

e

EX

AM

PLE

No

n-c

urr

en

t A

ssets

ROthe

r non

-curre

nt as

sets

Cash

and c

ash e

quiva

lents

Othe

r cur

rent

asse

ts

R R

RTota

l non

-cur

rent

asse

ts

Plea

se pr

ovide

desc

riptio

ns re

lating

to ot

her n

on-cu

rrent

asse

ts lis

ted ab

ove

ITR14

L XX

b91c9121-0a17-4b26-a09d-d5980eb532db

FV V2010.XX.XX

SV XXXX

CT XX

NO XXXXXXXXXX

P XXXXXX

Y XXXX

001/001

Inven

tory a

nd w

ork i

n pro

gres

s (ne

t afte

r pro

vision

s)

Trad

e and

othe

r rec

eivab

les (e

xcl. d

ebtor

s)–n

et aft

er pr

ovisi

ons

RRCu

rre

nt

As

se

ts

RTota

l cur

rent

asse

ts

Plea

se pr

ovide

desc

riptio

ns re

lating

to ot

her c

urre

nt as

sets

listed

abov

e

Tota

l Cap

ital a

nd R

eser

ves

RPlea

se pr

ovide

desc

riptio

ns re

lating

to ot

her c

apita

l and

rese

rves

listed

abov

e

Cap

ital

an

d R

eserv

es

No

n-C

urr

en

t L

iab

ilit

ies

Long

-term

loan

s

Othe

r non

-curre

nt lia

bilitie

s

R Plea

se pr

ovide

desc

riptio

ns re

lating

to ot

her n

on-cu

rrent

liabil

ities l

isted

abov

e

Tota

l Non

-Cur

rent

liabi

lities

RR

Prop

erty,

plan

t and

equip

ment

R Inves

tmen

ts in

asso

ciates

and j

oint v

entur

es

R Long

term

loan

s –int

eres

t bea

ring

R Long

term

loan

s –int

eres

t free

R Debto

rs (e

xcl. t

rade

debto

rs)

R

Othe

r cap

ital a

nd re

serve

s

RNon-

distrib

utable

rese

rves

RShor

t-ter

m inv

estm

ents

RCu

rren

t A

ss

ets

(C

on

tin

ued

)

Trad

e and

othe

r pay

ables

(inclu

ding a

ccru

als)

RCu

rre

nt

Lia

bil

itie

s

Over

draft

and i

ntere

st be

aring

shor

t-ter

m bo

rrowi

ngs

R Othe

r cur

rent

liabil

ities

R Plea

se pr

ovide

desc

riptio

ns re

lating

to ot

her c

urre

nt lia

bilitie

s list

ed ab

ove

Tota

l Cur

rent

liabi

lities

R

(Co

nti

nu

ed

)(C

on

tin

ued

)B

SS

BD

01

The

se c

onta

iners

are

fo

r S

ma

ll B

usin

ess a

nd D

orm

an

t C

om

pa

nie

sPa

ge 8

of 26

SARS

_201

5_Lo

okFe

el_IT

R14_

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5.00.2

8Exa

mpl

e

EX

AM

PLE

RSa

les (T

urno

ver)

R Gros

s pro

fit –

subt

otal

R Admi

n., m

anag

emen

t, sec

retar

ial, r

ental

s

R RGros

s los

s –su

btot

al

R Bad a

nd do

ubtfu

l deb

ts re

cove

red

RPlus

: Clos

ing st

ock

R Divid

ends

rece

ived

R R ITR14

L XX

b91c9121-0a17-4b26-a09d-d5980eb532db

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SV XXXX

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Y XXXX

001/001

Othe

r inco

me

R

Acco

untin

g pro

fit on

disp

osal

of fix

ed as

sets

and /

or ot

her a

ssets

Plea

se pr

ovide

desc

riptio

ns re

lating

to ot

her in

come

listed

abov

e

Admi

n., m

anag

emen

t, sec

retar

ial fe

es, r

ental

s

R R R R R

Prov

ision

for d

oubtf

ul de

bts

R

Gro

ss

Pro

fit

/ L

os

s

Inc

om

e I

tem

s(O

nly

cre

dit

am

ou

nts

)

Exp

en

se I

tem

s(O

nly

deb

it a

mo

un

ts)

Bad d

ebts

writte

n off

RDepr

eciat

ion

Inter

est p

aid

Acco

untin

g los

s on d

ispos

al of

fixed

asse

ts / o

ther a

ssets

Inter

est r

eceiv

ed

Cont

rol T

otal

R Cons

ulting

, lega

l and

profe

ssion

al fee

s

Dona

tions

–othe

r

Dona

tions

(s18

A)

Alter

ation

s and

impr

ovem

ents

Trav

elling

expe

nses

R R R

RDire

ctors’

/ mem

bers’

remu

nera

tion

Inco

me

Ite

ms

(On

ly c

red

it a

mo

un

ts)

(Co

nti

nu

ed

)E

xp

en

se

Ite

ms

(On

ly d

eb

it a

mo

un

ts)

(Co

nti

nu

ed

)

Othe

r exp

ense

s

R Plea

se pr

ovide

desc

riptio

ns re

lating

to ot

her e

xpen

ses l

isted

abov

e

Cont

rol T

otal

RSalar

ies an

d Wag

es (in

cl. M

edica

l, Pen

sion a

nd P

rovid

ent F

und C

ontrib

ution

s)

Repa

irs an

d main

tenan

ce

R R Net P

rofit

-Su

btot

al

R Net L

oss -

Subt

otal

RNe

t P

rofi

t /

Lo

ss

Less

: Pur

chas

es

R Less

: Ope

ning s

tock

R

(Co

nti

nu

ed

)(C

on

tin

ued

)IS

SB

A0

1

RREIT

divid

ends

rece

ived

The

se c

onta

iners

are

fo

r S

ma

ll B

usin

ess C

om

pa

nie

sPa

ge 9

of 26

SARS

_201

5_Lo

okFe

el_IT

R14_

v201

5.00.2

8Exa

mpl

e

EX

AM

PLE

No

n-c

urr

en

t A

ssets

Fixed

asse

ts -o

ther

RFixed

prop

erty

RFixed

asse

ts (p

lant a

nd eq

uipme

nt)

R

Grou

p com

panie

s cur

rent

acco

unts

RPrep

ayme

nts

R R Cash

and c

ash e

quiva

lents

R Othe

r cur

rent

asse

ts

RShor

t-ter

m inv

estm

ents

R

RTota

l non

-cur

rent

asse

ts

SA R

even

ue S

ervic

e

Othe

r non

-curre

nt as

sets

R Plea

se pr

ovide

desc

riptio

ns re

lating

to ot

her n

on-cu

rrent

asse

ts lis

ted ab

ove

Gros

s inv

entor

y (inc

l. spa

re pa

rts an

d con

suma

bles a

nd w

ork i

n pro

gres

s)

Gros

s tra

de an

d othe

r rec

eivab

les (e

xcl. d

ebtor

s)

RR

Good

will a

nd in

tellec

tual p

rope

rty

R Inves

tmen

ts in

subs

idiar

ies

R Long

-term

loan

s –int

eres

t free

: Con

necte

d (Lo

cal)

R

Defer

red t

ax as

sets

R Cu

rren

t A

ssets

RTota

l cur

rent

asse

ts

Plea

se pr

ovide

desc

riptio

ns re

lating

to ot

her c

urre

nt as

sets

listed

abov

e

Long

-term

loan

s –int

eres

t free

: Non

-Con

necte

d (Lo

cal)

R Long

-term

loan

s –int

eres

t free

: Con

necte

d (Fo

reign

)

R Long

-term

loan

s –int

eres

t free

: Non

-Con

necte

d (Fo

reign

)

R ITR14

L XX

b91c9121-0a17-4b26-a09d-d5980eb532db

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Y XXXX

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Long

-term

loan

s –int

eres

t bea

ring:

Conn

ected

(Loc

al)

R Long

-term

loan

s –int

eres

t bea

ring:

Non-

Conn

ected

(Loc

al)

R Long

-term

loan

s –int

eres

t bea

ring:

Conn

ected

(For

eign)

R

Long

-term

loan

s –int

eres

t bea

ring:

Non-

Conn

ected

(For

eign)

R Gros

s deb

tors (

excl.

trad

e deb

tors)

RNo

n-c

urr

en

t A

ssets

(C

on

tin

ued

)C

urr

en

t A

ss

ets

(C

on

tin

ued

)

Less

: Pro

vision

s for

inve

ntory

write

off

R Less

: Pro

vision

s for

trad

e and

othe

r rec

eivab

les (e

xcl d

ebtor

s)

R

Less

: Pro

vision

s for

debto

rs (e

xcl. t

rade

debto

rs)

R Shar

e cap

ital

RCap

ital

an

d R

eserv

es

Cred

it Ba

lance

s

Shar

e pre

mium

R

(Co

nti

nu

ed

)(C

on

tin

ued

)B

SM

LA

01

The

se c

onta

iners

are

fo

r M

ed

ium

to

La

rge B

usin

ess C

om

pa

nie

sPa

ge 10

of 2

6

SARS

_201

5_Lo

okFe

el_IT

R14_

v201

5.00.2

8Exa

mpl

e

EX

AM

PLE

(Co

nti

nu

ed

)

