Page 342 - SAIT Compendium 2016 Volume2

IN 18 (3) Income Tax acT: InTeRPReTaTIon noTes IN 18 (3)
Note:
The balance of excess foreign taxes amounting to R2 635 (R16 000,00 less R13 365) may be carried forward to the 2016 year of assessment to be used in determining the foreign tax rebate for that year of assessment.
(d) Calculation of 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 [{(R34 496 – (R6 168 × 4) + R31 548} – (R137 250 × 7.5%)]
= 25% of the excess of [(R9 824 + R31 548) – (R137 250 × 7.5%)]
= 25% of the excess of [R41 372 – R10 293,75] = 25% of the excess of (R31 078,25)
= R7 769,56
(e) 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
Limited to
Final tax payable before section 6quat(1) rebate
Less: Section 6quat(1) rebate Limited to
Amount payable (refundable)
RR
24 705
(6 168,00) (7 769,56)
11 979,00
13 365
(12 726) 11 979
(11 979) Nil
Nil
Nil
Note:
The balance of excess foreign taxes of R13 365 (R13 365 see (c) above – Nil) is forfeited and may not be carried forward to the 2016 year of assessment to be used in determining the foreign tax rebate for that year of assessment.
Example 6 – 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 from a foreign source is attributable to a permanent establishment 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-
source service fees be deducted from normal tax under section 6quin. 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
334
saIT comPendIum oF Tax LegIsLaTIon VoLume 2