Page 231 - SAIT Compendium 2016 Volume2

IN 13 (3) Income Tax acT: InTeRPReTaTIon noTes IN 13 (3)
(other than an agent or representative whose remuneration is normally derived mainly in the form of commissions based on his or her sales or the turnover attributable to him or her)
An agent or representative whose remuneration is normally derived mainly in the form of commission based on sales or turnover that is attributable to that agent or representative is excluded from the provisions of section 23 (m). The term ‘remuneration’ in this context is not necessarily as de ned in the Fourth Schedule, that is. it is a general reference to a reward or pay received in return for services rendered or work done. The term ‘mainly’ is interpreted to mean more than 50% of the taxpayer’s gross remuneration. This means that the total income of the taxpayer (including 100% of all allowances) must be compared to his or her commission income. Furthermore, where the commission is more than 50% of the gross remuneration, the agent or representative who is in this position may continue to be granted permissible deductions under section 11. [See examples C, D, E and F of Annexure A] In the event that an agent or representative did not derive more than 50% commission income for the year of assessment, but it can nevertheless be shown that his or her income normally consists of more than 50% commission, the limitation of section 23 (m) will not be applicable. The test for ‘normally’ is a subjective test and each case must be evaluated on its own merits, with due regard to the taxpayer’s previous and future years of assessment. For purposes of section 23 (m) the terms ‘agent’, ‘representative’ and ‘commission’ should be interpreted as follows:
• ‘Agent’ – a person authorised or delegated to transact business for another.
• ‘Representative’ – one who represents another or others.
• ‘Commission’ – a percentage of sales or turnover of the person on behalf of whom the agent or representative is acting.
in respect of which he or she
The prohibition on deductions applies to natural persons only.
derives any remuneration, as de ned in paragraph 1 of the Fourth Schedule,
The prohibition applies to expenditure, losses and allowances that relate to “remuneration” as de ned in the Fourth Schedule to the Act. Expenditure, losses and allowances that relate to income other than ‘remuneration’ may therefore still be considered for deduction. An employee or of ce holder in receipt of two or more streams of income may thus be in a situation where the deduction of expenditure, losses or allowances relating to a ‘remuneration’ stream of income is prohibited, while expenditure, losses or allowances relating to another trade remain deductible. [See Example B of Annexure A]
other than—
These expenses and allowances are still deductible by an of ce holder or an employee:
any contributions to a pension or retirement annuity fund as may be deducted from the income of that person in terms of sections 11 (k) or (n);
Contributions to a pension or retirement fund subject to the limits imposed by sections 11 (k) and (n).
any allowance or expense which may be deducted from the income of that person in terms of section 11 (c), (e), (i) or (j);
• Qualifying legal expenses [section 11 (c)].
• Wear-and-tear allowances on items used for purposes of trade, such as computers or books [section 11 (e)]. • Bad debts, for example, income which was not paid to the employee as a result of the insolvency of the
employer [section 11 (i)].
• Doubtful debts [section 11 (j)].
any deduction which is allowable under section 11 (nA) or (nB)
Any amount, including a restraint of trade payment, received by or accrued to an employee or of ce holder that was included in that taxpayer’s taxable income, and was refunded by that taxpayer. Only amounts actually refunded may be claimed as a deduction. [See Example H of Annexure A]
saIT comPendIum oF Tax LegIsLaTIon VoLume 2 223