ITR14

L XX

b91c9121-0a17-4b26-a09d-d5980eb532db

FV V2010.XX.XX

SV XXXX

CT XX

NO XXXXXXXXXX

P XXXXXX

Y XXXX

001/001

Cap

ital

an

d R

es

erv

es

(Co

nti

nu

ed

)

Othe

r cap

ital a

nd re

serve

s

R Plea

se pr

ovide

desc

riptio

ns re

lating

to ot

her c

apita

l and

rese

rves(

credit

balan

ces)

listed

ab

ove

Accu

mulat

ed lo

ss

Othe

r cap

ital a

nd re

serve

sfor

debit

balan

ces

RRDebi

t Bala

nces

Plea

se pr

ovide

desc

riptio

ns re

lating

to ot

her c

apita

l and

rese

rves

(deb

it bala

nces

) liste

d ab

ove

RTota

l Cap

ital a

nd R

eser

ves

Depo

sits a

nd fu

nds r

eceiv

ed in

adva

nce (

excl.

contr

act p

rogr

ess p

ayme

nts)

RGros

s tra

de an

d othe

r pay

ables

(Not

older

than

3 ye

ars)

R Prov

ision

s –ex

cludin

g inv

entor

y and

trad

e rec

eivab

les

R

Defer

red t

ax lia

bility

R Plea

se pr

ovide

desc

riptio

ns re

lating

to ot

her n

on-cu

rrent

liabil

ities l

isted

abov

e

Tota

l Non

-Cur

rent

liabi

lities

ROthe

r non

-curre

nt lia

bilitie

s

RLong

-term

loan

s –int

eres

tfree

: Con

necte

d (Lo

cal)

R Long

-term

loan

s –int

eres

t free

: Non

-Con

necte

d (Lo

cal)

R Long

-term

loan

s –int

eres

t free

: Con

necte

d (Fo

reign

)

R Long

-term

loan

s –int

eres

t free

: Non

-Con

necte

d (Fo

reign

)

R Long

-term

loan

s –int

eres

t bea

ring:

Conn

ected

(Loc

al)

R Long

-term

loan

s –int

eres

t bea

ring:

Non-

Conn

ected

(Loc

al)

R Long

-term

loan

s –int

eres

t bea

ring:

Conn

ected

(For

eign)

R Long

-term

loan

s –int

eres

t bea

ring:

Non-

Conn

ected

(For

eign)

RNo

n-C

urr

en

t L

iab

ilit

ies

Cu

rre

nt

Lia

bilit

ies

Grou

p com

panie

s cur

rent

acco

unts

R Contr

act p

rogr

ess p

ayme

nts re

ceive

d in a

dvan

ce

R Curre

nt po

rtion o

f inter

est b

earin

g bor

rowi

ngs

R Curre

nt po

rtion o

f inter

est fr

ee bo

rrowi

ngs

R Over

draft

and i

ntere

st be

aring

shor

t-ter

m bo

rrowi

ngs

R SA R

even

ue S

ervic

e

R Shar

ehold

ers f

or di

viden

d / pr

opos

ed di

viden

d

R

Non-

distrib

utable

rese

rves f

or cr

edit b

alanc

es

R Distr

ibutab

le re

serve

s (ex

cl. re

taine

d pro

fit / a

ccum

ulated

loss

)

R Retai

ned p

rofit

R

Gros

s tra

de an

d othe

r pay

ables

(Olde

r tha

n 3 ye

ars)

R

(Co

nti

nu

ed

)(C

on

tin

ued

)B

SM

LB

01

The

se c

onta

iners

are

fo

r M

ed

ium

to

La

rge B

usin

ess C

om

pa

nie

sPa

ge 11

of 2

6

SARS

_201

5_Lo

okFe

el_IT

R14_

v201

5.00.2

8Exa

mpl

e

EX

AM

PLE

Cu

rre

nt

Lia

bil

itie

s(C

ontin

ued

)

Othe

r cur

rent

liabil

ities

R Plea

se pr

ovide

desc

riptio

ns re

lating

to ot

her c

urre

nt lia

bilitie

s list

ed ab

ove

Tota

l Cur

rent

liabi

lities

R

(Co

ntin

ue

d)

ITR14

L XX

b91c9121-0a17-4b26-a09d-d5980eb532db

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SV XXXX

CT XX

NO XXXXXXXXXX

P XXXXXX

Y XXXX

001/001

Gros

s Sale

s (ex

cl. cr

edit n

otes)

–For

eign:

Conn

ected

R Add:

Inven

tory a

djustm

ents

(Pre

vious

year

stoc

k pro

vision

reve

rsed)

RLess

: Inve

ntory

adj. (

Curre

nt ye

ar st

ock p

rovis

ion (o

bsole

te / s

low-m

oving

stoc

k))

RGros

s pro

fit –

subt

otal

R

Admi

n., m

anag

emen

t, sec

retar

ial, r

ental

s, gu

aran

tee fe

es an

d othe

r ser

vices

–Co

nnec

ted (F

oreig

n)R

Gros

s los

s –su

btot

al

Bad a

nd do

ubtfu

l deb

ts re

cove

red

R

Gro

ss P

rofi

t /

Lo

ss

Inc

om

e I

tem

s(O

nly

cre

dit

am

ou

nts

)

Gros

s Sale

s (ex

cl. cr

edit n

otes)

–Othe

r tha

n for

eign c

onne

cted

R Less

: Ope

ning s

tock

R Less

: Pur

chas

es –

Fore

ign: C

onne

cted (

excl.

reba

tes)

R Add:

Clos

ing st

ock (

Gros

s exc

l. adju

stmen

ts)

RLess

: Cre

dit no

tes on

sales

R Less

: Pur

chas

es –

Othe

r tha

n for

eign c

onne

cted (

excl.

reba

tes)

R RAdd:

Reba

tes

R

Admi

n., m

anag

emen

t, sec

retar

ial, r

ental

s, gu

aran

tee fe

es an

d othe

r ser

vices

–Non

-co

nnec

tedRAd

min.,

man

agem

ent, s

ecre

tarial

, ren

tals,

guar

antee

fees

and o

ther s

ervic

es–

Conn

ected

(Loc

al)R Di

viden

ds –

local

R Divid

ends

–for

eign

R Fore

ign ex

chan

ge ga

in

R Inter

est –

Non-

conn

ected

R Gros

s roy

alties

and l

icens

e fee

s

RAcco

untin

g pro

fit on

disp

osal

of fix

ed as

sets

and /

or ot

her a

ssets

R Inter

est –

Conn

ected

R

(Co

ntin

ue

d)

Inter

est –

Finan

cial in

stitut

ions

R

ISM

LA

01

REIT

divid

ends

rece

ived

R

The

se c

onta

iners

are

fo

r M

ed

ium

to

La

rge B

usin

ess C

om

pa

nie

s

RIndem

nity p

ayme

ntsre

ceive

d

Page

12 o

f 26

SARS

_201

5_Lo

okFe

el_IT

R14_

v201

5.00.2

8Exa

mpl

e

EX

AM

PLE

ITR14

L XX

b91c9121-0a17-4b26-a09d-d5980eb532db

FV V2010.XX.XX

SV XXXX

CT XX

NO XXXXXXXXXX

P XXXXXX

Y XXXX

001/001

R R Alter

ation

s and

impr

ovem

ents

(exc

luding

repa

irs an

d main

tenan

ce)

R R R RExp

en

se I

tem

s(O

nly

deb

it a

mo

un

ts)

Bad d

ebts

writte

n off

R

Acco

untin

g los

s on d

ispos

al of

fixed

asse

ts / o

ther a

ssets

Acco

mmod

ation

and t

rave

l exp

ense

s: Lo

cal

Acco

mmod

ation

and t

rave

l exp

ense

s: Fo

reign

Inco

me

Ite

ms

(On

ly c

red

it a

mo

un

ts)

Comp

ensa

tion f

or lo

ss of

offic

e

Cons

ulting

, lega

l and

profe

ssion

al fee

s

Depr

eciat

ion

R R R R RCapit

al im

prov

emen

ts –f

armi

ng op

erati

ons (

par 1

2 of th

e Firs

t Sch

edule

)

Comm

ission

paid

Dire

ctors’

/ mem

bers’

remu

nera

tion

R

(Co

nti

nu

ed

)(C

on

tin

ued

)

Othe

r inco

me

R Plea

se pr

ovide

desc

riptio

ns re

lating

to ot

her in

come

listed

abov

e

Reve

rsal o

f impa

irmen

t loss

reco

gnise

d in p

rofit

or lo

ss

R Cont

rol T

otal

R R

Exp

en

se I

tem

s(O

nly

deb

it a

mo

un

ts)

(Co

nti

nu

ed

)

R RDona

tions

(s18A

)

