Tax Law 410

Introduction (Chapter 1)

Tax Role-players

 The state (government)  H.E. Jacob Zuma

 National Treasury  Pravin Gordhan
 SARS  Oupa Magahala
 Parliament  Thaba Mufamadi
 Tax Practitioners
 Tax payers
 Dispute resolution institution

Broad Categories of Taxes

 Taxes on income and profit

 Payroll taxes
 Secondary Tax on companies (STC  will be replaced by dividends tax on 1 April
2012)
 Dividends Tax
 Donations tax
 Withholding tax
 Turnover tax
 Property taxes
 Taxes on goods and services
 Environmental taxes

Income and profit tax (Normal tax)

 Normal tax is imposed on persons, irrespective of whether they are natural persons,
trusts, insolvent estates etc.
 It is payable on the „taxable income‟ of a taxpayer for the year of assessment. The
year of assessment always ends on the last day of February, except for companies,
when it ends on the last day of the company‟s financial year.
 All natural persons are entitled to deduct a primary rebate from the normal tax per the
tax tables. Persons 65 years or older are also entitled to deduct a secondary rebate and
persons 75 years or older are entitled to deduct a tertiary rebate as well.
 A fixed rate of normal tax, currently 28% is payable for companies and close
corporations.
 The collection of tax is facilitated by a system of employee‟s tax and provisional tax
payments. Employee‟s tax is deducted by employers from remuneration payable to
employees.
 Income Tax Profit Tax
1. Income Tax or normal tax (including 1. Tax on foreign entertainers and
capital gains tax and turnover tax) sportspersons
2. Secondary tax on companies replaced 2. Withholding tax on royalties
by dividends tax and value extraction
tax  1 April 2012
3. Withholding tax on interest (2013)
4. Sale of immovable property by non-
residents
5. Betting and gambling duties
6. Mining taxes
Collection Mechanisms:

1. Pay As You Earn

2. Withholding
3. Provisional Tax systems

Secondary Tax on Companies (STC)

 Taxable separate from normal tax. STC is payable on 10% of the net amount of any
dividends declared by a resident company to its shareholders.
 It is imposed on the company which distributes the dividends and is therefore not
imposed on the shareholders.

Dividends Tax

 It will replace STC as the tax on dividends.

 The main difference between STC and dividends tax is that where STC is imposed on
the company, dividends tax is imposed on the shareholder receiving the dividends.

Withholding tax

 This is tax when a resident pays an amount to a non-resident, of which a part of the
amount is paid over to SARS.
 Royalties  When a non-resident receives a royalty from a resident for the use of a
patent, for e.g., 12% of the gross amount received is paid to SARS.
 Payments for immovable property acquired from a non-resident  A non-
resident who sells immovable property in SA will be liable to pay between 5 and 10%
of the amount received for the property.
 On interest  A fixed rate of 10% tax is levied on any interest received by a foreign
person who is not in control of a foreign company.
 Payments to foreign entertainers and sportspersons  A fixed rate of 15% tax is
levied on the amount received to such a person in respect of the specified activity.
Turnover tax

 Imposed on micro businesses with a turnover of up to R1million a year.

 It is tax calculated on the turnover of a micro business, and not on taxable income.

Payroll taxes:

1. Occupational injuries and diseases levy

2. Skills development levy
3. Unemployment Insurance Fund levy

Property tax

Income Tax Formula

1. Gross Income
2. Less: Exempt Income (non-taxable income)
3. Equals: Income
4. Less: Allowable deductions, Allowances And Assessed losses
(e.g. if office furniture cost R100 and has a lifespan of 5 years,
R20 can be deducted each year)
5. Add: Taxable Capital gains
6. Add: Special Inclusions (e.g. Income from overseas companies)
7. Equals: Taxable income (From here, calculations start)
8. Normal Tax per Tax Tables (Rates based on income category)
9. Less: Rebates (if person falls into tertiary category, for e.g.,
primary, secondary and tertiary rebates are subtracted)
10. Normal Tax liability
11. Less: Pay As You Earn and other advance payments (deduct the
amount already paid)
12. Normal Tax due or payable

1. Gross Income

*Must differentiate between residents and non-residents:

Residents: People who live in South Africa or intend to return to South Africa are
taxed on income derived from anywhere in the world. E.g., overseas
business.
 Non-residents: People who are in South Africa, but intend to leave the
Republic are only taxed on income derived in South Africa.

*People who derive income from immovable property in the Republic are taxed accordingly.

Definition of gross income:

Any amount received or approved during any financial year of assessment.

2. Exempt Income

According to a person‟s age, he/she may deduct a certain maximum amount of interest
received per annum:
 Under 65: R22 800 may be deducted
 65 or older: R33 000 may be deducted

Therefore, if a person receives R30 000 from interest on investments, R22 800 is exempted,
BUT if a person receives R10 000 from interest, only R10 000 is exempted.

Example 1:
A is 50 years old. Her income is R160 000 per year. She received R25 000 interest on an
investment in the 2012 year of assessment. Calculate the amount of tax she is liable to pay:

Gross income = yearly income + investment income

= R185 000
R22 800 is exempted from tax. Therefore her taxable income = R162 200
[then use table of categories on p 1141]
A must pay R27 000 + 25% on taxable income above R150 000.
Therefore: R162 200 – R150 000 = R12 200
R12 200 x 25% = R3 050
R3 050 + R27 000 = R30 050
[Subtract rebates]
Age 50 = primary rebate
Therefore: R30 050 – R10 755 =R19 295  Tax payable

Gross Income

 Resident v non-resident
 The amount in cash or otherwise
 Received or accrued
 During the year of assessment
  Which is not of capital nature

Deductions

 Trade
 Expenditure or loss
 Which is actually incurred
 In the production of income
 Which is not of capital nature
 Special deductions and prohibitions

Basic Concepts

 Progressive tax system v flat rate for companies and trusts

 Provisional tax v withholding tax v PAYE (collection mechanisms)
 STC v Dividends tax (from 1 April 2012)
 Rebates
 Year of assessment
 Tax threshold (the minimum income for a person to be taxed)
o Younger than 55 years  R59 750
o Younger than or 65 years  R93 150
o Older than or 75 years  R104 261
 Marginal tax rate (different tax per tax tables)
 Effective tax rate
 Capital Gains Tax inclusive rate
 Capital Gains Tax effective tax rate

