Page 318 - SAIT Compendium 2016 Volume2

IN 18 (3) Income Tax acT: InTeRPReTaTIon noTes IN 18 (3)
Example 50 – Determination of a section 6quin rebate per individual service
contract
Facts:
A resident company derives taxable income from professional services provided to a South African client (Client A) and two foreign clients (Client B and Client C) during its 2015 year of assessment. All of the resident company’s business operations are conducted in South Africa, that is, the services are rendered in South Africa.
The information relevant for each contract is as follows:
Contract 1 with resident Client A
Gross income Deductible expenses
Contract 2 with non-resident Client B
Gross income
Deductible expenses
Foreign taxes imposed in relation to Contract 2
Contract 3 with non-resident Client C
Gross income
Deductible expenses
Foreign taxes imposed in relation to Contract 3
The resident company does not have any other operations.
The foreign countries where the foreign clients are resident do not have tax treaties with South Africa.
Result:
South African taxable income:
Gross income (R30 000 + R100 000 + R80 000)
Less: Deductible expenses (R20 000 + R50 000 + R20 000) Taxable income
Normal tax payable (R120 000 × 28%)
Less: Section 6quin rebate – Contract 2 (working 1) Less: Section 6quin rebate– Contract 3 (working 2) Final tax payable
Working 1 – section 6quin rebate for Contract 2
Lesser of:
• Foreign tax of R5 000
• Taxable income per service contract
falling under 6quin per country _________________________________ × Normal tax payable
Taxable income derived from all sources
= (R100 000 – R50 000) / R120 000 × R33 600 = R14 000
Therefore, the section 6quin rebate = R5 000
Working 2 – section 6quin rebate for Contract 3 Lesser of:
• Foreign tax of R24 000
• Taxable income per service contract
falling under s6quin per country _________________________________ × Normal tax payable
Taxable income derived from all sources
= (R80 000 – R20 000) / R120 000 × R33 600 = R16 800
Therefore, the section 6quin rebate = R16 800
R
30 000 20 000
100 000 50 000 5 000
80 000 20 000 24 000
210 000 (90 000) 120 000
33 600 (5 000) (16 800) 11 800
310 saIT comPendIum oF Tax LegIsLaTIon VoLume 2