Dona

tions

–othe

r

R

R R R R R R RFore

ign ex

chan

ge lo

ss

Inter

est –

finan

cial in

stitut

ions

Emplo

yee e

xpen

ses:

UIF

contr

ibutio

ns an

d SDL

Emplo

yee e

xpen

ses:

Pens

ion an

d Pro

viden

t fund

contr

ibutio

ns

Emplo

yee e

xpen

ses:

Medic

al sc

heme

contr

ibutio

ns

Emplo

yee e

xpen

ses:

Memb

ersh

ip of

a pro

fessio

nal b

ody

Emplo

yee e

xpen

ses:

Train

ing

Impa

irmen

t loss

reco

gnise

d in p

rofit

or lo

ss

R REmplo

yee e

xpen

ses:

Wag

es an

d sala

ries (

exclu

ding m

edica

l, pro

viden

t and

pens

ion)

Emplo

yee e

xpen

ses:

Grou

p life

insu

ranc

e

RExpe

nditu

re in

curre

d dire

ctly o

r indir

ectly

in ef

fectin

g BEE

and /

or B

BEEE

comp

lianc

e

(Co

nti

nu

ed

)

Ex

pe

ns

e I

tem

s(O

nly

deb

it a

mo

un

ts)

(Co

nti

nu

ed

)

R R RInter

est –

Conn

ected

(Loc

al)

Insur

ance

prem

ium in

resp

ect o

f reh

abilit

ation

oblig

ation

s (s3

7A)

Insur

ance

(exc

luding

s37A

paym

ents)

RInter

est –

Conn

ected

(For

eign)

RInter

est a

nd pe

naltie

s paid

to S

ARS

Admi

n., se

cretar

ial, r

ental

s, gu

aran

tee fe

es an

d othe

r ser

vices

–Con

necte

d (Fo

reign

)

Admi

n., se

cretar

ial, r

ental

s, gu

aran

tee fe

es an

d othe

r ser

vices

–Non

-conn

ected

Admi

n., se

cretar

ial, r

ental

s, gu

aran

tee fe

es an

d othe

r ser

vices

–Con

necte

d (Lo

cal)

RInter

est –

Non-

conn

ected

ISM

LB

01

RExpe

nditu

re in

curre

d in r

espe

ct of

comp

any r

estru

cturin

g

The

se c

onta

iners

are

fo

r M

ed

ium

to

La

rge B

usin

ess C

om

pa

nie

s

Levy

inco

me

R

Page

13 o

f 26

SARS

_201

5_Lo

okFe

el_IT

R14_

v201

5.00.2

8Exa

mpl

e

EX

AM

PLE

(Co

nti

nu

ed

)

ITR14

L XX

b91c9121-0a17-4b26-a09d-d5980eb532db

FV V2010.XX.XX

SV XXXX

CT XX

NO XXXXXXXXXX

P XXXXXX

Y XXXX

001/001

Exp

en

se I

tem

s(O

nly

deb

it a

mo

un

ts)

(Co

nti

nu

ed

)

Restr

aint o

f trad

e

R R R

R R R

Rese

arch

and d

evelo

pmen

t cos

ts (s1

1B)

RRoya

lties a

nd lic

ense

fees

(exc

luding

paym

ents

in ter

ms of

mine

ral a

nd pe

troleu

m re

sour

ces r

oyalt

ies) –

Fore

ign

Roya

lty pa

ymen

ts in

resp

ect o

f mine

ral a

nd pe

troleu

m re

sour

ces r

oyalt

ies –

Loca

l

Roya

lties a

nd lic

ense

fees

(exc

luding

paym

ents

in ter

ms of

mine

ral a

nd pe

troleu

m re

sour

ces r

oyalt

ies) –

Loca

l

Roya

lty pa

ymen

ts in

resp

ect o

f mine

ral a

nd pe

troleu

m re

sour

ces r

oyalt

ies –

Fore

ign

Ex

pen

se I

tem

s (

On

ly d

eb

it a

mo

un

ts)

(Co

nti

nu

ed

)

RSmall

items

and l

oose

tools

Othe

r exp

ense

s

R Plea

se pr

ovide

desc

riptio

ns re

lating

to ot

her e

xpen

ses l

isted

abov

e

Cont

rol T

otal

R Net P

rofit

-Su

btot

al

R Net L

oss -

Subt

otal

RNe

t P

rofi

t /

Lo

ss

R Prov

ision

for d

oubtf

ul de

bts

R R R R R R R ROper

ating

leas

epay

ments

–No

n-co

nnec

ted

Partn

ersh

ip / J

oint v

entur

e los

s -Lo

cal

Repa

irs an

d main

tenan

ce

Leas

e pay

ments

othe

r tha

n ope

ratin

g lea

ses

Mana

geme

nt fee

s -Co

nnec

ted

Oper

ating

leas

epay

ments

-Co

nnec

ted

Partn

ersh

ip / J

oint v

entur

e los

s -F

oreig

n

Mana

geme

nt fee

s –No

n-co

nnec

ted

(Co

nti

nu

ed

)

RKey m

an in

sura

nce (

s11(

w))

Deb

it A

dju

stm

en

ts(d

ec

rea

se

net

pro

fit

/ in

cre

ase

ne

t lo

ss

)

No

n-T

ax

ab

le A

mo

un

ts C

red

ite

d t

o t

he I

nc

om

e S

tate

me

nt

Acco

untin

g inte

rest

rece

ived/

rece

ivable

R Acco

untin

g pro

fit on

disp

osal

of fix

ed an

d / or

othe

r ass

ets

R Adjus

tmen

ts to

comp

ly wi

th IF

RS: F

air va

lue

R Exem

pt loc

al div

idend

s

RExem

pt for

eign d

ivide

nds (

s10(

1)(k)

(ii))

R Incom

e (oth

er th

an fo

reign

divid

ends

) exe

mpt fr

om ta

x –s1

0 (ex

cludin

g s10

(1)(e

))

Amou

nts pr

eviou

sly ta

xed a

s rec

eived

in ad

vanc

e

R R RAdjus

tmen

ts to

comp

ly wi

th IF

RS: A

ccou

nting

R Exem

pt for

eign d

ivide

nds (

s10B

)

Se

lectio

nPl

ease

selec

t / de

-selec

t the n

on-ta

xable

amou

nts cr

edite

d to t

he In

come

St

ateme

nt

TX

SL

A0

1IS

ML

C0

1

Th

is c

on

tain

er

is for

Sm

all,

Me

diu

m to

La

rge B

usin

ess C

om

pa

nie

s

Rese

arch

and d

evelo

pmen

t cos

ts (s1

1D)

RExem

pt inc

ome r

eceiv

ed or

accru

ed in

resp

ect o

f gov

ernm

ent g

rants

(s12

P)

RIncom

e exe

mpt in

resp

ect o

f ship

s use

d for

inter

natio

nal s

hippin

g (s1

2Q)

The

se c

onta

iners

are

fo

r M

ed

ium

to

La

rge B

usin

ess C

om

pa

nie

s

RIncom

e not

taxab

le by

virtu

e of a

doub

le tax

ation

agre

emen

t

Page

14 o

f 26

SARS

_201

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okFe

el_IT

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8Exa

mpl

e

EX

AM

PLE

ITR14

L XX

b91c9121-0a17-4b26-a09d-d5980eb532db

FV V2010.XX.XX

SV XXXX

CT XX

NO XXXXXXXXXX

P XXXXXX

Y XXXX

001/001

Sp

ec

ial

All

ow

an

ce

s N

ot

Cla

ime

d i

n t

he

In

co

me

Sta

tem

en

t

RDoub

tful d

ebt a

llowa

nce (

s11(

j))

RImpr

ovem

ent to

leas

ehold

prem

ises (

s11(

g))

RRestr

aint o

f trad

e (s1

1(cA

))

RWea

r and

tear

allow

ance

(s11

(e))

RLeas

e pre

mium

allow

ance

(s11

(f))

RAmor

tisati

on of

lump

sum

contr

ibuted

to re

tireme

nt / b

enefi

t fund

s (s1

1(l))

Othe

r

Plea

se pr

ovide

desc

riptio

ns re

lating

tooth

er lis

ted ab

ove

RCont

rol T

otal

R

Se

lection

Plea

se se

lect /

de-se

lect th

e spe

cial a

llowa

nces

not c

laime

d in t

he In

come

St

ateme

nt

RBroa

d-ba

sed e

mploy

ee sh

are p

lan (d

educ

tion t

his ye

ar) (

s11(lA

))

(Co

nti

nu

ed

)

De

bit

Ad

justm

en

ts(d

ecre

as

e n

et

pro

fit

/ in

cre

ase

net

los

s)

No

n-T

axa

ble

Am

ou

nts

Cre

dite

d t

o t

he

In

co

me

Sta

tem

en

t (c

on

tin

ued

)

(Co

nti

nu

ed

)

Deb

it A

dju

stm

en

ts (

de

cre

ase

net

pro

fit

/ in

cre

ase

net

los

s)

Sp

ec

ial

All

ow

an

ce

sN

ot

Cla

ime

d in

th

e I

nco

me

Sta

tem

en

t(C

on

tin

ued

)

