The South African income tax implications of transactions entered into to earn points for a Broad- Based Black Economic Empowerment scorecard, with reference to a selection of structures
- Authors: Jaga, Praksha
- Date: 2021-04
- Subjects: Black Economic Empowerment (Program : South Africa) , South Africa. Income Tax Act, 1962 , Income tax -- Law and legislation -- South Africa , Spendings tax -- South Africa , Tax deductions -- South Africa
- Language: English
- Type: thesis , text , Masters , MCom
- Identifier: http://hdl.handle.net/10962/177306 , vital:42808
- Description: This thesis discussed the South African income tax implications, in terms of the Income Tax Act, No. 58 of 1962, arising from complying with Broad-Based Black Economic Empowerment requirements, and related principles established in case law. Various structures and transactions entered into for the purposes of earning points for the B-BBEE scorecard were identified. In the assessment of the deductibility of B-BBEE expenditure in terms of the preamble to section 11, section 11(a) and section 23(g) of the Act, it was highlighted that, in the South African economic environment, B-BBEE compliance represents a competitive advantage for entities. In addition, many South African organisations are required to comply with B-BBEE requirements for legal and regulatory purposes. The analysis of the deductibility of B-BBEE expenditure revealed that taxpayers that incur this expenditure would be carrying on a trade or commencing to do so. It was also concluded that B-BBEE expenditure is incurred in the production of income and would generally not be capital in nature, except in certain circumstances, in which case the Act provides certain allowances. Any deduction will only be allowed in the year of assessment in which the expenditure is actually incurred, or when the taxpayer incurs an unconditional legal obligation. This thesis explored several alternatives to achieve the requirements of the ownership element of B-BBEE and highlighted the income tax implications that arise because of these structures. It was also observed that there are a number of incentives in the Act that could be beneficial to taxpayers seeking to earn points for the remaining elements of the B-BBEE scorecard. A legal interpretive approach, in particular a doctrinal research methodology, was adopted in carrying out this research. This research concluded that the Act facilitates most of the B-BBEE transactions and structures, but due to the complex and sometimes uncertain nature of the tax consequences of B-BBEE transactions and structures, there is a need for further guidance in this area of tax law. , Thesis (MCom) -- Faculty of Commerce, Accounting, 2021
- Full Text:
- Date Issued: 2021-04
- Authors: Jaga, Praksha
- Date: 2021-04
- Subjects: Black Economic Empowerment (Program : South Africa) , South Africa. Income Tax Act, 1962 , Income tax -- Law and legislation -- South Africa , Spendings tax -- South Africa , Tax deductions -- South Africa
- Language: English
- Type: thesis , text , Masters , MCom
- Identifier: http://hdl.handle.net/10962/177306 , vital:42808
- Description: This thesis discussed the South African income tax implications, in terms of the Income Tax Act, No. 58 of 1962, arising from complying with Broad-Based Black Economic Empowerment requirements, and related principles established in case law. Various structures and transactions entered into for the purposes of earning points for the B-BBEE scorecard were identified. In the assessment of the deductibility of B-BBEE expenditure in terms of the preamble to section 11, section 11(a) and section 23(g) of the Act, it was highlighted that, in the South African economic environment, B-BBEE compliance represents a competitive advantage for entities. In addition, many South African organisations are required to comply with B-BBEE requirements for legal and regulatory purposes. The analysis of the deductibility of B-BBEE expenditure revealed that taxpayers that incur this expenditure would be carrying on a trade or commencing to do so. It was also concluded that B-BBEE expenditure is incurred in the production of income and would generally not be capital in nature, except in certain circumstances, in which case the Act provides certain allowances. Any deduction will only be allowed in the year of assessment in which the expenditure is actually incurred, or when the taxpayer incurs an unconditional legal obligation. This thesis explored several alternatives to achieve the requirements of the ownership element of B-BBEE and highlighted the income tax implications that arise because of these structures. It was also observed that there are a number of incentives in the Act that could be beneficial to taxpayers seeking to earn points for the remaining elements of the B-BBEE scorecard. A legal interpretive approach, in particular a doctrinal research methodology, was adopted in carrying out this research. This research concluded that the Act facilitates most of the B-BBEE transactions and structures, but due to the complex and sometimes uncertain nature of the tax consequences of B-BBEE transactions and structures, there is a need for further guidance in this area of tax law. , Thesis (MCom) -- Faculty of Commerce, Accounting, 2021
- Full Text:
- Date Issued: 2021-04
The South African income tax implications of a Stokvel
- Authors: Matshego, Katlego
- Date: 2020
- Subjects: Rotating credit associations -- South Africa. , Taxation -- South Africa , Tax deductions -- South Africa
- Language: English
- Type: text , Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/143094 , vital:38201