Example:
Company X has only one shareholder. In the 2012 year of assessment Company X‟s taxable
income is R100.
Companies pay a flat rate of 28% on its income.
According to STC, the company has to pay additional 10% on the amount that it declares on
its dividends before it declares it to its shareholders. Therefore the shareholders are exempt.
Therefore: 100 – 28 = 72
72 x 10/110 = 6.5
72 – 6.5 = 65.5  the dividends declared to the shareholders.
According to dividends tax the shareholders are liable to pay 15% on the dividends they
receive.
Therefore; 100 – 28 = 72  Declared to the shareholders
72 x 10/100 = 7.2  Tax liability
CGT Formula

1. Disposal or deemed disposal of an asset

2. Proceeds from the disposal
3. Less: the base cost of the Asset
4. Equals: capital gains or loss
5. Exclusions or limitations (for example the asset was the seller‟s primary residence)
6. Sum of all (gains and losses smaller or equal to R2million or capital gains of smaller
or equal to R1.5million)
7. Annual Exclusions (R20 000)
8. Equals aggregate capital gains or aggregate capital loss
9. Deduct or add previous assessed capital gains or loss (depending on whether the
person has capital gains or losses in the current year)
10. Equals: the net capital gains (if assessed capital loss, it’s carried forward)
11. Multiply by inclusion rate (25% for natural persons, 50% otherwise)
12. Equals: taxable capital gains (included in taxable income – Section 26A)

Example 2:
Miss B is 65 years old. She has a yearly income of R300 000. She derives R20 000 interest
from her investments and her net capital gain is R200 000. She has expenditure in the form
of petrol and stationary expenses to the amount of R12 000. Calculate the amount she is
liable to pay tax:

Gross income = R300 000 + R20 000

= R320 000
Less: exemptions = -R20 000
Equals: income = R300 000
Less: deductions = -R12 000
Add: Capital Gain = Net capital gain x inclusion rate = Taxable capital gains
= R200 000 x 25/100
= R50 000
Equals: taxable income = R 338 000
Tax per tax tables = R75 250
Add: 35% of taxable income over R325 000 = (R338 000 – R325 000) x 35/100
= R4550
Tax = R79 800
Less: rebate = -R16 767
Equals: tax payable = R63 033
Example 3:
Miss C is 75 years old. She has a yearly salary of R180 000. She derives R40 000 interest
from her investment and her taxable capital gain is R800 000. She has a total expenditure of
R13 000 in the form of medical expenses. Calculate the amount she is liable to pay tax:

Gross Income = R220 000

Less: exemptions = -R33 000
Equals: income = R187 000
Less: deductions = -R13 000
Add: Capital Gain = R800 000
Equals: taxable income = R 974 000
Tax per tax tables = R325 850
Less: rebate = -R18 767
Equals: tax payable = R307 083

Administration of the Act

 The commissioner of SARS is responsible for carrying out the provisions of the Act.
 The commissioner was previously referred to as the Commissioner of Inland Revenue
(CIR).
 Receivers of Revenue and their staff assist in the administration of the Act, subject to
the commissioner‟s direction and control.
 The commissioner may amend or withdraw any notice issued by an officer under his
control (within 3 years).
 Some of the commissioner‟s decisions are subject to appeal and objection.

Judicial decisions

 The following route is set out for appeals of taxpayers:

o Tax board  Tax disputes of which the amount is not more than R500 000.
o Tax court  Not a court of law and has not inherent jurisdiction. It is bound
by the decisions of the provincial divisions of the High Court and the SCA,
although it is not bound by its own decisions. Decisions by the tax court are
binding on the parties of the case.
o Provincial divisions of the High Court  Bound by their own decisions, but
not by that of another division.
o SCA

Interpretation approaches

 The „golden rule‟ of interpretation is followed: The legislature‟s intention is

determined by looking at the literal meaning of the words, unless it would lead to
some absurdity or inconsistency.
Regulations, practice notes and interpretation
The Minister of Finance may make regulations regarding certain matters:

 Tue duties of all persons engaged in the administration of the Act

 The limits of areas where such persons may act
 The nature and contents of accounts which the taxpayers must provide as well as their
authentication.
 The method of valuation of annuities and other limited interests in property.

Residence and source (Chapter 5)

Why is it necessary to distinguish between residents and non-residents?

 Residents have an active income taxed on source basis and passive income taxed on a
worldwide basis. [Worldwide tax system]
 Non-residents are taxed on South African sourced income (both active and passive)
 Certain provisions are applicable exclusively to residents and non-residents
respectively.
 Provisions which do not apply to residents:
o Central Foreign Companies provisions
o STC
o 6 quat rebate
o Donations tax
 Provisions which do not apply to non-residents:
o Interest exemption (unless the non-resident is in the RSA for 183 days or if
there is a permanent establishment in the RSA) [NB  from 2013 there will
be a withholding tax]
o Withholding taxes on royalties; disposal of immovable property; foreign
entertainers & sportspersons.

Meaning of residence
NB  The Act defines when a non-resident becomes a resident, not when a resident ceases
to be a resident.
NB  DTA (double taxation agreement) override. A person who is exclusively a resident of
another country, for purposes of the DTA, cannot be a resident in South Africa, even if he
meets all the requirements of being a resident.

Distinction between natural persons or other persons:

 Ordinary Resident Test

 Physical Presence Test
Ordinary Resident Test

 This is not defined in the Act.

 It is a question of fact depending on the facts and circumstances of each case.
 It is the country in which X will naturally and as a matter of course return to from
trips. It is his principal or usual residence (Real home as stated in Cohen v CIR).
 Where X resides normally and not temporarily (CIR v Kuttel).
 Generally one can be ordinarily resident in only one country (Cohen).
 Physical presence: X‟s actions, mode of life, possession of establishments etc. This is
taken into account although it is not necessarily conclusive.
 It is not a country of domicile or nationality.
 A person can be ordinarily resident in a country even if he was physically absent from
the country for the year of assessment.

Physical Presence Test

 Not an ordinary resident, but will be considered a resident if:

o Person was in the country for more than 91 days in the current year.
o The person was in the country for more than 91 days in each year of the
preceding 5 years.
o The person was in the country for more than 915 days in the immediately
preceding 5 years.

A person ceases to be a resident of the country if they are outside the RSA for a continuous
330 full days.

Residence of persons other than natural persons

A person other than a natural person will be defined as a resident if:

 It is incorporated, established or formed in SA.