RExpe

nditu

re be

fore c

omme

ncing

trad

e (s1

1A)

R Rese

arch

and d

evelo

pmen

t ded

uctio

n (s1

1D)

Mach

inery,

plan

t, imp

lemen

ts, ut

ensil

s and

artic

lesde

ducti

on(s1

2B)

R RDedu

ction

again

st Fo

reign

Divi

dend

s (s1

1C)

Rese

arch

and d

evelo

pmen

t ded

uctio

n (s1

1B)

R RR Pipe

lines

, tran

smiss

ion an

d rail

dedu

ction

(s12

D)

Manu

factur

ers,

hotel

keep

ers,

aircra

ft, sh

ip, st

orag

e and

pack

ing of

agric

ultur

al pr

oduc

ts de

ducti

on(s1

2C)

RIndus

trial a

ssets

used

for q

ualify

ing in

dustr

ial po

licy p

rojec

ts (s1

2G)

R Plan

t and

mac

hiner

y whe

re co

mpan

y qua

lifies

as a

SBC

(s12E

)

R Airp

ort a

nd po

rt as

sets

(s12F

)

RRollin

g stoc

k (s1

2DA)

RDepr

eciab

le as

set a

llowa

nce (

s11(

o))

RRegis

tered

lear

nersh

ip ag

reem

ents

comp

leted

in cu

rrent

year

(s12

H)

RLear

nersh

ip ag

reem

ents

regis

tered

/ in e

ffect

(s12H

)

Indus

trial p

olicy

proje

cts: B

rown

field

proje

cts (s

12I)

Indus

trial p

olicy

proje

cts: G

reen

field

proje

cts (s

12I)

R Certif

ied E

miss

ion R

educ

tions

Exem

ption

(s12K

)

Dedu

ction

of m

edica

l lump

sum

paym

ents

(s12M

)

R R Dedu

ction

for b

uildin

gs us

ed in

a ma

nufac

turing

proc

ess (

s13)

R Hotel

build

ing de

ducti

on (s

13bis

)

RR Expe

nditu

re in

curre

d in e

xcha

nge f

or th

e iss

ue of

Ven

ture C

apita

l Com

pany

shar

es

(s12J

)

RSp

ecia

l A

llo

wan

ces N

ot

Cla

imed

in

th

e I

nco

me S

tate

men

t(C

on

tin

ued

)

(Co

nti

nu

ed

)

De

bit

Ad

justm

en

ts (

dec

rea

se n

et

pro

fit

/ in

cre

as

e n

et

los

s)

TX

SL

B0

1T

XS

LD

01

TX

SL

C01

Ener

gy ef

ficien

cy sa

vings

dedu

ction

(s12

L)

R

Reve

rsal o

f pro

vision

s

RRece

ipts a

nd / o

r acc

ruals

of a

capit

al na

ture

R

Impr

ovem

ents

not o

wned

by th

e com

pany

(s12

N)

Impr

ovem

ents

on pr

oper

ty of

which

gove

rnme

nt ho

lds a

right

of us

e or o

ccup

ation

(s1

2NA)

R R

The

se c

onta

iners

are

fo

r S

ma

ll, M

ediu

m t

o L

arg

e B

usin

ess C

om

pa

nie

s

RExem

ption

in re

spec

t of fi

lms (

s12O

)

Page

15 o

f 26

SARS

_201

5_Lo

okFe

el_IT

R14_

v201

5.00.2

8Exa

mpl

e

EX

AM

PLE

ITR14

L XX

b91c9121-0a17-4b26-a09d-d5980eb532db

FV V2010.XX.XX

SV XXXX

CT XX

NO XXXXXXXXXX

P XXXXXX

Y XXXX

001/001

R Reve

rsal o

f clos

ing va

lues o

f wor

k in p

rogr

ess(

s 22(

2A))

-pre

vious

year

Reve

rsal o

f clos

ing va

lues o

f con

suma

ble st

ock a

nd sp

are p

arts

(pre

vious

year

)

R Prep

aid ex

pend

iture

not li

mited

by s2

3H

R Cred

it agr

eeme

nt an

d deb

tors a

llowa

nce (

hire-

purch

ase)

(s24

)

Allow

ance

for f

uture

expe

nditu

re (s

24C)

R Film

allow

ance

(s24

F)

RLow

cost

resid

entia

l unit

dedu

ction

(s13s

ept)

R Inter

est in

curre

d (s2

4J an

d s24

JA)

RRSp

ecia

l A

llo

wan

ces N

ot

Cla

imed

in

th

e I

nco

me S

tate

men

t(C

on

tin

ued

)

R RUDZ

(s13q

uat)

-impr

ovem

ents

this y

ear

Resid

entia

l unit

dedu

ction

(s13

sex)

R Comm

ercia

l buil

dingd

educ

tion(

s13q

uin)

(Co

nti

nu

ed

)

Deb

it A

dju

stm

en

ts (

de

cre

as

e n

et

pro

fit

/ in

cre

ase

net

los

s)

Adjus

tmen

ts to

comp

ly wi

th IF

RS: A

ccou

nting

Adjus

tmen

ts to

comp

ly wi

th IF

RS: F

air va

lue

R Amor

tisati

on of

leas

e pre

mium

s and

impr

ovem

ents

to lea

seho

ld pr

emise

s

R Capit

al ex

pend

iture

and /

or lo

sses

R R

No

n-D

ed

ucti

ble

Am

ou

nts

Deb

ited

to

th

e In

co

me

Sta

tem

en

t

Depr

eciat

ion ac

cord

ing to

finan

cial s

tatem

ents

Dona

tions

(s18

A)

Expe

nses

attrib

utable

to ex

empt

incom

e -Lo

cal

R Expe

nses

attrib

utable

toex

empt

incom

e -Fo

reign

R R R R Expe

nses

not a

ctuall

y inc

urre

d in t

he pr

oduc

tion o

f inco

me (s

11(a

))

Dona

tions

–oth

er

RRCapit

al Im

prov

emen

t -Fa

rming

oper

ation

s (pa

r 12 o

f the F

irst S

ched

ule)

TX

SL

E0

1

ROthe

r

Plea

se pr

ovide

desc

riptio

ns re

lating

to ot

her li

sted a

bove

RCont

rol T

otal

Sp

ecia

l A

llo

wan

ces

No

t C

laim

ed

in

th

e I

nco

me S

tate

men

t(C

on

tin

ued

)

(Co

nti

nu

ed

)

De

bit

Ad

justm

en

ts(d

ecre

as

e n

et

pro

fit

/ in

cre

ase

net

los

s)

TX

SL

F0

1

Se

lectio

nPl

ease

selec

t / de

-selec

t the n

on-d

educ

tible

items

debit

ed to

the I

ncom

e St

ateme

ntAc

coun

ting i

ntere

st pa

id / p

ayab

le

Acco

untin

g los

ses d

erive

d fro

m for

eign s

ource

s (ex

cludin

g CFC

)

R

Acco

untin

g los

s on d

ispos

al of

fixed

and /

or ot

her a

ssets

R

RNo

n-D

ed

ucti

ble

Am

ou

nts

De

bit

ed

to

th

e In

co

me

Sta

tem

en

t(C

on

tin

ued

)

(Co

nti

nu

ed

)

Cre

dit

Ad

jus

tme

nts

(in

cre

ase

net

pro

fit

/ d

ecre

ase

net

los

s)

TX

SL

G0

1

UDZ

(s13q

uat)

-ere

ction

of a

new

build

ing th

is ye

ar

R

Cre

dit

Ad

justm

en

ts(i

nc

rea

se n

et

pro

fit

/ d

ec

rea

se n

et

loss

)

Envir

onme

ntal a

sset

dedu

ction

(s37

B)

Envir

onme

ntal c

onse

rvatio

n and

main

tenan

ce de

ducti

on (s

37C)

R R Leas

e pay

ments

on ca

pitali

sed l

ease

d ass

ets

RRDedu

ction

s in r

espe

ct of

co-o

pera

tives

(s27

)Re

siden

tial b

uildin

g ded

uctio

n (s1

3ter)

R

Inter

est p

aid in

resp

ect o

f cap

italis

ed le

ased

asse

ts

R

The

se c

onta

iners

are

fo

r S

ma

ll, M

ediu

m t

o L

arg

e B

usin

ess C

om

pa

nie

sPa

ge 16

of 2

6

SARS

_201

5_Lo

okFe

el_IT

R14_

v201

5.00.2

8Exa

mpl

e

EX

AM

PLE

ITR14

L XX

b91c9121-0a17-4b26-a09d-d5980eb532db

FV V2010.XX.XX

SV XXXX

CT XX

NO XXXXXXXXXX

P XXXXXX

Y XXXX

001/001

Doub

tful d

ebt a

llowa

nce (

s11(

j))

RAllow

ance

for f

uture

expe

nditu

re (s

24C)

R Cred

it agr

eeme

nts an

d deb

tors a

llowa

nce (

hire-

purch

ase)

(s24

)

R ROthe

r

Plea

se pr

ovide

desc

riptio

ns re

lating

to ot

her li

sted a

bove

RCont

rol T

otal

Se

lectio

nPl

ease

selec

t / de

-selec

t the a

llowa

nces

/ ded

uctio

ns gr

anted

in pr

eviou

s ye

ars o

s ass

essm

ent a

nd no

w re

verse

d.

