Page 340 - SAIT Compendium 2016 Volume2

IN 18 (3) Income Tax acT: InTeRPReTaTIon noTes IN 18 (3) Calculation of the limitation:
Taxable income derived from all foreign sources _______________________________________ × Normal tax payable
Total taxable income derived from all sources
_R_1_2_3__9_3_8_ × R102 984,30 R422 028
= R30 243,65
Note:
The full amount of R27 041,80 potentially quali es for the section 6quat(1) rebate because it is less than the limitation amount.
(e) Calculation of the section 6A and 6B rebate
Section 6A tax credit
Medical scheme fees tax credit (R514 per section 6A × 12) R6 168
Section 6B tax credit
Additional medical expenses tax credit = 25% of the excess of [{(Medical aid contributions as exceeds 4 × medical scheme fees tax credit) + qualifying medical expenses} as exceeds 7,5% taxable income]
25% of the excess of [{(R25 000 – (R6 168 × 4) + R31 548} – (taxable income × 7.5%)]
= 25% of the excess of [(R328 + R31 548) – (R422 028 × 7.5%)]
= 25% of the excess of [R31 876 – R31 652,10] = 25% of the excess of (R223,90)
= 55,98
(f) Calculation of the normal tax payable after taking into account rebates
Normal tax payable before rebates Less: Primary rebate
Less: Section 6A tax credit Section 6B tax credit Section 6quat(1) rebate PAYE
Amount payable
R
102 984,30 (12 726,00)
90 258,30 (6 168,00) (55,98) (27 041,80) (25 078) 31 914,52
Example 5 – Natural person receiving both South African-source and foreign-source consulting fees and foreign dividends
Facts:
X (the taxpayer), aged 33, is married to Z. Both are residents. Z belongs to X’s medical aid. During the 2015 year of assessment X derives income from both local and foreign sources. None of the income derived by X from a foreign source is attributable to a permanent establishment of X located outside South Africa.
X is a business management consultant who provides consulting services to a company resident in Country A of which 60% is rendered in South Africa while the remaining 40% is rendered in Country A. Under the tax laws of Country A withholding tax is levied at a at rate of 15% in respect of the gross receipts. Country A regards all the income derived under the service contract as being derived from a source in Country A because the payment of the consulting fees are funded from Country A. South Africa regards the source of the income as the place where the services are rendered, that is 60% is sourced in South Africa and the remaining 40% is sourced in Country A.
South Africa does not have a tax treaty with Country A. X elects that the foreign taxes attributable to South African
sourced service fees be deducted from income derived from service fees under section 6quat(1C). The following information is relevant:
Income items:
• Consulting fees earned
• Foreign dividends
Expense items:
• Donation to section 18A approved public bene t organisation - the taxpayer has a section 18A receipt for the donation
• Qualifying medical expenses
• Medical aid fund contributions
• Deductible expenses incurred in earning consulting fees
• Foreign taxes paid in respect of consulting fees
• Foreign withholding taxes on foreign dividends
R
200 000 60 000
20 000 31 548 34 496 50 000 30 000
4 000
332
saIT comPendIum oF Tax LegIsLaTIon VoLume 2