- Description: The term “Stokvel” originates from the rotating cattle auctions of English settlers in the Eastern Cape during the nineteen century. A Stokvel is defined as a credit union where a group of people agree to contribute a fixed amount of money to a common pool and is referred to as a rotating savings and credit association, where the contributions to a fund are given in whole or in part to each member. The goal of the thesis was to determine the “gross income” implications of the fund and its members, as well the deductibility of their expenses. An interpretative research approach was used in the research as it sought to understand and describe. No interviews were conducted for this research and the data used for the research are publicly available. The tax implications of five different types of a Stokvel were considered in relation to the research goals through the application of legislation and case law principles. The study established that a collection burial society, where funds are contributed after death, does not beneficially receive funds and it is not entitled to any deductions. The same applies to the member of that society. A contributing burial society, where funds are contributed over time, beneficially receives funds, which are included in “gross income”, and qualifies for deductions. The receipt by the member is exempt and deductions are prohibited by section 23(f). An entertainment Stokvel does not receive the contributions on its own behalf and benefit. No deductions are available to it. However, the member beneficially receives the contributions from the Stokvel, which are included in “gross income”, and qualifies for deductions. A purchasing power group, where items are purchased on behalf of members, does not receive the funds beneficially and no deductions are available to it. The members simply receive the goods they have paid for. Lastly an investment Stokvel, which invests contributions for the members, beneficially receives contributions and qualifies for various deductions. The member receives the share of income from the Stokvel for his/her own benefit. However, no deductions are available in respect of contributions.
- Full Text:
- Date Issued: 2020
- Authors: Matshego, Katlego
- Date: 2020
- Subjects: Rotating credit associations -- South Africa. , Taxation -- South Africa , Tax deductions -- South Africa
- Language: English
- Type: text , Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/143094 , vital:38201
- Description: The term “Stokvel” originates from the rotating cattle auctions of English settlers in the Eastern Cape during the nineteen century. A Stokvel is defined as a credit union where a group of people agree to contribute a fixed amount of money to a common pool and is referred to as a rotating savings and credit association, where the contributions to a fund are given in whole or in part to each member. The goal of the thesis was to determine the “gross income” implications of the fund and its members, as well the deductibility of their expenses. An interpretative research approach was used in the research as it sought to understand and describe. No interviews were conducted for this research and the data used for the research are publicly available. The tax implications of five different types of a Stokvel were considered in relation to the research goals through the application of legislation and case law principles. The study established that a collection burial society, where funds are contributed after death, does not beneficially receive funds and it is not entitled to any deductions. The same applies to the member of that society. A contributing burial society, where funds are contributed over time, beneficially receives funds, which are included in “gross income”, and qualifies for deductions. The receipt by the member is exempt and deductions are prohibited by section 23(f). An entertainment Stokvel does not receive the contributions on its own behalf and benefit. No deductions are available to it. However, the member beneficially receives the contributions from the Stokvel, which are included in “gross income”, and qualifies for deductions. A purchasing power group, where items are purchased on behalf of members, does not receive the funds beneficially and no deductions are available to it. The members simply receive the goods they have paid for. Lastly an investment Stokvel, which invests contributions for the members, beneficially receives contributions and qualifies for various deductions. The member receives the share of income from the Stokvel for his/her own benefit. However, no deductions are available in respect of contributions.
- Full Text:
- Date Issued: 2020
A critical analysis of the deductibility of bad debts for income tax purposes
- Authors: Naidu, Aveshni
- Date: 2018
- Subjects: Collecting of accounts -- South Africa , Tax deductions -- South Africa , South Africa. Income Tax Act, 1962
- Language: English
- Type: text , Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/61712 , vital:28051
- Description: The objective of this thesis was to critically analyse the deductibility of bad debts for income tax purposes. This was achieved by applying a doctrinal research methodology to the data, which consisted of local and international legislation and case law, as well as other relevant writings. In setting out to achieve this primary objective, this thesis addressed certain subsidiary goals. The requirements of section 11 (i) of the South African Income Tax Act that provides for the deduction of bad debts were examined with reference to local case law, together with case law from selected international jurisdictions. To clarify the requirement of section 11 (i) that a debt must have become bad, this thesis set out to ascribe a meaning to the term “bad debt” which is currently not defined in the South African Income Tax Act and to ascertain the principles applicable in determining when a debt will be regarded as having become bad. The research also addressed the timing in relation to the identification of a debt as bad, as well as other commercial considerations. This research concluded that there is a need for further guidance in this area and provided brief recommendations that could provide more certainty in relation to the deductibility of bad debts.