Amou

nts re

ceive

d in a

dvan

ce

R Amou

nts ac

crued

but n

ot re

ceive

d

R Clos

ing va

lue of

cons

umab

le sto

ck an

d spa

re pa

rts

R Clos

ing ba

lance

of st

ock v

alues

of w

ork i

n pro

gres

s -(s2

2(2A

))

R

Se

lection

Plea

se se

lect /

de-se

lect th

e amo

unts

not c

redit

ed to

the In

come

Stat

emen

t

(Co

nti

nu

ed

)

Incom

e dee

med t

o be f

rom

a Sou

th Af

rican

sour

ce

R Inter

est a

ccru

ed (s

24Ja

nds2

4JA)

R Loan

s / ad

vanc

es gr

anted

by an

insu

rer (

par.

(m) o

f def.

of “g

ross

inco

me”)

R Tran

sfer p

ricing

adjus

tmen

t(ex

cludin

g fina

ncial

assis

tance

)

RAm

ou

nts

no

t C

red

ited

to

th

e In

co

me

Sta

tem

en

t )

R Plea

se pr

ovide

desc

riptio

ns re

lating

to ot

her li

sted a

bove

RCont

rol T

otal

Othe

r

TX

SL

J0

1(C

on

tin

ued

)

Cre

dit

Ad

justm

en

ts(i

nc

reas

e n

et

pro

fit

/ d

ec

reas

e n

et

loss

)

No

n-D

ed

ucti

ble

Am

ou

nts

Deb

ited

to

th

e In

co

me S

tate

men

t(C

on

tin

ue

d)

Prov

ision

s not

dedu

ctible

curre

nt ye

ar(e

xclud

ing do

ubtfu

l deb

t)

Tran

sfer p

ricing

adjus

tmen

ts (e

xclud

ing th

in ca

pitali

satio

n adju

stmen

ts)

R R

ROthe

r

Plea

se pr

ovide

desc

riptio

ns re

lating

to ot

her li

sted a

bove

RCont

rol T

otal

TX

SL

H0

1

Lump

sum

contr

ibutio

ns to

retire

ment

and /

or be

nefit

funds

Prov

ision

for d

oubtf

ul de

bt no

t ded

uctib

le in

curre

nt ye

ar

R Prep

aid ex

pend

iture

not a

llowe

d und

ers2

3H

R R

(Co

nti

nu

ed

)T

XS

LI0

1

All

ow

an

ce

s /

De

du

cti

on

s G

ran

ted

in

Pre

vio

us

Ye

ars

of

As

sessm

en

t an

d n

ow

Revers

ed

Inter

est, p

enalt

ies pa

id in

resp

ect o

f taxe

s (s2

3(d)

)

RInter

est n

on-d

educ

tible

in ter

ms of

s23K

Limita

tion o

f inter

est d

educ

tion u

nder

s23N

RRFinan

cial a

ssist

ance

(s31

)

No

n-D

ed

ucti

ble

Am

ou

nts

Deb

ited

to

th

e In

co

me S

tate

men

t(C

on

tin

ue

d)

Shor

t term

insu

ranc

e poli

cy pr

emium

snot

allow

able

(s23L

)

RInter

est n

ot all

owab

le in

resp

ect o

f deb

ts ow

ed to

perso

n(s)

not s

ubjec

t to ta

x(s2

3M)

RThe

se c

onta

iners

are

fo

r S

ma

ll, M

ediu

m t

o L

arg

e B

usin

ess C

om

pa

nie

s

R

Page

17 o

f 26

SARS

_201

5_Lo

okFe

el_IT

R14_

v201

5.00.2

8Exa

mpl

e

EX

AM

PLE

Did t

he co

mpan

y inc

uran

y ins

uran

ce pr

emium

s on t

he liv

es of

em

ploye

es or

dire

ctors?

Did t

he co

mpan

y ente

r into

an in

stalm

ent s

ale ag

reem

ent a

s refe

rred t

o in

s12D

A to

use t

he ro

lling s

tock a

s an a

sset

to ge

nera

te inc

ome?

Was

the a

llowa

nce c

laime

d in t

erm

of s1

2F on

ly in

relat

ion to

asse

ts us

ed di

rectl

y in t

he pr

oduc

tion o

f inco

me?

Does

the c

ompa

ny ca

rry on

any b

usine

ss as

a ho

telke

eper

(s13

bis)?

Was

the s

trateg

ic ind

ustria

l pro

ject fo

r whic

h an a

llowa

nce w

as cl

aimed

ap

prov

ed by

the M

iniste

r of T

rade

and I

ndus

try (s

12G)

?

ITR14

L XX

b91c9121-0a17-4b26-a09d-d5980eb532db

FV V2010.XX.XX

SV XXXX

CT XX

NO XXXXXXXXXX

P XXXXXX

Y XXXX

001/001

If Yes

, stat

e the

total

amou

nt of

insur

ance

prem

iums i

ncur

red d

uring

the y

ear o

f as

sess

ment:

R

Was

the i

ndus

trial p

olicy

proje

ct for

whic

h an a

llowa

nce w

as cl

aimed

ap

prov

ed by

the M

iniste

r of T

rade

and I

ndus

try (s

12I)?

Is the

comp

any t

he ow

ner o

f the f

ilm as

conte

mplat

ed in

s12O

?

Is the

comp

any t

he ow

ner o

f the f

ilm as

conte

mplat

ed in

s24F

?

Did t

he co

mpan

y mak

e any

contr

ibutio

ns to

the b

enefi

t of th

e emp

loyee

s to

any p

ensio

n, pr

ovide

nt or

med

ical fu

nd in

exce

ss of

20%

of th

e ap

prov

ed re

mune

ratio

n (s1

1(l))

?

Is the

build

ing fo

r whic

h an a

llowa

nce i

s clai

med u

sed i

n the

proc

ess o

f ma

nufac

turing

(s13

)?

Does

the c

ompa

ny us

e a bu

ilding

in th

e pro

ducti

on of

inco

me in

re

spec

t of tr

ade o

ther t

han t

he pr

ovisi

on of

resid

entia

l acc

ommo

datio

n (s1

3quin

)?

Was

the d

oubtf

ul de

bt all

owan

ce as

refer

red t

o in s

11(j)

base

d on a

fixed

pe

rcenta

ge of

all d

ebtor

s as a

t yea

r end

in re

spec

t of th

e cur

rent

year

of

asse

ssme

nt?

Was

the a

llowa

nce c

laime

d in r

espe

ct of

s13te

r for

the e

recti

on of

at

least

5 res

identi

al un

its?

Did t

he co

mpan

y com

plete

IT18

0's fo

r lear

nersh

ip ag

reem

ents

in re

spec

t of s

12H?

Calcu

lated

Pro

fit ex

cludin

g net

incom

e fro

m CF

C

Calcu

lated

Loss

Impu

ted ne

t inco

me fr

om C

FC

RR R

(Co

nti

nu

ed

)T

XS

LK

01

Sour

ce co

de

Sour

ce co

de

Reco

up

men

t o

f A

llo

wa

nces /

Exp

en

ses P

revio

usly

Gra

nte

d

Bad d

ebts

R Leas

e cha

rges

(s8(

5))

R Wea

r and

tear

(s8(

4))

R R Plea

se pr

ovide

desc

riptio

ns re

lating

to ot

her li

sted a

bove

RCont

rol T

otal

Othe

r

Se

lectio

nPl

ease

selec

t / de

-selec

t the r

ecou

pmen

t of a

llowa

nces

/ exp

ense

s pr

eviou

sly gr

anted

TA

SL

A0

1

No

te:

Sche

dules

mus

t be

prep

ared

in a

ll cas

es w

here

the

ques

tions

belo

w ar

e an

swer

ed in

the

affirm

ative

. The

sch

edule

s mu

st be

retai

ned

for a

per

iod o

f 5 y

ears

after

sub

miss

ion o

f this

re

turn.

Amou

nt re

coup

ed in

resp

ect o

f VCC

shar

es so

ld, fo

r whic

h a ta

x de

ducti

on w

as al

lowed

R Redu

ction

of D

ebt (

s19)

R

Did t

he co

mpan

y obta

in ap

prov

al fro

m the

Dep

artm

ent o

f Scie

nce a

nd

Tech

nolog

y as c

ontem

plated

in s1

1D?

The

se c

onta

iners

are

fo

r S

ma

ll, M

ediu

m t

o L

arg

e B

usin

ess C

om

pa

nie

s

Did t

he co

mpan

y obta

in a c

ertifi

cate

issue

d by t

he S

ANED

I in

resp

ect o

f ene

rgy e

fficien

cy sa

vings

for t

he pu

rpos

es of

claim

ing a

s12L

dedu

ction

?

