exempt income: chapter 5

golden rule

always include gross amount in gross income never net amount

exemptions incentivising investments

S10(1)(i) and S10(1)(h)

S10(1)(i)

for res and non-res, for interest from SA source and has a primary exemption of R23800 and secondary of R34500

S10(1)(h)

for non-res, from SA source and has no limit of exemption

proviso: unless physically present for 183+ days or debt connected to PE of non-res in RSA

other proviso: neither exemptions apply if interest from annuity and apportion interest if YoA less than a year

Tax free investemnts- S12T

interest is tax free, yearly limit of R36 000 and lifetime limit of R500 000

40% tax on excess contributions

purchased annuities- S10A

full annuity included in gross income and S10A exempts the capital portion of the income

insuurance policy proceeds

policies owned by employers paid to employees- S10(1)(gC) specific exemptions

policies where holder is not employer- generally capital in nature but income protection policies and annuities is included in GI- S10(1)(gI)

local dividends exemption- S10(1)(k)(i)

local dividends- generally, dividends from resident companies are fully exempt unless part of an annuity

foreign dividends- S10B

if receipient holds 10% share and vote- S10B(2)(a)

foreign dividends listed in respect of shares listed on the JSE- S10B(2)(d)

Proviso- if dividend used as a tax deduction then it is not exempt

Partial exemption- does not qualify for full exemption: natural-25/45 and companies: 7/27

exemption relating to employment- S10(1)(gC)

exempt amounts received under foreign country’s soocial security system or lump sum, pension or annuity received by resident from a source outside RSA for employment out RSA

Apportion if services rendered inside and out of RSA- based on years of service

UIF benefits- S10(1)(nA)

UIF benefits received by the recipient are fully exempt

Uniforms- S10(1)(nA)

exempt if clearly distinguishable from ordinary clothing and have to wear it on duty. if i receive the physical clothing or a cash allowance then it is exempt

Relocation benefits- S10(1)(nB)

exempt where the employer bears relocation costs as a result of an employee changing place of residence- temporary accommodation limited to 183 days and then becomes fringe benefit

equity instruments- S10(1)(nB)

to employees/Directors

if shares are awarded but do not vest at time of acquisition then the amount accruing at acquisition is exempt

if person disposes of unvested shares- amount received is exempt

S&C dtermines taxable amount when shares eventually vest

employment outside RSA- S10(1)(o)(ii)

foreign remuneration received up to 1.25mil is exempt

there must be a employer-employee relationship

183+ days out the country

60 days in a row

casual link to work and remuneration

apportion if services rendered outside and inside, based on work days with 1.25Mil cap

Exemption incentivising education- Bursaries- S10(1)(q) and (qA)

1) gross income- bursary granted because of employment relationship- under Par( c), even if paid to 3rd party

2) exempt if bursary awarded to non-employee or relative, employee must accept and repay if not completed, relative of employee

R600 000 proxy and step child qualifies as a relative

alimony and maintenance- S10(1)(u)

maintenance amounts received under a seperation agreement entered after 21 March 1962 are exempt

war pensions and injury/disease awards- S10(1)(g)

exempts: disability pensions

war pensions

workmen’s compensation

pensions due to occupational injuries

employer compensation on death caused by employment capped at R300 000

compensation from Road Accident Fund