Page 331 - SAIT Compendium 2016 Volume2

IN 18 (3) Income Tax acT: InTeRPReTaTIon noTes IN 18 (3)
The limitation is applicable to the diversionary service income because net income includes an amount falling under section 9D(9A)(a)(iii)(cc).
The portion of foreign tax attributable to the diversionary income
= Attributable foreign taxes × (diversionary foreign taxable income × participation interest) / (total foreign taxable
income × participation interest)
= R6 000 × (R80 000 × 75%) / (R100 000 × 75%)
= R4 800
The foreign tax attributable to the diversionary income will be limited to the normal tax attributable to that amount, that is, R16 800 (see working 1 below).
Working 1:
(R60 000 / R467 500 × R130 900) = R16 800
Thus the full amount of foreign taxes on the diversionary income therefore potentially quali es for a rebate because the limit is greater than the applicable amount of foreign taxes.
Therefore, the total amount of foreign taxes for CFC C potentially qualifying for a rebate equals R6 000 (R1 200 + R4 800).
Sum of foreign taxes that potentially qualify for the foreign tax rebate
1) Foreign dividends
2) Net income of foreign branch
3) In respect of net income of CFC A
4) In respect of net income of CFC B
5) In respect of net income of CFC C
Total
Step 3: Application of limitation under section 6quat(1B)(a)]
Calculation of the limitation of the rebate:
Taxable income derived from all foreign sources _______________________________________ × Normal tax payable
Taxable income derived from all sources
(R37 500 + R80 000 + R60 000 + 15 000 + R75 000)
= ___________________________________________ × R130 900
R467 500
= R74 900
Total foreign taxes potentially qualifying for a section 6quat(1) rebate is R37 000, therefore the full amount quali es for a rebate in year 1.
R
3 500
20 000 6 000 1 500 6 000
37 000
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