YN

YN

YN

YN

YN

YN

YN

YN

YN

YN

YN

YN

YN

YN

YN

No

te:

Allow

able

s18A

dona

tions

and r

elated

carry

over

s will

be ca

lculat

ed by

SAR

S.

Am

ou

nts

to

be

In

clu

ded

in

th

e D

ete

rmin

ati

on

of

Taxa

ble

In

co

me

befo

re s

18A

Do

nati

on

s (

Ex

clu

din

g a

sse

ss

ed

lo

ss

es

bro

ug

ht

forw

ard

an

d

ca

pit

al

ga

ins

/ lo

ss

es

)

YN

Page

18 o

f 26

SARS

_201

5_Lo

okFe

el_IT

R14_

v201

5.00.2

8Exa

mpl

e

EX

AM

PLE

Ru

les

Was

the c

ompa

ny a

party

to an

y of th

e foll

owing

tran

sacti

ons d

uring

the y

ear o

f ass

essm

ent:

Asse

t-for

-shar

e tra

nsac

tion a

s defi

ned i

n s42

?Y

N

Amalg

amati

on tr

ansa

ction

as de

fined

in s4

4?Y

N

Intra

-gro

up tr

ansa

ction

as de

fined

in s4

5?Y

N

Unbu

ndlin

g tra

nsac

tion a

s defi

ned i

n s46

?Y

N

Liquid

ation

, wind

ing-u

p or d

ereg

istra

tiond

istrib

ution

as

defin

ed in

s47?

YN

CR

SM

L0

1

Inv

es

tme

nts

in

(V

CC

): s

12J

–R

an

ds o

nly

, n

o c

en

ts

Name

of S

ARS

appr

oved

VCC

Amou

nt inv

ested

in a

Ventu

re C

apita

l Com

pany

in ex

chan

ge fo

r the

issu

e of s

hare

s dur

ing

the ye

ar of

asse

ssme

nt

RVCC

numb

er

Date

of iss

ue of

VCC

shar

es

(CCY

YMMD

D)8

Co

mp

lete

th

e d

eta

ils o

f th

e in

vestm

en

t(s

) m

ad

e b

elo

w:

Co

mp

lete

th

e d

eta

ils

of

the

to

p 1

0 i

nv

es

tme

nts

ma

de

be

low

:

4276

allo

wab

le i

n t

erm

s o

f s18A

to

ap

pro

ved

Pu

blic

B

en

efi

t O

rgan

isati

on

s(P

BO

) –

Ran

ds o

nly

, n

o c

en

ts

R40

11To

tal am

ount

dona

ted du

ring t

he ye

ar of

asse

ssme

nt

Refer

ence

numb

er

RAmou

nt do

nated

to th

is PB

O

Co

mp

lete

th

e d

eta

ils

of

the

Pu

bli

c B

en

efi

t O

rga

nis

ati

on

(s)

to

wh

om

do

nati

on

s w

ere

mad

e:

Co

mp

lete

th

e d

eta

ils o

f th

e t

op

Pu

blic B

en

efi

t O

rgan

isati

on

s t

o

wh

om

th

e t

op

10 d

on

ati

on

s w

ere

ma

de:

allo

wab

le i

n t

erm

s o

f s18A

to

ap

pro

ved

Pu

blic

B

en

efi

t O

rgan

isati

on

s(P

BO

) in

resp

ect

of

a C

ollecti

ve

Investm

en

t S

ch

em

e –

Ran

ds o

nly

, n

o c

en

ts

R40

11

Total

amou

nt do

nated

durin

g the

year

of as

sess

ment

RAver

age v

alue o

f agg

rega

te of

all pa

rticipa

tory i

ntere

sts he

ld by

inve

stors

in the

portf

olio

ITR14

L XX

b91c9121-0a17-4b26-a09d-d5980eb532db

FV V2010.XX.XX

SV XXXX

CT XX

NO XXXXXXXXXX

P XXXXXX

Y XXXX

001/001Pa

ge 19

of 2

6

SARS

_201

5_Lo

okFe

el_IT

R14_

v201

5.00.2

8Exa

mpl

e

EX

AM

PLE

ITR14

L XX

b91c9121-0a17-4b26-a09d-d5980eb532db

FV V2010.XX.XX

SV XXXX

CT XX

NO XXXXXXXXXX

P XXXXXX

Y XXXX

001/001

Sch

ed

ule

of

in r

es

pe

ct

of

the

dis

po

sa

l o

f a

ss

ets

Pro

ce

ed

sB

as

e C

os

tC

ap

ita

l G

ain

/ L

os

sN

um

ber

of

tran

sacti

on

s

Plea

se re

fer t

o th

e gui

de w

ith re

gard

s to

the m

ain as

set t

ype

sour

ce co

de lis

t.Ev

en n

umbe

red

code

s ref

er to

gain

s and

une

ven

num

bere

d co

des r

efer

to lo

sses

.Pl

ease

not

e the

inclu

sion

rate

will

be ap

plied

by S

ARS.

Main

Ass

et T

ype

Sour

ce C

ode

Aggr

egate

Gain

Aggr

egate

Loss

4250

4251

Add:

Adjus

tmen

t for c

logge

d los

ses i

nclud

ed in

amou

nts lis

ted ab

ove t

o be

carri

ed fo

rwar

d (pa

r. 39

of the

Eigh

th Sc

hedu

le)Le

ss: A

llowa

ble de

ducti

on i.r

.o. pr

ior ye

ar cl

ogge

d los

ses c

arrie

d for

ward

on

capit

al ga

in(s)

to co

nnec

ted pe

rson(

s) (p

ar. 3

9of th

e Eigh

th Sc

hedu

le)

Page

20 o

f 26

SARS

_201

5_Lo

okFe

el_IT

R14_

v201

5.00.2

8Exa

mpl

e

EX

AM

PLE

Sch

ed

ule

of

in r

es

pe

ct

of

the d

isp

os

al

of

as

sets

Pro

ce

ed

sB

ase C

ost

Ca

pit

al

Ga

in /

Lo

ss

Nu

mb

er

of

tran

sacti

on

s

Plea

se re

fer t

o th

e gui

de w

ith re

gard

s to

the m

ain as

set t

ype s

ourc

e co

de lis

t. Ev

en n

umbe

red

code

s ref

er to

gain

s and

une

ven

num

bere

d co

des

refe

r to

loss

es.

Plea

se n

ote t

he in

clusio

n ra

te w

ill be

appl

ied b

y SAR

S.

Main

Ass

et T

ype

Sour

ce C

ode

Fore

ign ta

x cre

dits i

n res

pect

of ca

pital

gains

(Ran

d valu

e only

) 41

1441

14

Add:

Adjus

tmen

t for c

logge

d los

ses i

nclud

ed in

amou

nts lis

ted ab

ove t

o be

carri

ed fo

rwar

d (pa

r. 39

of the

Eigh

th Sc

hedu

le)Le

ss: A

llowa

ble de

ducti

on i.r

.o. pr

ior ye

ar cl

ogge

d los

ses c

arrie

d for

ward

on

capit

al ga

in(s)

to co

nnec

ted pe

rson(

s) (p

ar. 3

9of th

e Eigh

th Sc

hedu

le)

Aggr

egate

Gain

Aggr

egate

Loss

4252

4253

ITR14

L XX

b91c9121-0a17-4b26-a09d-d5980eb532db

FV V2010.XX.XX

SV XXXX

CT XX

NO XXXXXXXXXX

P XXXXXX

Y XXXX

001/001

Red

ucti

on o

f Lo

cal A

sses

sed

Cap

ital

Los

s du

e to

RAmou

nt of

debt

redu

ction

4254

Red

ucti

on o

f Fo

reig

n A

sses

sed

Cap

ital

Los

s du

e to

RAmou

nt of

debt

redu

ction

4255

Page

21 o

f 26

SARS

_201

5_Lo

okFe

el_IT

R14_

v201

5.00.2

8Exa

mpl

e

EX

AM

PLE

(exclu

din

g p

rovis

ion

al

tax)

4102

,R

Fore

ign in

come

Impu

ted ne

t inco

me C

FC

Ne

t L

osses

Taxab

le I

nco

me

Fo

reig

n T

ax C

red

its

7454

7455

ITR14

L XX

b91c9121-0a17-4b26-a09d-d5980eb532db

FV V2010.XX.XX

SV XXXX

CT XX

NO XXXXXXXXXX

P XXXXXX

Y XXXX

001/001

IRP

5 c

ert

ific

ate

nu

mb

er

PA

YE

Cre

dit

Taxab

le F

ore

ign

So

urc

ed

In

co

me o

f R

esid

en

t C

om

pan

ies –

s6qu

at (e

xclu

din

g f

ore

ign

ca

pit

al

gain

/ lo

ss

)

Fore

ign

Tax C

redi

t (Ra

nd va

lue o

nly)

R

FT

CR

A01

So

uth

Afr

ica

n S

ou

rce

d

Inc

om

e (

alr

ea

dy

els

ew

he

re i

nc

lud

ed

in

th

is r

etu

rn)

–s

6qu

in(R

an

ds o

nly

, u

nle

ss c

en

ts s

pecif

ied

)

R RFore

ign T

ax C

redit

s

Taxa

ble in

come

from

servi

ces r

ende

red i

n Sou

th Af

rica t

axed

outsi

de th

e RSA

7456

,

Was

the d

eclar

ation

of fo

reign

tax w

ithhe

ld (F

TW01

) su

bmitte

d to t

he C

ommi

ssion

er w

ithin

60 da

ys?