- Full Text:
- Date Issued: 2018
- Authors: Naidu, Aveshni
- Date: 2018
- Subjects: Collecting of accounts -- South Africa , Tax deductions -- South Africa , South Africa. Income Tax Act, 1962
- Language: English
- Type: text , Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/61712 , vital:28051
- Description: The objective of this thesis was to critically analyse the deductibility of bad debts for income tax purposes. This was achieved by applying a doctrinal research methodology to the data, which consisted of local and international legislation and case law, as well as other relevant writings. In setting out to achieve this primary objective, this thesis addressed certain subsidiary goals. The requirements of section 11 (i) of the South African Income Tax Act that provides for the deduction of bad debts were examined with reference to local case law, together with case law from selected international jurisdictions. To clarify the requirement of section 11 (i) that a debt must have become bad, this thesis set out to ascribe a meaning to the term “bad debt” which is currently not defined in the South African Income Tax Act and to ascertain the principles applicable in determining when a debt will be regarded as having become bad. The research also addressed the timing in relation to the identification of a debt as bad, as well as other commercial considerations. This research concluded that there is a need for further guidance in this area and provided brief recommendations that could provide more certainty in relation to the deductibility of bad debts.
- Full Text:
- Date Issued: 2018
An analysis, from a South African case law perspective, of the deductibility of losses due to embezzlement, fraud, theft, damages and compensation
- Authors: Jachi, Adelaide Gamuchirai
- Date: 2018
- Subjects: South Africa. Income Tax Act, 1962 , Tax deductions -- South Africa , Taxation -- Law and legislation -- South Africa , Tax courts -- South Africa , Tax administration and procedure -- South Africa , Tax accounting -- South Africa , Income tax deductions for losses -- South Africa
- Language: English
- Type: text , Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/60855 , vital:27846
- Description: When calculating the income tax payable for a year of assessment, a taxpayer deducts from his or her or its income, allowable deductions in terms of the preamble to section 11 and section 11(a) as read with section 23(g) of the Income Tax Act, 58 of 1962. Amongst the expenditure and losses incurred by a taxpayer during a year of assessment, a claim may be sought for the deduction of losses incurred due to embezzlement, fraud and theft as well as damages and compensation. The requirements of the preamble and section 11(a) include the requirement that expenditure and losses must be incurred “in the production of the income”. Losses incurred due to defalcations, as well as expenditure on damages and compensation must satisfy this requirement to be allowed as deductions. The objective of the research was to analyse the judicial decisions dealing with “in the production of the income” in granting a deduction for income tax purposes in cases dealing with embezzlement, fraud and theft, and damages and compensation, to establish why the courts grant or disallow the deduction of expenditure and losses. A doctrinal research methodology was applied to the research. The provisions of the Income Tax Act, relevant case law relating to embezzlement, fraud and theft, and damages and compensation, and the contributions of the revenue authority and tax experts in articles of accredited journals, textbooks and other writings were analysed. The major conclusions drawn from the research were that losses due to defalcations are regarded as having been incurred “in the production of the income” if the taxpayer discharges the onus of proof that the risk of the act leading to misappropriation is an incidental risk of the business. Expenditure on damages and compensation is deductible provided the expense is attached to the performance of a business operation bona fide performed for the purpose of earning income and the expense is so closely connected with the business operation as to be regarded as part of the cost of performing it. Where negligence is attached to an expense or loss, the South African courts have held that negligence does not increase the likelihood of disallowing an expense or loss as not having been incurred “in the production of the income”.
- Full Text:
- Date Issued: 2018
- Authors: Jachi, Adelaide Gamuchirai
- Date: 2018
- Subjects: South Africa. Income Tax Act, 1962 , Tax deductions -- South Africa , Taxation -- Law and legislation -- South Africa , Tax courts -- South Africa , Tax administration and procedure -- South Africa , Tax accounting -- South Africa , Income tax deductions for losses -- South Africa
- Language: English
- Type: text , Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/60855 , vital:27846
- Description: When calculating the income tax payable for a year of assessment, a taxpayer deducts from his or her or its income, allowable deductions in terms of the preamble to section 11 and section 11(a) as read with section 23(g) of the Income Tax Act, 58 of 1962. Amongst the expenditure and losses incurred by a taxpayer during a year of assessment, a claim may be sought for the deduction of losses incurred due to embezzlement, fraud and theft as well as damages and compensation. The requirements of the preamble and section 11(a) include the requirement that expenditure and losses must be incurred “in the production of the income”. Losses incurred due to defalcations, as well as expenditure on damages and compensation must satisfy this requirement to be allowed as deductions. The objective of the research was to analyse the judicial decisions dealing with “in the production of the income” in granting a deduction for income tax purposes in cases dealing with embezzlement, fraud and theft, and damages and compensation, to establish why the courts grant or disallow the deduction of expenditure and losses. A doctrinal research methodology was applied to the research. The provisions of the Income Tax Act, relevant case law relating to embezzlement, fraud and theft, and damages and compensation, and the contributions of the revenue authority and tax experts in articles of accredited journals, textbooks and other writings were analysed. The major conclusions drawn from the research were that losses due to defalcations are regarded as having been incurred “in the production of the income” if the taxpayer discharges the onus of proof that the risk of the act leading to misappropriation is an incidental risk of the business. Expenditure on damages and compensation is deductible provided the expense is attached to the performance of a business operation bona fide performed for the purpose of earning income and the expense is so closely connected with the business operation as to be regarded as part of the cost of performing it. Where negligence is attached to an expense or loss, the South African courts have held that negligence does not increase the likelihood of disallowing an expense or loss as not having been incurred “in the production of the income”.