 It has its place of effective management in SA.
POEM (Place of Effective Management)

 SARS regards the POEM as the place where the company is managed on a regular or
day-to-day basis by the directors or the senior management of the company.
 Therefore, a company transacting its day-to-day business in SA, but controlled by
foreign shareholders ordinarily resident outside SA, will have its POEM in SA.

Shareholders
OECD: POEM is where key management
and commercial decisions necessary for C
conduct of business as a whole in O
Board of Directors I
substance made.
Policy directions N
[control]
C
SARS Interpretation note 6: I
POEM is where day-to-day management D
Management
by directors or senior management E
[MD/CEO]
Day to day
management

Operations
Day-to-day operations

Source Rules

 For non-residents, only receipts derived from sources within SA are subject to tax in
SA.
 Therefore it is necessary to determine whether non-residents has any receipts from
either a true source or a deemed source in SA.
Year of Assessment Commencing before 1 Year of Assessment commencing on or
January 2012 after 1 January 2012
 No definition in Act  Repealed Section 9 [Deemed source
 Common law Principles rules] and deleted all reference to
o General Principles (originating deemed source
cause)  Introduction of new Section 9
o Apportionment o When Specified amounts
o Application to various income sourced in South Africa?
streams o When specified amounts not
 Section 9 [deemed source rules] sourced in South Africa?
o Retained default common law
amounts not specifically
covered.

Common law Principles

Lever Brothers case (1946) AD:

 Not a quarter from which income arises, but the originating cause of its receipt.
 Originating cause is quid pro quo for the income. I.e. business activity carried on.
 Determine 1) the originating cause and 2) where it is located.
 E.g. of an originating cause:
o Personal [mental or physical] exertion.
o Employment of capital [using it or letting its use to someone]
o Combination of both
 Practical man‟s test [Rhodesia metals 1938 AD]

Apportionment

 Difficulties arise if income was sourced in SA and another country.

 In these cases, the whole of, or a part of, or no part of the income has to be deemed to
be sourced in SA.
 Not specifically provided for in the Act.
 Case law favours “dominant or main” source rule.
 In practice, SARS will apportion.
 DIVIDENDS

Common law and Deemed source rules New Source rules

 Boyd v CIR (1951) and Lamb v CIR  No reference is made to share
(1955). registration.
 Focus on share register, i.e.  The dividends will be locally sourced
[dividends are paid pursuant to a if the distributing company is a
share and a share is located where the resident.
title to the shares is registered. [Title
to shares is evidenced by (principal)
share registration] Therefore,
dividends are sourced in South Africa
if the shares are kept in South Africa.

INTEREST

Common Law and Deemed Source Rules New Source rules

 Common law and Lever Brothers  Incurred by a person that is a resident
 The doctrine of the originating [i.e. residence of the payor] unless:
cause  It is attributable to a foreign
 Originating cause of interest is Permanent Establishment
the supply of the credit. OR
 Located where the credit is  The place where the funds are utilised
supplied or applied.
 Deemed source rules
 Use or application of funds of
South Africa.
 South African resident: paying
interest is presumed to be
utilising or applying funds
within South Africa.

Lever Brothers:
5
Facts:

UK 1 DUTCH 3 SOUTH AFRICAN

COMPANY COMPANY COMPANY

AMERICAN 4
COMPANY
 1. Sale on loan account between the Dutch company and the UK Company in terms of
which the Dutch company bought from the UK Company.
2. The Dutch Company ceded its shares in its American subsidiary as security to the
loan of the UK Company.
3. Assignment of sale and the transfer of the American Company from the Dutch
Company to the South African Company.
4. Dividends of the American Company went to the South African Company as it was
now a subsidiary after assignment.
5. The South African Company now had to pay interest to the American Company.

Legal Question:
Can SARS tax the interest paid by the South African Company to the UK Company?
Majority Judgment:
Source of interest

 Source is not the mere existence of the indebtedness

 The source of the interest is the provision of the money or the credit.

Alternative argument

 Even if the indebtedness is the real source, it is located where it is recoverable or

enforceable.
 Practical man regards the operations of the American Company which generated the
funds from which the interest was paid as the source of the interest.

ROYALTIES

Common Law and Deemed Source Rules New Source Rules

 Common law  Royalty incurred by a resident unless
 The doctrine of the originating it is attributable to a foreign
cause permanent establishment
 Millin v CIR 1928 AD
 Where the intellectual
property was created, devised
or developed (wits and labour
is exercised)
 Deemed source rules
 South Africa used intellectual
property
 NB  Intellectual property
can be capital (therefore look
at where employed)
 EMPLOYMENT INCOME

Common Law and Deemed Source Rules New Source Rules

 Common law  Civil service
 The doctrine of the originating  Holding public office
cause  Residual common law doctrine of
 Where the employment originating cause
service is rendered
 Deemed source rules
 Civil service
 Holding public office

DISPOSAL OF MOVABLE PROPERTY

Common Law and Deemed Source Rules New Source Rules

 Common law  Non-residents:
 The doctrine of the originating  South African permanent
cause (activities test) establishment
 Deemed source rules  Residents:
 Non-resident:  No foreign permanent
o South African establishments
permanent  No foreign TAX
establishment  NB  The source rule in relation to
 Residents: residents is linked to the Section
o No foreign 6quat credit (rebate). Therefore no
establishments credit is sourced in South Africa.
o No foreign TAX

DISPOSAL OF IMMOVABLE PROPERTY

Common Law and Deemed Source Rules New Source Rules
 Common law  The situs of the property
 The doctrine of the originating  NB  Immovable property includes
cause (where capital is indirect interest in immovable
property [80/20 value and ownership]
productively employed)
 Coincide with where the
capital is situated
 Deemed source rules
 Where the property is situated
(the situs of the property)
 NB  Immovable property
includes indirect interest in
immovable property [80/20
value and ownership]
 RENTAL
Common Law and Deemed Source Rules New Source Rules
 The Doctrine of the Originating  Residual doctrine of originating
Cause (where the capital is cause.
productively employed.
 COT v British United Shoe
Machinery 1964 CFC
 Where asset is used (particularly in
regarding long lease of capital assets
 Dist. Business income – emphasis is
not on business and not on asset.

Non-residents

 Non-residents are taxed on income that is derived from sources within or deemed to
be within SA.
 Non-residents are not entitled to the Section 6quat rebate.