YN

Refu

nd

ed

/ D

isch

arg

ed

by t

he

go

vern

men

t o

f a F

ore

ign

Co

un

try in

res

pe

ct

of

a r

eb

ate

all

ow

ed

by

SA

RS

in

a

pre

vio

us

year

–s6

quin

FT

CR

D01

RSpec

ify th

e por

tion o

f the a

moun

t so r

efund

ed / d

ischa

rged

as w

as pr

eviou

sly al

lowed

by

SAR

S as

a re

bate

,

Plea

se co

nfirm

that

this a

moun

t was

not c

laime

d as a

de

ducti

on in

term

s of s

6qua

t(1C)

?Y

N

How

much

of th

e abo

ve F

oreig

n Tax

Cr

edits

is be

ing cl

aimed

in te

rms o

f a

treaty

? 15

PR

TIF

01

Partn

ersh

ipNa

me

Spec

ify th

e com

pany

’s pr

ofit /

loss s

harin

g %

durin

g the

year

of as

sess

ment:

Indica

te if t

he co

mpan

y der

ived a

profi

t / los

s fro

m thi

s pa

rtner

ship

durin

g the

year

of as

sess

ment:

Profi

tLo

ss,

%

Indica

te if t

his in

forma

tion i

s in

resp

ect o

f a lo

cal o

r a fo

reign

pa

rtner

ship:

Loca

lFo

reign

R

Page

22 o

f 26

SARS

_201

5_Lo

okFe

el_IT

R14_

v201

5.00.2

8Exa

mpl

e

EX

AM

PLE

ITR14

L XX

b91c9121-0a17-4b26-a09d-d5980eb532db

FV V2010.XX.XX

SV XXXX

CT XX

NO XXXXXXXXXX

P XXXXXX

Y XXXX

001/001

Re

ceiv

ed

/ R

ec

eiv

ab

le

In ter

ms of

secti

on 46

of th

e Tax

Adm

inistr

ation

Act,

spec

ify th

e tota

l agg

rega

te va

lue (w

here

appli

cable

) for

the y

ear o

f ass

essm

ent w

here

the t

rans

actio

n, op

erati

on, s

chem

e, ag

reem

ent o

r und

ersta

nding

dire

ctly o

r indir

ectly

enter

ed in

to, re

sulte

d in:

Sale

of go

ods

To

tal A

gg

reg

ate

Valu

e –

Fo

reig

n:

Co

nn

ecte

d

Comm

ission

rece

ived /

rece

ivable

Inter

est r

eceiv

ed / r

eceiv

able

Roya

lties o

r lice

nse f

ees r

eceiv

ed /

rece

ivable

Admi

n., m

ng., s

ecre

tarial

fees

, ren

tals

rece

ived /

rece

ivable

Guar

antee

fees

rece

ived /

rece

ivable

Insur

ance

prem

iums r

eceiv

ed / r

eceiv

able

Othe

r fina

nce c

harg

es re

ceive

d /

rece

ivable

Rese

arch

& D

evelo

pmen

t fees

rece

ived /

re

ceiva

ble

Othe

r inco

me re

ceive

d / re

ceiva

ble

Receiv

ed

/ R

eceiv

ab

le

TP

RR

A0

1

3

Tra

nsacti

on

va

lue:

Fo

reig

n C

on

nec

ted

per

co

un

try

To

p <

5>

Ju

risd

icti

on

s 3

33

Numb

er of

Ju

risdic

tions

Numb

er of

Ju

risdic

tions

No

of

Ju

risd

icti

on

s 33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

3Nu

mber

of

Juris

dictio

ns

3Nu

mber

of

Juris

dictio

ns

3Nu

mber

of

Juris

dictio

ns

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Sale

of go

ods

Comm

ission

rece

ived /

rece

ivable

Inter

est r

eceiv

ed / r

eceiv

able

Roya

lties o

r lice

nse f

ees r

eceiv

ed /

rece

ivable

Admi

n., m

ng., s

ecre

tarial

fees

, ren

tals

rece

ived /

rece

ivable

Guar

antee

fees

rece

ived /

rece

ivable

Insur

ance

prem

iums r

eceiv

ed / r

eceiv

able

Othe

r fina

nce c

harg

es re

ceive

d /

rece

ivable

Rese

arch

& D

evelo

pmen

t fees

rece

ived /

re

ceiva

ble

Othe

r inco

me re

ceive

d / re

ceiva

ble

Receiv

ed

/ R

eceiv

ab

le

3

To

p <

5>

Ju

risd

icti

on

s 3

33

Numb

er of

Ju

risdic

tions

Numb

er of

Ju

risdic

tions

No

of

Ju

risd

icti

on

s 33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

To

tal

Ag

gre

gate

Valu

e –

Fo

reig

n:

No

n-c

on

necte

d

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Page

23 o

f 26

SARS

_201

5_Lo

okFe

el_IT

R14_

v201

5.00.2

8Exa

mpl

e

EX

AM

PLE

: P

aid

/ P

ayab

le

ITR14

L XX

b91c9121-0a17-4b26-a09d-d5980eb532db

FV V2010.XX.XX

SV XXXX

CT XX

NO XXXXXXXXXX

P XXXXXX

Y XXXX

001/001

In ter

ms of

secti

on 46

of th

e Tax

Adm

inistr

ation

Act,

spec

ify th

e tota

l agg

rega

te va

lue (w

here

appli

cable

) for

the y

ear o

f ass

essm

ent w

here

the t

rans

actio

n, op

erati

on, s

chem

e, ag

reem

ent o

r und

ersta

nding

dire

ctly o

r indir

ectly

enter

ed in

to, re

sulte

d in:

Purch

ase o

f goo

ds

Comm

ission

paid

/ pay

able

Inter

est p

aid / p

ayab

le

Roya

lties o

r lice

nse f

ees p

aid / p

ayab

le

Admi

n., m

ng., s

ecre

tarial

fees

, ren

tals p

aid /

paya

ble

Guar

antee

fees

paid

/ pay

able

Insur

ance

prem

iums p

aid / p

ayab

le

Othe

r fina

nce c

harg

es pa

id / p

ayab

le

Rese

arch

& D

evelo

pmen

t fees

paid

/ pa

yable

Othe

r exp

ense

s paid

/ pay

able

Pa

id /

Pa

ya

ble

TP

PP

A0

1

To

tal A

gg

reg

ate

Valu

e –

Fo

reig

n:

Co

nn

ecte

d

3

Tra

nsacti

on

va

lue:

Fo

reig

n C

on

nec

ted

per

co

un

try

To

p <

5>

Ju

ris

dic

tio

ns 3

33

Numb

er of

Ju

risdic

tions

Numb

er of

Ju

risdic

tions

No

of

Ju

risd

icti

on

s 33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

3

To

p <

5>

Ju

risd

icti

on

s 3

33

Numb

er of

Ju

risdic

tions

Numb

er of

Ju

risdic

tions

No

of

Ju

risd

icti

on

s 33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

33

Numb

er of

Ju

risdic

tions

To

tal

Ag

gre

gate

Valu

e –

Fo

reig

n:

No

n-c

on

nec

ted

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Coun

try C

ode

Purch

ase o

f goo

ds

Comm

ission

paid

/ pay

able

Inter

est p

aid / p

ayab

le

Roya

lties o

r lice

nse f

ees p

aid / p

ayab

le

Admi

n., m

ng., s

ecre

tarial

fees

, ren

tals p

aid /

paya

ble

Guar

antee

fees

paid

/ pay

able

Insur

ance

prem

iums p

aid / p

ayab

le

Othe

r fina

nce c

harg

es pa

id / p

ayab

le

Rese

arch

& D

evelo

pmen

t fees

paid

/ pa

yable

Othe

r exp

ense

s paid

/ pay

able

Pa

id /

Pa

ya

ble

Page

24 o

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_201

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el_IT

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e

EX

AM

PLE

ITR14

L XX

b91c9121-0a17-4b26-a09d-d5980eb532db

FV V2010.XX.XX

SV XXXX

CT XX

NO XXXXXXXXXX

P XXXXXX

Y XXXX

001/001

Min

ing

an

d Q

ua

rry

ing

Did t

he co

mpan

y con

duct

minin

g ope

ratio

ns in

mor

e tha

n one

sepa

rate

and d

istinc

t mine

? Y

N

Did t

he co

mpan

y acq

uire

a mini

ng op

erati

on as

a go

ing co

ncer

n dur

ing

the ye

ar of

asse

ssme

nt?

