Page 238 - SAIT Compendium 2016 Volume2

IN 14 (3) Income Tax acT: InTeRPReTaTIon noTes IN 14 (3)
• the employer pays the expense directly; or
• the recipient pays the expense but is subsequently reimbursed by the employer.
5.3.3 Deemed method
Day
Under the deemed method the amount the recipient is deemed to have actually expended is equal to –
• an amount determined by the Commissioner for the relevant year of assessment by way of notice in
the Gazette;*
• for meals and other incidental costs, or incidental costs only;
• for each day or part of a day in the period during which the recipient is absent from his or her usual
place of residence;
• excluding any amount of expenditure borne by the employer (otherwise than by way of the allowance
or advance) for which the allowance was paid or granted for that day or part of that day;†
• excluding any amount proven by the recipient to SARS as actual expenditure and claimed as a
deduction for meals or incidental costs equal to the actual costs for that day or part of that day; and
• limited to the amount of the allowance or advance granted to meet these expenses.‡
The amount stipulated in the Gazette is a daily amount. Accordingly, in calculating the amount of deemed expenditure based on the points listed above, the recipient must multiply the daily amount by the number of days or part of a day that he or she is away on business.§ Taxpayers must review the effective date of the particular notice to ensure they apply the correct amounts to the correct year of assessment.
The Gazetted amounts are for meals and other incidentals for local and foreign travel, or incidentals only for local travel, and do not cover accommodation for either local or foreign travel. As a result to the extent a recipient receives an allowance or an advance for accommodation, the recipient must apply the actual method to determine the amount that will be allowed to be deducted from that allowance, or relevant portion of the allowance, for accommodation. There is no ‘meals only’ deemed expenditure amount. Accordingly a recipient, who receives such an allowance, would also have to apply the actual method to calculate the allowable deduction (see 5.3.2).
In practice, accommodation service providers often levy a single charge for bed and breakfast. In these circumstances, the cost of breakfast may be regarded as part of the cost of accommodation (see Example 8).
The word ‘day’, which is not de ned in the Act, is de ned in the Concise Oxford English Dictionary¶ to mean –
‘a twenty-four-hour period as a unit of time, reckoned from one midnight to the next and corresponding to a rotation of the earth on its axis; the time between sunrise and sunset’.
In the Collins English Dictionary,** the word is de ned to mean –
‘1. the period of time, the calendar day, of 24 hours duration reckoned from one midnight to the next. 2. the period of light between sunrise and sunset, as distinguished from the night’.
It is clear from the context of section 8 (1)(c) (ii) that the word ‘day’ must be given the wider meaning of the full period of 24 hours from one midnight to the next.
A ‘part’ means a constituent portion or division of a whole, which is distinct from that whole.†† A part of a day could be an hour, a half-hour or even a minute. The deemed expenditure is not apportioned if the recipient is only away for part of the day.
5.3.4 Examples
Example 5 – Subsistence allowance and amounts included in taxable income
Facts:
During the 2013 year of assessment Y attended a business seminar in Cape Town on behalf of his employer. Y was away from his normal home in Johannesburg for ve nights and six days. His employer granted him an allowance of R7 000 for accommodation and R2 500 for meals and incidental costs. He was not required to refund any excess if his actual expenditure was less than the allowances he received and similarly his employer would not reimburse him should his actual expenditure exceed the allowances granted to him. Y did not keep any supporting documentation and he was unable to prove any of the expenditure incurred on accommodation, meals or incidental costs.
* The relevant notices are available on the SARS website, www.sars.gov.za.
† The deemed subsistence amounts will be reduced by the amount the employer has borne.
‡ That is, the amount of the deduction may never exceed the amount of the allowance.
§ Not forgetting that a prerequisite to any deduction is the requirement that he or she spends at least one night away
from his or her usual place of residence – see 5.3.1.
¶ Concise Oxford English Dictionary. Edited by Catherine Soanes, Angus Stevenson. 11th Edition Revised. New
York: Oxford University Press, 2006.
** Collins English Dictionary. 3rd Edition. Glasgow: Harper Collins, 1991.
†† Concise Oxford English Dictionary. Edited by Catherine Soanes, Angus Stevenson. 11th Edition Revised. New
York: Oxford University Press, 2006.
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