Interest

 Only interest from a real or deemed South African source will be included in a non-
resident‟s gross income.
 Interest of a non-resident is exempt from normal tax, unless:
o The non-resident is a natural person who was physically present in SA for
more than 183 days during the year of assessment in which the interest
accrued.
o Or, if the non-resident carried on business in SA through a permanent
establishment during the year of assessment.

Donations tax

 Non-residents are not liable for donations tax, even if the subject matter of the
donation is property situated in SA.

Employees’ tax and provisional tax

 Remuneration from SA sources payable to non-residents qualifies for employees‟ tax

the same way as for residents.
 Ship and aircraft owners assessable in terms of Section 33 are exempted from
provisional tax.

Asset disposals

 Non-residents are taxed on gains made from the disposal of certain assets in SA.
Amendments in respect of the 2013 year of assessment (not NB)

Source

 A new uniform system of source is proposed, representing the common law, pre-
existing statutory law and tax treaty principles.
 The common law will remain to govern certain categories of income not addressed by
the proposed section 9 such as rental income and insurance premiums.
 The Act will no longer refer to a source “deemed to be within the Republic”.
 The amendment takes effect on 1 January 2012

The new Section 9 source rules can be summarised as follows:

Section 9(2)
Dividends

(a) Any South African dividends accruing to a person.

Interest

(b) Interest which is:

i. Paid by a resident, unless that interest is attributable to a permanent
establishment outside SA or
ii. Is received in respect of any funds used or applied by any person in SA.
Therefore the debtor‟s residence determines the source of the interest.

Royalties
(c) Paid by a resident, unless it is attributable to a permanent establishment outside SA.
(d) Royalties received in respect of the use of any intellectual property.
Therefore, the focus is no longer on the person creating the intellectual property.

Scientific, technical, industrial or commercial knowledge or information

(e) Same as (c) and (d)

Public office and services rendered in public sector

(g) Amounts received or accrued due to holding public office

(h) Amounts received due to services rendered on behalf of any listed employers in the
public sector

Pensions and annuities

(i) Pensions and annuities received or in respect of services rendered in SA

Capital gain (immovable)

(j) Amount received due to the disposal of immovable property in SA.

Capital gain (movable)

(k) Amount received due to disposal of asset other than immovable property in SA.
i. Only if the asset is not attributable to any permanent establishment outside
SA.
ii. If it is the asset of a non-resident, it only accrues if the asset is attributable to a
permanent establishment situated in SA.

Exchange differences

(l) Any exchange of an item made by:

i. A resident if the exchanged item is not attributable to a permanent
establishment outside SA
ii. A non-resident if the exchanged item is attributable to a permanent
establishment in SA.

Section 9(4)
If an amount that accrues to a person from a source outside SA, it is taxed if:

(a) It constitutes a foreign dividend

(b) It constitutes an interest from a source outside SA.
(c) It constitutes a royalty from a source outside SA
(d) It constitutes an amount in respect of the disposal of an asset not sourced in SA
(e) It is attributable to any exchange difference that is not from a source in SA.

Amount received or accrued (Chapter 2)

What is an amount?

 Could be cash (credit).

 Or it could be an item with monetary value, e.g. shares.
 Value is established by the nominal / par value, or by the market value. In practice,
the market value of the item is used in cases where a taxpayer received an amount not
in cash.
 The asset must have an ascertainable monetary value.
 The onus to prove an amount rests on the commissioner.
Determining whether an amount forms part of gross income:

Is there an amount
in cash or There is no inclusion in
If no
otherwise? gross income.

is the amount
If yes received by or If no
accrued to in
favour o a person?

was the amount

received during the If no
If yes year of
assessment?

Was the amount

If yes received of a If yes
capital nature?

Is the person a

If no
If no resident of South
Africa?

Was the amount

If no If yes from a source in
South Africa?

The amount is included If yes

in gross income.
Brummeria Case

Facts:

 The defendant owned and operated a retirement village.

 The policy of the institution stated that the occupants had to pay an initial fee of R100
000 when they move in, and if the person moves out or dies, the R100 000 is paid
back to the estate.
 Therefore, Brummeria had right of use of the R100 000 until the occupants left.

Legal Question:

 Did Brummeria receive an "amount"?

Held:

 Yes, the value in casu is the market related interest rate.

 Therefore the right of use of money is an amount.

Issues not covered:

 Issues regarding interest free donations to trusts?

o The answer could be that these donations constitute capital in nature.

SARS:

 The Brummeria Case will only be applied in cases of interest free loans in return for
something. Therefore only when quid pro quo applies.

Received or accrued

 Whichever occurs first. Therefore if an amount accrues now, but is only received next
year, it is taxable in the current year of assessment.
 Notional amounts (appreciations).
o E.g. if a house's value increases from R100 000 to R120 000, that R20 000 is
not an accrual.
 Unrealised gains (opportunity costs).
o E.g. an opportunity to invest which is not realised.
o Not taxable, only actual accruals or received amounts are taxable.

Receipt

 Subjective test:
If a person has intention to appropriate an amount for himself, the amount is received.
 Therefore, thieves are able to be taxed on amounts stolen.
Special cases

 A trustee or beneficiary
o Trustees who receive money for his clients or customers will not be taxed on
these amounts as they do not receive it for their own benefit and may not mix
it with his own money.
 Borrowed money (the amount is not received because of the obligation to return).
 Advanced payments or deposits (non-refundable).
o These payments or deposits will form part of the gross income of a taxpayer if
it's applied for the taxpayer's own benefit.
o If the advance payment is repayable at some stage, it will not form part of the
taxpayer's gross income.
 Illegal receipts (MP Finance Case).

MP Finance Case

Facts:

 MP Finance ran a pyramid scheme which raised almost R2 billion.

 The company tried to legitimise the company, but was liquidated.
 SARS regarded the R2 billion as Gross Income which is therefore taxable.

Held:

 The subjective test was applied.

 It was held that MP Finance did intend to appropriate the amount. Therefore the
amount was received.

