Page 179 - SAIT Compendium 2016 Volume2

IN 2 (3) Income Tax acT: InTeRPReTaTIon noTes
IN 2 (3)
Interest available for deduction
Less: Allowable interest (deduction limited to the amount of income derived from foreign dividends) Excess interest
Less: Exempt dividends (R1 000 + R3 200)
Balance of interest carried forward to the 2010 year of assessment (section 11C (3))
(2) Calculation of taxable income derived from foreign dividends
Gross foreign dividends (para (k) of the gross income de nition)
Less: Gross foreign dividends exempt under section 10 (1) (k) (ii) (bb) Basic interest and dividends exemption (section 10 (1) (i) (xv) (aa)) Income derived from foreign dividends
Less: Interest expenditure (section 11C (1))
Taxable income derived from foreign dividends
15 000
(7 000) 8 000 (4 200) 3 800 R
11 200
(1 000)
(3 200) 7 000 (7 000) NIL
See Annexure A for another example on the calculation of taxable income derived from foreign dividends (Example 7). Legal and Policy Division
SOUTH AFRICAN REVENUE SERVICE
Date of rst issue: 1 February 2002
Date of second issue: 28 August 2002
Annexure A — Example 7 — Calculation of taxable foreign dividends for an individual
Year of assessment
Ref
2006
35 000 (9 000) (2 000)
24 000 (24 000)
2007
2008
2009
RR
RR
RR
RR
Gross foreign dividends (paragraph (k) of the de nition of ‘gross income’)
Less: Exempt foreign dividends (section 10 (1) (k) (ii))
Less: Basic exemption (section 10 (1) (i) (xv))
Income derived from foreign dividends
Less: Deductible interest expense Calculation of deductible interest:
Interest actually incurred during the year (section 11C (1))
Add: Excess interest brought forward from previous year
Total interest incurred
Less:Maximum deduction = income derived from foreign dividends (c)
limited to total interest incurred
Taxable income derived from foreign dividends
Excess interest (D – E)
Less: Exempt foreign dividends (A + B) Balance carried forward
45 000 (2 000) (2 500)
40 500 (32 000)
50 000 (2 000) (3 000)
45 000 (8 600)
20 000 (10 000) (3 200)
6 800 (6 800)
A B C
D E
37 000 –
30 000 2 000
8 600 –
15 000 –
37 000 (24 000)
32 000 32 500
8 600 8 600
15 000 (6 800)
–
8 500
–
(4 500)
–
36 400
–
(5 000)
–
–
13 000
(11 000)
2 000
8 200
(13 200)
–
saIT comPendIum oF Tax LegIsLaTIon VoLume 2 171