YN

Did t

he co

mpan

y acq

uire /

disp

ose o

f mini

ng pr

oper

ty an

d equ

ipmen

t as

envis

aged

in s3

7?

YN

Spec

ify th

e % of

the c

ompa

ny’s

total

turno

ver t

hat

relat

es to

the b

uy-in

of m

inera

ls.

Did t

he co

mpan

y con

duct

pros

pecti

ng ou

tside

Sou

th Af

rica?

YN

Did t

he co

mpan

y con

duct

minin

g / m

ining

oper

ation

s whe

re th

e co

mpan

y is n

ot the

lega

l own

er of

the m

ining

right?

Y

N

Info

rmati

on

IRIM

Q0

1

Co

nstr

ucti

on

Did t

he co

mpan

y hav

e any

cred

itor’s

reten

tions

with

sub-

contr

actor

s of

servi

ces?

Y

N

Did t

he co

mpan

y inc

ur an

y los

ses o

n con

tract

work

in pr

ogre

ss w

hich

is re

quire

d to b

e dec

lared

as in

to tra

ding s

tock i

n ter

ms of

s22(

3)?

YN

Wh

ole

sa

le a

nd

Re

tail

Tra

de

(in

cl. M

ail O

rde

r)

Did t

he co

mpan

y ente

r into

an ag

reem

ent to

disc

lose t

he de

btor’s

book

to

a 3rd

party

? Y

N

Fin

an

cia

l an

d I

nsu

ran

ce A

cti

vit

ies

Note

: If t

he co

mpan

y is a

shor

t term

insu

rer,

comp

lete t

he ap

plica

ble In

sura

nce C

ompa

ny

Sche

dule

and s

ubmi

t as a

supp

ortin

g doc

umen

t with

this

retur

n(re

fer to

guide

).

If the

comp

any i

s a ba

nk, h

as th

e com

pany

claim

ed a

doub

tful d

ebt

prov

ision

in ex

cess

of th

e amo

unt a

gree

d upo

n with

SAR

S?Y

N

Has t

he co

mpan

y mad

e a ca

pital

contr

ibutio

n or a

dvan

ced a

loan

to an

y tru

st?

YN

Whe

re th

e tax

paye

r has

claim

ed a

dedu

ction

for a

ny pr

ovisi

on re

lated

to

claim

s inti

mated

but n

ot re

porte

d or t

o outs

tandin

g clai

ms, d

oes s

uch

prov

ision

facto

r in an

amou

nt re

lated

to ex

grati

a pay

ments

? Y

N

IRIC

A0

1

IRIR

T01

IRIF

R0

1

Note

:Co

mplet

e the

appli

cable

mini

ng sc

hedu

les (S

ched

ules A

and B

) and

subm

it as a

su

ppor

ting d

ocum

ent w

ith th

is re

turn(

refer

to gu

ide).

Info

rma

tio

n

,%

Does

the c

ompa

ny ha

ve tr

ansfe

r pric

ing do

cume

ntatio

n tha

t sup

ports

the

prici

ng po

licy a

pplie

d to e

ach t

rans

actio

n betw

een t

he co

mpan

y an

d the

fore

ign co

nnec

ted pe

rson d

uring

the y

ear o

f ass

essm

ent a

s be

ing at

arm’

s len

gth?

YN

Did t

he co

mpan

y con

duct

any o

utbou

nd tr

ansa

ction

, ope

ratio

n, sc

heme

, agr

eeme

nt for

no co

nside

ratio

n with

a co

nnec

ted pe

rson t

hat

is tax

resid

ent o

utside

Sou

th Af

rica?

YN

Tra

ns

fer

Pri

cin

g S

up

po

rtin

g I

nfo

rma

tio

nT

PS

IA0

1

Did t

he co

mpan

y mak

e a ye

ar-e

nd ad

justm

ent to

achie

ve a

guar

antee

d pr

ofit m

argin

?Y

N

YN

Did t

he co

mpan

y, on

or af

ter 19

90, tr

ansfe

r, ali

enate

or di

spos

e of a

ny

South

Afric

an de

velop

ed (o

r pre

vious

ly So

uth A

frican

regis

tered

) Int

ellec

tual P

rope

rty to

any n

on-re

siden

t con

necte

d per

son o

r any

for

eign b

ranc

h of a

Sou

th Af

rican

resid

ent?

YN

Did t

he co

mpan

y tra

nsac

t with

a co

nnec

ted pe

rson t

hat is

tax r

eside

nt in

a cou

ntry w

ith w

hich S

outh

Afric

a doe

s not

have

a tax

trea

ty?

YN

Is the

“tes

ted pa

rty”,

of an

y tra

nsac

tion o

pera

tion,

sche

me, a

gree

ment

or un

derst

andin

g, a t

ax re

siden

t outs

ide S

outh

Afric

a?

YN

Was

ther

e any

chan

ge be

twee

n the

comp

any a

nd no

n-re

siden

t co

nnec

ted pe

rson s

ince t

he pr

eviou

s rep

ortin

g per

iod w

ith re

spec

t to

the tr

ansfe

r pric

ing m

ethod

ologie

s/tra

nsac

tion,

oper

ation

, sch

eme,

agre

emen

tor u

nder

stand

ing cl

assif

icatio

n?

How

many

“tes

ted pa

rty/pa

rties”

of the

tran

sacti

on op

erati

on, s

chem

e, ag

reem

ent o

r und

ersta

nding

are a

tax r

eside

nt of

anoth

er co

untry

?

: P

aid

/ P

ay

ab

le(c

on

tin

ued

)

Spec

ify th

e deb

t in re

lation

to E

BITD

A (e

arnin

gs be

fore i

ntere

st, ta

xes,

depr

eciat

ion,

and a

mortis

ation

) rati

oSp

ecify

the E

BITD

A (e

arnin

gs be

fore i

ntere

st,

taxes

, dep

recia

tion,

and a

mortis

ation

) to

finan

ce co

st ra

tio

Spec

ify th

e fina

ncial

assis

tance

to fix

ed ca

pital

ratio

,: 1 : 1: 1

Spec

ify th

e deb

t in re

lation

to to

tal ta

ngibl

e as

sets

ratio

: 1,

Did t

he co

mpan

y tra

nsac

t with

a co

nnec

ted pe

rson t

hat is

a tax

re

siden

t in a

jurisd

iction

that

has a

corp

orate

tax r

ate th

at is

less t

han

18%

or is

a tax

have

n?Y

N

,,

Page

25 o

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SARS

_201

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el_IT

R14_

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5.00.2

8Exa

mpl

e

EX

AM

PLE

Ta

x

(dec

reas

e net

pro

fit / i

ncre

ase n

et lo

ss)

Am

ou

nts

Cre

dit

ed

to

th

e In

co

me S

tate

men

t

TX

CP

A0

1

RCont

rol T

otal

R ITR14

L XX

b91c9121-0a17-4b26-a09d-d5980eb532db

FV V2010.XX.XX

SV XXXX

CT XX

NO XXXXXXXXXX

P XXXXXX

Y XXXX

001/001

{Disp

lay fie

ld se

lected

from

Dro

pdow

n list

with

the a

moun

t field

}

Se

lectio

nPl

ease

selec

t / de

-selec

t the n

on-ta

xable

amou

nts cr

edite

d to t

he In

come

St

ateme

ntN

on

-Taxab

le A

mo

un

ts C

red

ited

to

th

e I

nco

me S

tate

men

t

Acco

untin

g inte

rest

rece

ived/

rece

ivable

Acco

untin

g pro

fit on

disp

osal

of fix

ed an

d / or

othe

r ass

ets

Adjus

tmen

ts to

comp

ly wi

th IF

RS: A

ccou

nting

Adjus

tmen

ts to

comp

ly wi

th IF

RS: F

air va

lue

Amou

nts pr

eviou

sly ta

xed a

s rec

eived

in ad

vanc

e

Exem

pt for

eign d

ivide

nds (

s10(

1)(k)

(ii))

Exem

pt for

eign d

ivide

nds (

s10B

)

Incom

e (oth

er th

an fo

reign

divid

ends

) exe

mpt fr

om ta

x –s1

0 (ex

cludin

g s1

0(1)

(e))

Incom

e exe

mpt b

y virtu

e of d

ouble

taxa

tion a

gree

ment

Loca

l divi

dend

s exc

luding

divid

ends

men

tione

d in s

8E an

d 103

(5)

Levy

exem

ption

in te

rms o

f s10

(1)(e

)(i) (

refer

to gu

ide)

Othe

r inco

me ex

empti

on (e

xclud

ing le

vy) in

term

s of s

10(1

)(e)(i

i) (re

fer to

gu

ide)

Rece

ipts a

nd / o

r acc

ruals

of a

capit

al na

ture

Reve

rsal o

f pro

vision

s

Othe

r

OK

Am

ou

nts

Cre

dit

ed

to

th

e I

nco

me S

tate

men

t

Ca

nce

l

Page

26 o

f 26

SARS

_201

5_Lo

okFe

el_IT

R14_

v201

5.00.2

8Exa

mpl

e

EX

AM

PLE