Accrual

 An amount accrues to a person when that person is unconditionally entitled to that

amount [Ochberg case].
 Therefore the physical receipt or the enforceability of the amount is irrelevant for
purposes of accrual. The subjective intention of the taxpayer is also irrelevant.
 If a taxpayer was unjustly enriched, therefore receiving moneys he was not entitled to,
the amount will not have accrued for the purposes of his gross income.
 Unquantified amounts only accrue to a person once it can be quantified. [e.g. a farmer
sells his future crops at R2 000 000 per ton.]
 Value of the accrual:
o May be hard to establish.
o The People's Stores case held that it is the present value of the specific
amount. [past position].
o SARS: the proviso refers to the face value of the amount. [current position].
 E.g. revolving credit facility (People's Stores).
 o R500 paid over 6 months. If the end of the year of assessment is at the end of
only the third month of the transaction (therefore when only R250 has been
paid), all R500 accrued.
o The face value of an amount is included in the gross income: face value would
entail that only R250 already paid has accrued and is taxable. This is preferred
to the present value of the amount (as the value of money decreases over
time0.
 Sale of property on condition that a loan is obtained from the bank.
o There is no accrual to the seller until the condition is fulfilled.
 Early settlement discount (GUD Holdings Case).
o E.g. the payment of R1000 for an item, but if it is paid by the 1 st of April, only
R800 is payable.
o Held that the R200 difference constitutes a penalty for late payment. Therefore
the accrual is R800.

Disposal of income after accrual / receipt

Witwatersrand Association of Racing Club

Facts:

 WARC wanted to donate moneys received.

 They did so before paying tax.
 SARS taxed the donations.

Held:

 WARC should have organized the donation before the amount accrued to them.
 Therefore it is not necessary that a taxpayer receive benefit from the accrual. A
taxpayer will be taxed if they objectively received an amount (Ochberg case).

Note:

 Out and out cession vs cession in securitatem debiti. In other words, the disposal of
income after receipt or accrual vs the disposal of a right to future income.
o When income was disposed of after it has been received or accrued, it still
accrued nonetheless.
o Cession of the right to future income, means that the transferor cedes his right
to accrual, therefore the income accrues to the cessionary. If the transferor
actually and physically received the money and then, subsequently handed it
to cessionary, it is said that he received the money on behalf of the cessionary.
 Sale of shares cum or ex dividendi?
o Sometimes shares are sold together with a right to a dividend or interest.
 o
Dividend day CUM
Therefore the dividend is R2

Share = R12
-2 Ex dividendi
Share is 'pregnant'
with a dividend Share = R10

Payment day

o If the income (dividend) has already accrued to the share before the sale of the
share, it is taxable to the seller.
o If the income only accrues after the sale, it is taxable to the buyer.
o No apportionment of the tax can be done.

ITC 1847 Case

Facts:

 An international sale of goods (Fluorspar) by a South African resident to China.

 Incoterms: (international import and export)
o FOB (free of board)  ownership of the goods pass upon the loading of the
ship and subsequently the delivery of the bill of lading.
o At destination, independent geologist should confirm the required quality and
quantity of the goods shipped.
o If goods do not meet the required standards, the purchaser could return them
or negotiate a reduced price.

Question;

 Is the time of the accrual the time of payment or the time of the delivery of the bill of
lading?

Held:

 Mere FOB is insufficient – must look at the intention of the parties as expressed in the
contract.
 The purchase price is subject to a suspensive condition. Therefore the amount accrues
upon the confirmation by the geologist.
 Income and Capital (Chapter 3)

Cases

 Sale of property
o Stott
o Natal Estates
o John bell
o Elandsheuwel
o George Forest
o Heron Heights
o Wyner
o Founders Hill
 Sale of Shares
o Pick 'n Pay
o Nussbaum
o ITC 1746
 Settlement Comp.
o ITC 1765
o WJ Fourie
 Sand Case
o Ernst Bester

General Principles

 Gross income excludes receipts and accruals of a capital nature.

 However, a portion of capital gains realised on the disposal of an asset is taxable.
 Therefore a distinction between income and capital exists.
 Trading Income vs Trading Expenses
 Why is it necessary to distinguish between Capital and Revenue?
o Different tax rates
o CGT inclusion rates [table]
o (current vs proposed)

Capital / Revenue

 This is not defined in the Act, therefore it is necessary to look at case law.
 The burden of proof is on the taxpayer in accordance with section 82.
 If capital is a 'Tree', revenue would be the 'fruit'. Therefore income is produced by
capital.
  There is no halfway house [there can be apportionment of amount]. An amount can't
be part capital, part revenue.
 Generally, donations, lump-sum inheritance or isolated lottery / betting wins form part
of a person's capital.
 Test is one of intention. Whether the income earned is based on the carrying on of
business or a scheme of profit making. [Trading income?]
 Generally, proceeds are income in nature if the asset was acquired with the purpose of
selling at a profit. However, if the asset was acquired with the intention to produce
income from that asset, the proceeds will be capital in nature.
 Intention is measured against objective factors. Income must be designedly sought for
and not fortuitous.
 Change of intention is possible [crossing the revenue].
 In absence of intervening change of intention, the original intention prevails.
 Repurchase and sale, look at intention of both parties at acquisition and sale.
 Continuity is important, but a single isolated transaction can constitute a scheme of
profit making.
 The right to analyse property in the best way possible, it is therefore a question of
degree.

Factors (not numerous clauses)

 Ipse dixit (the taxpayer's own evidence about his intention and his credibility will be
assessed by the court.)
 Business of taxpayer vs ordinary business of that nature.
 Surrounding circumstances [Board minutes, resources of C to undertake professed
business, object of company etc.]
 Conduct in relation to asset up to time of sale [e.g. subdivision, marketing, provision
of infrastructure etc.]
 Frequency and continuity of transaction [history].
 Length of time property held.

Examples

 Manufacturer selling redundant warehouse.

 Pensioner selling house to live in a retirement home.
 Property developer buying plots, building houses and selling for profit.

Furthermore….

 Where a taxpayer has mixed intentions, effect will be given to his main intention.
 Where a taxpayer has two alternative intentions, the proceeds of the disposal of the
asset will be income in nature.
 The intention of a company is not necessarily derived from his shareholders.
Therefore, the intention of the (managing) directors should be considered.
  There is a difference between fixed and floating capital. Floating capital frequently
changes in nature, e.g. stock stock is sold to the debtor on credit, then the capital
changes to cash when the debtor pays, and could again change back to stock if the
cash is used to buy more stock.
 Therefore floating capital is consumed while fixed capital is not [George Forest
Case].

CIR v Stott

Facts:

 Regarding a change of intention.

