Page 290 - SAIT Compendium 2016 Volume2

IN 18 (3)
Income Tax acT: InTeRPReTaTIon noTes
IN 18 (3)
Taxable income before interest Interest income
Interest expense
Taxable income
Tax payable:
Foreign tax
South African tax
Calculation of the limitation of the rebate:
Taxable income derived from all foreign sources _______________________________________ × Normal tax payable
Taxable income derived from all sources
= (R101 / R1 101) × R308,28 = R28,28
RR 100
11 (10) 101
40,40 308,28
1 100 11 (10) 1 101
Taxable income (foreign source)
Taxable income (all sources)
The amount of foreign taxes due is R40,40, however the amount qualifying for a rebate under section 6quat(1) in year 1 is limited to R28,28. The excess of R12,20 (R40,40 – R28.28) does not qualify for a foreign tax rebate in year 1 but may be carried forward to year 2 in which it will be deemed to be foreign tax paid in that succeeding year of assessment on foreign-source income.
Example 24 – Determination of rebate (no limitation)
Facts:
A resident company conducts its trading operations in South Africa. It also has a branch in Country L. The following results are applicable to the year of assessment:
Turnover
Less: Direct expenses
Indirect expenses Taxable income (all sources) Foreign taxes due
South African normal tax due: R6 600 × 28%
Result:
8 000 (2 000)
2 000 (800)
10 000 (2 800)
(600) 6 600 108
1 848
2 000 (800) (120)*
1 080
South Africa Country L Total
RRR
Calculation of taxable income derived from Country L (that is, from a foreign source): Turnover
Less: Direct expenses
Indirect expenses Taxable income
* = indirect expenses apportioned to branch in Country L based on turnover = (R2 000 / R10 000) × R600
= R120
Calculation of the limitation of the rebate:
Taxable income derived from all foreign sources ___________________________________________________
Taxable income derived from all sources × Normal tax payable
= (R1 080 / R6 600) × R1 848 = R302,40
The amount of foreign taxes due is only R108 therefore the full amount of R108 quali es as a rebate and the limitation is not of application in these speci c circumstances.
* A dependent agent may create a permenent establishment, unlike an independent agent. † As de ned in section 1(1)
282 saIT comPendIum oF Tax LegIsLaTIon VoLume 2