- Full Text:
- Date Issued: 2018
The tax consequences of a contingent liability disposed of as part of the sale of a business as a going concern
- Authors: Staude, Daylan
- Date: 2015
- Subjects: Sale of business enterprises -- Taxation -- South Africa , Sale of business enterprises -- Law and legislation -- South Africa , Tax deductions -- South Africa , Contingent liabilities (Accounting) -- Taxation -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:918 , http://hdl.handle.net/10962/d1017544
- Description: The sale of an entity as a going concern has a number of tax consequences for both the purchaser and the seller. The tax deductibility of a contingent liability upon its transfer from the seller to the purchaser, where the selling price has been reduced by the value of the contingent liabilities transferred, remains uncertain following the decision in Ackermans Ltd v Commissioner for the South African Revenue Service. An expense is either deductible under a specific section of the Income Tax Act, 58 of 1962, or under the general expense provisions in terms of sections 11(a) and 23(g). The Act does not contain a specific section relating to contingent liabilities and therefore a contingent liability will need to be considered for deduction under these sections. The Act further disallows an expense as a deduction under section 23(e), where a reserve is created (for example a leave pay provision). This study analyses the tax deductibility of a contingent liability, where the contingent liability has been transferred from the seller to the purchaser in a sale of an entity as a going concern and the purchase price has been reduced to compensate for the transfer of the contingent liability. The deductibility of the contingent liability was first assessed in terms of the provisions of the Act (sections 11(a), 23(g) and 23(e)) and associated case law. The decision in the Ackermans case and its preceding Income Tax Case 1839 was then analysed in order to establish the principles arising from the decisions. Finally the proposals in the Draft Taxation Laws Amendment Bill, 2011, and the subsequent Discussion Document issued by the South African Revenue Service were discussed. The analysis revealed the continuing confusion surrounding the status quo, thus demonstrating the importance of legislative intervention to provide guidelines for taxpayers.
- Full Text:
- Date Issued: 2015
- Authors: Staude, Daylan
- Date: 2015
- Subjects: Sale of business enterprises -- Taxation -- South Africa , Sale of business enterprises -- Law and legislation -- South Africa , Tax deductions -- South Africa , Contingent liabilities (Accounting) -- Taxation -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:918 , http://hdl.handle.net/10962/d1017544
- Description: The sale of an entity as a going concern has a number of tax consequences for both the purchaser and the seller. The tax deductibility of a contingent liability upon its transfer from the seller to the purchaser, where the selling price has been reduced by the value of the contingent liabilities transferred, remains uncertain following the decision in Ackermans Ltd v Commissioner for the South African Revenue Service. An expense is either deductible under a specific section of the Income Tax Act, 58 of 1962, or under the general expense provisions in terms of sections 11(a) and 23(g). The Act does not contain a specific section relating to contingent liabilities and therefore a contingent liability will need to be considered for deduction under these sections. The Act further disallows an expense as a deduction under section 23(e), where a reserve is created (for example a leave pay provision). This study analyses the tax deductibility of a contingent liability, where the contingent liability has been transferred from the seller to the purchaser in a sale of an entity as a going concern and the purchase price has been reduced to compensate for the transfer of the contingent liability. The deductibility of the contingent liability was first assessed in terms of the provisions of the Act (sections 11(a), 23(g) and 23(e)) and associated case law. The decision in the Ackermans case and its preceding Income Tax Case 1839 was then analysed in order to establish the principles arising from the decisions. Finally the proposals in the Draft Taxation Laws Amendment Bill, 2011, and the subsequent Discussion Document issued by the South African Revenue Service were discussed. The analysis revealed the continuing confusion surrounding the status quo, thus demonstrating the importance of legislative intervention to provide guidelines for taxpayers.
- Full Text:
- Date Issued: 2015
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