 Stott is a professional architect and surveyor with several transactions. Three
transactions [buying and selling; buying and letting] were in question:
1. Property 1
 Acquired property with the original intention to build a seaside
residence [property was 54 Ha].
 He was unable to buy a sizable portion, therefore he had to buy a
whole lot.
 He tried to sell the excess portion [30 Ha] as a whole, but could not.
Therefore he subdivided the 30 Ha and sold it as lots.
2. Property 2
 S bought the property subject to a 7 year lease [huur gaat voor koop].
 The original lease was terminated due to non-payment of the lessee.
 S subsequently re-let the farm.
 Later the farm was subdivided and sold as lots.
3. Property 3
 S bought the property to rescue the natives living on it from forced
removal.
 He subdivided the property and sold it to the natives at marginal
profits.

Held:

 Test: intention of sale in scheme of profit making.

 Original intention with which the asset is acquired is important [not conclusive].
 Unless there is a change of intention [conclusive].
 Mere subdivision of land before sale is not conclusive of a change of intention.
 S is entitled to realise his capital assets in the best way possible to accommodate
exigencies (demands) of the market he's selling to.
 Conclusion: no proof of a change of intention, therefore the original intention is
upheld.
Natal Estates Case

Facts:

 X carrying on business as grower and miller of sugar cane [La lucia and Umhlanga
rocks].
 Possibility that government may expropriate land.
 Ancillary object of selling land at profit.
 After about 40 years, X undertook elaborate township development on portion of
land, marketing and selling lots. [Appointed experts: town planners, engineers,
finance and tax.]

Held:

 Intention at the time of buying and at the time of selling should be considered.
 Extent of activities carried out before selling [e.g planning marketing]  manner of
realisation.
 Frequency of transactions continuity.
 Ipse dixit of taxpayers vs objective facts.
 X's business vs what would ordinarily be regarded as carrying on business or
embarking on scheme of profit making.
 Insignificant that sale was ancillary to main object.
 Conclusion: X did more than realise capital assets  crossed the rubicon.

Elandsheuwel

Facts:

 Shareholders of X company (the company let a farm to Y) sold shares to D, a property

speculator.
 Immediately after the purchase of the farm, Company X sold it to the municipality.

Held:

 Does the sale of the assets amount to a realisation of capital assets or the sale of an
asset in the course of carrying on business.
 NB  The court pierced the corporate veil to establish Company X's intention:
o Shareholders were property speculators.
o Immediately after acquiring shares, X actively sought to sell the property.
o Therefore X had no intention of farming.

Conclusion:

 The taxpayer could not prove capital intent.

Heron Heights

Facts:

 The CC was registered with its main purpose that of "property development".
 It acquired property in Knysna with the intention to develop a group housing scheme.
Ipse dixit  Wanted to rezone, subdivide and sell some of the erven to members of
the CC at cost  it contemplated selling other units at a profit.
 G5 objected to the development as it would hinder the view from adjacent residential
properties.
 G5 then acquired the undeveloped land from the CC.

Held:

 The CC acquired the property with the intention to engage in a scheme of profit
making and the intervening dispute did not break that intention.

John Bell

Facts:

 The company operated a textile business from its premises which it owned.
 After relocation of the business, the directors decided in principle to sell the original
premises.
 The property was rented out for 11 years while the directors waited for the selling
market to improve. Thereafter the property was sold for a profit.

Held:

 Court emphasised principle that a taxpayer is entitled to realise his property to his best
advantage.
 Therefore there was no change of intention to use the property as trading stock.

Founders Hill

Facts:

 Founders Hill was a wholly-owned subsidiary of AECI. Its purpose was to act as
'realisation company' to realise surplus land owned by AECI.

Held:

 Merely labelling a company as a 'realisation company' does not change the character
of the company (therefore it is not necessarily capital in nature) In casu, Founders Hill
acquired land from AECI, with the purpose to develop and resell.
 What is the interposition of a company where it could realise the property itself?
 o Position is limited to instances where the entity formed to achieve other
purposes than that of selling property.
o Examples:
 1 owner involved.
 The sale would be difficult or impossible without the interposed entity.
 The court refused to look through Founders Hill to AECI (which established Founders
Hill).

Pick 'n Pay Employees Share Trust

Facts:

 An employee share scheme trust established by PnP. The purpose of the trust served
as incentive for employee retention. Therefore it aimed to keep employees for longer
at PnP.
 The trust capitalised a loan from PnP.
 Various share transactions were involved:
o Initial allotment of shares by PnP.
o The trust acquired shares from members who were no longer eligible for the
shares.
o The trust acquired shares from members who wished to realise their holdings.
o Transactions of shares in open market.
o Sale of shares to qualifying participants [Price at the date of the application
was payable in 5 – 10 years.]
 Profit could accrue to the trust as a result of market movement for the period between
the forfeiture and the resale of the same shares.

21 Day Period 3 Year Period 1 Year Period

-EE applied for - The trustee accepts the -EE resigns -New applicant
shares. application. -The trustee buys back the applies for shares.
- Trustee buys shares on an shares at the original sale -NB  price could
open market. price. be R17 per share,
- Sells shares to EE on a loan -NB  the value of the but because the
payable in 5 – 10 years. share could be R15 per Trustee only paid
- The price of share to be paid share, but was bought back R10 for it, the trust
over 5 – years is the price on the for R10 per share. makes R7 profit.
day immediately before the
decision day. E.g. R10 per share.
Held:

 The established test was applied  intention [Natal Estates, Elandsheuwel].

 Therefore the court had to determine the purpose of the establishment of the trust.
 The court found that profit was neither sought for or inevitable, but it was purely
fortuitous (various factors could influence the profit such as the resignation of a
shareholder).
 Continuity is irrelevant where there is a clear intention of not carrying on a scheme of
profit making.
 The trust operated differently from what share dealers ordinarily do (taking long and
short position on shares).
 Therefore the profits were held to be capital in nature.

Nussbaum

Facts:

 A retired school teacher inherited a portfolio of listed shares.

 From 1982 – 1984 he engaged in extensive trade activities, thereby substantially
increasing his share portfolio.

Legal Question:

 Are the proceeds of the trading activities gross income?

Held:

 N argued that the purpose of the activities was to maximise the dividends declared.
 The court found that the dividends were the main purpose, but that N had a secondary
intention of dealing in shares.
 N sold his shares when:
o A company's performance no longer met the expected performance criteria.
o The market value of a share increased substantially vis-à-vis the dividend yield
(declared).
o Another share offered better returns.
o Rebalancing of his portfolio [with interest instruments].
 The court found that N was an astute (perceptive) investor actively pursuing
investment policies and constantly revising his portfolio.
 It was inevitable that a rise in the market would increase his dividends yield. [DPS
divided by Share Price].
  A continuity of activities and profitability of sales meant that N failed to prove capital
intent.

