Page 372 - SAIT Compendium 2016 Volume2

IN 24 (3) Income Tax acT: InTeRPReTaTIon noTes IN 24 (3)
the asset during the period when the PBO was fully exempt from income tax must be taken into account in determining the amount by which the value of the asset has diminished.
For more information on the application and interpretation of section 11(e) as it relates to the determination of the value of an asset on which the allowance is based and acceptable write-off periods, see Interpretation Note No. 47 (Issue 3) ‘Wear-and-Tear or Depreciation Allowance’ dated 2 November 2012.
11. Period for which accounts are to be submitted
A PBO that is registered as a trust will have a year of assessment ending on the last day of February. However, under section 66(13A) a trust can apply for permission to draw up its nancial statements to a different closing date if it would be more convenient for it to do so. For more information see Interpretation Note No. 19 (Issue 3) ‘Year of Assessment of Natural Persons and Trusts: Accounts accepted to a date other than the last day of February’ dated 9 October 2013. A PBO that is a non-pro t company as de ned in section 1 of the Companies Act No. 71 of 2008, as well as an association of persons established under a constitution or any other written instrument will have a year of assessment ending on the date that coincides with its nancial year-end.
12. Rate of tax
A PBO that is liable to tax on receipts and accruals which do not qualify for exemption, will pay tax at a single at rate of 28% on its taxable income, irrespective of whether it is established as a trust, non-pro t company or as an association of persons.
13. Provisional tax
A PBO is exempt from making provisional tax payments.* Any liability to income tax on taxable income will become payable on assessment.
14. Capital gains tax (CGT)
Capital gains and losses on the disposal of assets are determined under the Eighth Schedule. Under section 26A a person must include in taxable income the amount of any taxable capital gain determined under the Eighth Schedule. Under paragraph 63A of the Eighth Schedule a PBO must disregard any capital gain or capital loss made on the disposal of certain categories of assets. Comprehensive information and guidance on the application and interpretation of paragraph 63A relating to the disposal of assets by PBOs is dealt with in Interpretation Note No. 44 (Issue 2) ‘Public Bene t Organisations: Capital Gains Tax’, dated 4 February 2014.
15. Transfer duty
Transfer duty will become payable on a property which quali ed for an exemption from transfer duty if the whole of the property or substantially the whole of that property is used for purposes other than the carrying on of any PBA. The transfer duty becomes payable at the time the property is used for any purpose other than for the purpose of carrying on one or more PBAs. For more information in this regard see Interpretation Note No. 22 (Issue 2) ‘Exemption: Public Bene t Organisations and Statutory Bodies’ dated 9 December 2008.
16. Reporting requirements and compliance
16.1 Record-keeping
Any books of account, records or other documents, including annual nancial statements, relating to any PBO must be retained and carefully preserved for a period of at least four years after the last date of an entry in any book or, if kept in electronic format or any other form, for a period of four years after completion of the transaction, act or operation to which they relate.†
16.2 Income tax returns
PBOs must annually submit the prescribed income tax return to enable SARS to assess whether the PBO is operating within the prescribed limits of the relevant approval granted and to determine whether the partial taxation principles have been applied to receipts and accruals derived from a trading activity or business undertaking which does not qualify for exemption.
17. Objection and appeal
A PBO that does not agree with any assessment that has been issued by SARS may lodge an objection against the assessment. If the objection is disallowed or partially disallowed, the PBO has the right to lodge an appeal against the disallowance or partial disallowance.
18. Conclusion
This Note discusses only the broad principles in interpreting the legislation. Since the facts and circumstances pertaining to each PBO may differ, each case must be considered on its own merits.
Annexure – Calculation of taxable income
The following examples provide a step-by-step guide to calculating the taxable income of PBOs by applying the basic exemption rule.
* Paragraph (aa) of the exclusions to the de nition of a ‘provisional taxpayer’ in paragraph 1 of the Fourth Schedule to the Act.
† Section 30(9).
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