Page 334 - SAIT Compendium 2016 Volume2

IN 18 (3) Income Tax acT: InTeRPReTaTIon noTes IN 18 (3)
(2) R2 025 of the qualifying withholding tax of R3 000 is deductible in full. The balance of R975 (R3 000 – R2 025) may be carried forward to the 2016 year of assessment to be used in determining the foreign tax rebate for that year of assessment.
(c) Calculation of the normal tax payable after taking into account rebates
Normal tax before rebates Less: Primary rebate Amount payable
Note:
R
3 321
(12 726)
NIL
(1) As the amount of the primary rebate exceeds the amount of normal tax payable, no portion of the qualifying foreign tax credit of R2 025 may be used against the normal tax payable. This foreign tax rebate is forfeited. It may not be used as a rebate against normal tax payable and may also not be carried forward to the 2016 year of assessment to be used in determining a foreign tax rebate in that year of assessment. The amount of the foreign tax rebate does not qualify for a deduction under section 6quat(1C).
Example 2 – Natural person receiving foreign dividends and foreign interest
Facts:
A (the taxpayer), aged 30, is married to B. A and B are resident in South Africa. B is a member of the taxpayer’s medical aid. For the 2015 year of assessment the taxpayer earned a pensionable salary from a South African source of R200 000 from which an amount of R25 078 was withheld in respect of PAYE.
In addition, the taxpayer received the following investment income during the 2015 year of assessment:
South African source Foreign source
RR Dividends Nil 56 500 Interest 121 000 44 000
The following withholding taxes were paid in respect of the above-mentioned foreign-source dividends and interest income:
Withholding taxes on foreign dividends 20 000 Withholding tax on foreign interest 8 800
The taxpayer’s contract of employment requires a contribution of 8% of pensionable salary to a pension fund. In addition the taxpayer contributed R15 000 during the 2015 year of assessment to a retirement annuity fund.
During the 2015 year of assessment the taxpayer incurred qualifying medical expenses of R16 152 and made medical aid fund contributions of R25 000.
The taxpayer donated R1 500 to a public bene t organisation which has been approved for section 18A purposes. The taxpayer has a copy of a section 18A receipt for the donation.
Result:
(a) Calculation of taxable income
Gross income
Salary income Dividend income Interest income Less:
Exempt income
Section 10B(3) exemption for foreign dividends [R56 500 × 25 / 40]
Section 10(1)(i) interest exemption
Income
Less:
Pension fund contributions Section 11(k)(i) -
Actual contributions R16 000 (R200 000 × 8%) Limited to the greater of –
i) R1 750; or
ii) 7,5% × R200 000 = R15 000
South African source
Foreign source
Total
RRR
321 000
(23 800)
297 200
(15 000)
282 200
100 500
(35 313)
65 187
(Nil)
65 187
421 500
(59 113)
362 387
(15 000)
347 387
200 000 Nil 121 000
Nil 56 500 44 000
200 000 56 500 165 000
Nil 23 800
35 313 Nil
35 313 23 800
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saIT comPendIum oF Tax LegIsLaTIon VoLume 2