Page 294 - SAIT Compendium 2016 Volume2

IN 18 (3) Income Tax acT: InTeRPReTaTIon noTes IN 18 (3)
Result:
1. Tax calculation R
1.1 Taxable income derived from foreign sources
Foreign dividends included in gross income ($6 000 × 11.6474) Less: Section 10B(3) exemption [R69 884 × 13 / 28]
Less: Foreign branch taxable loss
Taxable income derived from foreign dividends
1.2 Taxable income derived from South African sources
Consulting fees
Interest income
Taxable income derived from South African sources
1.3 Total taxable income derived from all sources
Taxable income derived from foreign sources Taxable income derived from South African sources Total
1.4 Income tax calculation
(a) Calculation of normal tax payable before rebates Normal tax payable (R1 107 438 × 28%) 310 083
(b) Calculation of the section 6quat rebate Amount of foreign taxes that qualify for the rebate ($600 × 10.9515) 6 571
Limited to: R2 083 (see below)
Calculation of the limitation:
Taxable income derived from all foreign sources _______________________________________ × Normal tax payable
Total taxable income derived from all sources
=__R__7_4_3__8__×R310083 R1 107 438
= R2 083
Note:
69 884 (32 446) (30 000)
7 438
1 000 000 100 000
1 100 000
7 438
1 100 000 1 107 438
1) Under paragraph (ii) of the proviso to section 6quat(1A) the amount of foreign taxes attributable to the exempt foreign dividends of R32 446 quali es for the foreign tax rebate under section 6quat(1).
2) R2 083 of the qualifying withholding tax of R6 571 is deductible in full. The balance of R4 488 (R6 571 – R2 083) may be carried forward to the 2016 year of assessment to be used in determining the foreign tax rebate for that year.
(c) Calculation of the normal tax payable after taking into account rebates
Normal tax payable before rebates Less: Section 6quat(1) rebate Amount payable
310 083 (2 083)
308 000
See examples 1 to 6 in Annexure B which illustrate the tax treatment of foreign taxes on exempt foreign dividends earned by natural persons.
4.6 Application of section 6quat to capital gains
4.6.1 General
As noted in 4.2, a foreign tax on a foreign capital gain potentially quali es for a rebate under section 6quat(1). The amount of the rebate will generally be equal to the amount of any foreign taxes paid on the taxable capital gain reduced as required by the three-step limitation process discussed in 4.6.4.
The following capital gains tax principles are particularly relevant to any discussions regarding the availability of a section 6quat(1) rebate for foreign taxes paid on capital gains:
• The taxable capital gain is equal to the relevant inclusion rate multiplied by the person’s net capital gain for the year. • The ‘net capital gain’ of a person is the positive amount remaining after deducting any assessed capital loss brought
forward from the previous year of assessment from the aggregate capital gain for the year.
• The aggregate capital gain or loss (as appropriate) is equal to the sum of the capital gains for the year plus the other capital gains required to be taken into account less the sum of the capital losses for the year less or plus* the annual exclusion
(in the case of a natural person or special trust).
* Section 6quat(1A)(a)(iii).
286 saIT comPendIum oF Tax LegIsLaTIon VoLume 2