ITC 1746

Facts:

 X took out a short term debt to acquire a large amount of shares in his employer
company before the shares were listed.
 Sold the shares immediately after the listing.

Held:

 X contemplated that the share price will rise after the listing.
 X's ipse dixit must be weighed against objective considerations.
 X's interest commitment indicated that he could not afford to hold on to the amount of
shares purchased.
 The shares were sold a short period after being acquired.
 The court had to consider whether there was a change of intention when X decided to
sell the shares at the best possible price.
 X failed to prove capital intent.

ITC 1642

 This case refers more to "receipt" or "accrual" in the particular impact of a divorce
settlement made by court order [disposal after accrual].
 See Witwatersrand Case.

Damage and Compensation

 Question of purpose of payment:

o Paid to fill hole in a capital structure; or
o Paid to fill hole in trading profit?
 The principle applies to contracts, delict and insurance.
 NB  special inclusions regarding employment, restraint of trade etc.
o Payments received in respect of a restraint of trade are capital in nature.
 If compensation is paid for the loss of income  TAXABLE.

WJ Fourie Beleggings

Facts:
  Compensation was received in a full and final settlement for the cancelation of a 2
year accommodation contract with a hotelier.

Held:

 The court had to distinguish:

o A contract which is the means of producing income (i.e. acquiring business
e.g. a contract of agency "tree"); from
o A contract, the performance of which will result in the earning income
("fruits").
 The hotelier was already in business before the termination of the contract. Therefore
its income structure was not affected.
 Thus, the compensation was revenue in nature.

Special Inclusions (Chapter 4)

Annuities

 An annuity is a contractual obligation.

 A living annuity is the right of a member or former member of a pension fund to an
annuity purchased from a person / the fund on or after the retirement date of that
member or former member.
 The characteristics of an annuity:
o It is an annual payment
o Which is repetitive
o Chargeable against a person.
 All annuities are included in the taxpayer's gross income, unless exempted by section
10A:
o Annuities bought for a lump sum from an insurer for the benefit of the
purchaser or a spouse.
o If the purchaser is a natural person or a trust created for the benefit of the
mentally incapable.
o If it has a capital element (determined by way of a formula).

Alimony

 Before 21 March 1962:

o The recipient of the alimony was taxed in full for amount received [no
exceptions].
o The payer could deduct it as expenses.
 After 21 March 1962:
o The recipient is taxed on gross income, but alimony received is exempt.
o The payer could not deduct alimony paid.
Services

 Amounts received / accrued in respect of services rendered or to be rendered are

included in gross income.
 There must be a causal relationship between the amount received and the services
rendered.
 Annual bonuses are included for employees who render services.

Restraint of trade

 Where a restraint of trade is imposed on a natural person; a labour broker; a personal

service provider; or a personal service company; it will be included in the gross
income of the taxpayer regardless of whether its capital nature.
 All restraints of trade which are of revenue nature of all persons and companies will
be included in the gross income.

Services: compensation for loss of office

 Any amount received for the loss / termination of an office will be included in the
gross income.
 Normally, such an amount accrues only after the person's death, to someone other
than the deceased. Therefore, the amount must be deemed to have accrued to the
deceased and included in his gross income.

Severance benefits

 Includes any amount received / accrued to a person by way of lump sum from the
person's employer in respect of the termination / loss of the person's employment if:
o He or she is 55 or older
o The loss / termination is due to incapability to continue employment due to
sickness, injure etc.
o If the loss is due to:
 The employer ceased to carry on the trade
 The employee became redundant due to a reduction in personnel.

Fund benefits

 Includes a retirement fund lump sum benefit into a person's gross income.
 The balance remaining after the deduction of the allowable deductions in terms of
schedule 2 is taxable.

Services: commutation of amounts due

 Commutation means the substitution. Therefore the substitution of amounts due under
employment or service is included in a person's gross income.

Lease premiums
  Any amount received / accrued due to the use of a person's assets is included in the
gross income.
 The whole amount is included in the gross income.

Compensation for imparting knowledge and information

 Any amounts received / accrued from a person who paid for the imparting any
scientific, technical, industrial or commercial knowledge or information is included in
the gross income.

Leasehold improvements

 The value of any improvements done to leased property is taxable to the lessor
(owner) as part of his gross income.
 Only applies if the lessor has a right to have the improvements effected to his
property.

Dividends

 Any amount received or accrued by way of dividends are included in the gross
income.

Exempt Income (Chapter 6)

 Exempt income is gross income that is not subject to normal tax.

 It is initially included in gross income, but then subtracted when calculating income.
 Two broad categories of exemptions exist through the nature of the exemptions:
o Partial exemptions
The exemptions apply only to particular receipts and accruals.
o Absolute exemptions
The exemptions are granted on all the receipts and accruals of the entity.

Partial exemptions

Salaries and emoluments

Salaries payable to certain persons are exempt;

 Persons who holds an office of another government in SA (diplomats, consuls etc.).

 A domestic or private servant of a foreign diplomat who is not a SA citizen or
ordinarily resident in SA.
 A subject of a foreign state who is temporarily employed in SA.
 Foreign employees of certain foreign government agencies.
  A pension payable to a former State President or Vice State President or his surviving
spouse.

Bodies corporate, share block companies and other associations

 All levies and a total of R50 000 received / accrued to a body corporate of all amounts
other than levies.
 Subject to particular legislation.

War pensions and awards for diseases and injuries

 The following are exempt from normal tax:

o Amounts received as war pensions or reward relating to compensation in
respect of diseases contracted by miners.
o Disability pensions
o Compensation in terms of the Workmen's Compensation Fund
o Pensions for occupational injuries sustained before 1 March 1994
o Compensation paid by an employer in respect of an employment related death
of an employee
o From 1 January 2012, compensation paid by the RAF

Foreign pensions

 Any foreign pensions (government or non-government) will be included in the gross

income of a resident.
 Exceptions:
o Amounts received by a resident from a social security system of another
country
o Pensions received by a resident from a source outside SA in respect of an
employment outside SA

Dividends

 Dividends are usually exempt from normal tax, except for:

o Amounts distributed by a portfolio of a collective investment scheme

o Dividends received by a share dealer in terms of a share buy-back
o Dividends received in respect of a restricted equity instrument
o Dividends received in consequence of a cession
o Dividends received in respect of borrowed shares
o Foreign dividends and dividends paid by a headquarter company.

Payments to non-residents

 Any royalty or similar amount received by a person subject to withholding tax.

 Only available to non-residents.
  Therefore withholding tax levied is final and non-residents may not claim any
deductions against that income.

Authors

 Any amount received for a work in respect of the assignment or grant of an interest in
a copyright in the work is exempt from normal tax.
 This only applies to the first owner of the copyright.

Unemployment insurance benefit

 Any benefit or allowance in terms of the Unemployment Insurance Act is exempt

from normal tax.

Bursaries and scholarships

 Three requirements to be met for a bursary / scholarship to be exempt:

o It must be a bona fide scholarship
o It must be granted to assist / enable a person to study
o The person must study at a recognised educational / research institution
 A distinction is made with regard to bursaries to non-employees as opposed to
bursaries to employees or their relatives.
 Non-employees:
o Competed for on merit
o Exempt from normal tax
 Employees or relatives:
o By employers to employees
 Will be tax exempt as long as the employee agrees to repay the bursary
to the employer if he fails to complete his studies.
o By employers to relatives of employees
 These are exempted from normal tax, although the exemption is
limited:
 If the remuneration to the employee during a year of
assessment exceeds R100 000, no exemption is available.
 Even if the remuneration does not exceed R100 000, but the
amount of the bursary exceeds R10 000 during the year of
assessment, there will be no exemption.
 SARS practice note:
o Reimbursements for study expenses, after the person completed his studies, do
not constitute a bursary or scholarship.
o A recognised educational or research institution is defined in s 18 of the Act.
o If a person conducts research for the benefit of another, the expenditure by the
employer does not constitute a bona fide bursary.
 o A scholarship or bursary granted to a visiting academic to teach or lecture
does not constitute a bursary as the object is to impart knowledge, not to gain
it.
o A loan does not constitute income for tax purposes and is not taxable.
o A bursary subject to repayment due to non-fulfilment of the conditions is a
bona fide bursary until the non-compliance provisions are invoked.
o Where an employee is absolved from repaying a loan, it will constitute a tax
benefit.

Alimony and maintenance

 Any amount received in consequence of divorce proceedings instituted on or before

21 March 1962 is exempt from normal tax.

State incentive schemes

 Any amount received in the form of a rebate or assistance in respect of exports is

exempt.
 Must be approved by the Minister of Trade and Industry and the Minister of Finance.

Film owners

 Where the state subsidises a taxpayer promoting the production of films, such
subsidies are exempted subject to certain conditions.

Micro businesses

 A registered micro business is exempt from paying normal tax.

Interest

 A person receiving interest may qualify for one of the following exemptions:
o Interest and foreign dividends: Monetary exemption
 Only applies to residents.
 Subject to monetary limitations depending on the person's age.
 From 1 March 2012, foreign dividends and interest is no longer exempt
under this section.
o Interest: non-residents
 Only applies to non-residents
 Only if the person does not carry on business in SA through a
permanent establishment.
o Interest: holder of a debt instrument
 Only if the holder and issuer of the debt instrument is part of the same
group of companies and the issuer is denied a deduction under s23K.

Employment

 Uniforms and uniform allowances

  Relocation benefits
 Broad-based employee share plan
o Where an employee receives shares from his employer, shares in terms of
broad-based employee share plans are limited to R50 000.
 Equity instruments
 Stop-loss provision for share incentive schemes
 Seafarers
o Remuneration earned by a person employed on a ship conducting
transportation of goods or passengers is exempt.
 Outside SA
o All forms of remuneration earned by SA residents outside SA is exempt if it is
not sourced in SA.
 Non-residents

Purchased annuities

 Annuities exempt if it is payable to individuals or trusts for a person who is incapable

of managing his own affairs.
 Furthermore, only annuities bought from an insurer for a lump sum cash consideration
give rise to an annuity amount qualifying for a division into capital and non-capital
elements. Then the capital element is exempted.
 Calculating the capital element:

Certified emission reductions (CER)

 Only available within developed countries.

o Any amount received by a person
o In respect of the disposal on or after 11 February 20009
o Of any CER issued
o In the furtherance of the Clean Development Mechanism project
o Registered on or before 31 December 2012

Collective investment schemes

 The Act distinguishes between portfolios of a collective investment scheme:

o In participation bonds
o In property
o In securities
o And a portfolio of a declared collective investment scheme.
Public benefit organisations

 All amounts received from a public benefit activity (non-trading) of an approved

public benefit organisation are exempt.
 The principle objective of the organisation must be the carrying on of one or more
public benefit activities in a non-profit manner with an altruistic (unselfish) or
philanthropic approach.

Absolute exemptions

Government

 All receipts and accruals of the government of RSA in the national, provincial or local
spheres are exempt from normal tax.

Political parties

 All amounts received by a party registered in terms of the Electoral Commission Act
are exempt.

Ships and aircraft: foreign owners or charterers

 Liftings tax is imposed on owners or charterers of non-resident ships or aircrafts who

embark passengers, livestock, mail or goods in SA.

Recreational clubs

 Certain receipts / accruals are exempt from normal tax:

o Membership fees
o Occasional fundraising undertaken with voluntary assistance without
compensation
 Subject to requirements of s 30A

Benefit, pensions and retirement annuity funds

 All receipts or accruals are exempt from normal tax.

 These funds must be approved by the commissioner.
 The fund must comply with the definition of a benefit fund.

Special bodies and institutions

 Specified research entities

 Only exempted if:
o It conducts scientific, technical or industrial research
o It is not permitted to distribute any of its profits to any person
o It is required to use its funds solely for the investment for which it has been
established.
 Other specified institutions
o The receipts / accruals of the following institutions are exempt from normal
tax:
 A mutual loan association, fidelity / indemnity fund, trade union,
chamber of commerce approved by the commissioner
 Any company established to promote the common interests of its
members approved by the commissioner
 The Council for Scientific and Industrial Research
 The South African Inventions Development Agency
 The South African National roads Agency
 Any traditional council or community
 Any regional electricity distributor wholly owned by a person that is
exempt from normal tax during any year of assessment commencing
on or before 1 January 2014
 The compensation fund
 Amounts received by the Small Business Development Corporation
Limited