IT12SB

Information on Income Tax

for Salaried Employees

2006
 Background 1

Section 1: Personal particulars 2

Change of address details 2
Banking details 2

Section 2: Rental Income: Information brought forward from 2005 2

Section 3: Income received and / or accrued

General Information 2
Type of income 3
Main source of income 3
Income shown on your IRP5 and / or IT3(a) 4

Section 4: Tax credits and reasons for non-deduction 5

Section 5: Deductions
Medical and dental expenditure 5
Donations 7
Pension-, retirement annuity-, provident fund- and income protection 7
contributions 8
Subsistence
Other expenses 8

Section 6: Directors of companies / Members of close corporations 10

% Schedule 1: Investment income 10

Schedule 2: Rental income 12

Schedule 3: Capital gains / losses 16

Schedule 4: Total taxable foreign income 20

Schedule 5: Other local receipts and accruals not elsewhere declared 21

Schedule 6: Receipts and accruals which you consider non-taxable 21

Travelling expenses 21

Statement of assets and liabilities 23

Additional financial information 23

Schedule of medical expenses not submitted to / or recovered from your medical fund 24

Tax computation
Statutory rates of tax 25
Calculation of tax liability 26
BACKGROUND

This brochure has been provided to assist you with the completion of your Personal Income Tax (IT12SB) return. For
easy reference, each section in this brochure is numbered to correspond with the same section in your IT12SB form.
Please read the brochure in conjunction with your IT12SB form and your IRP5 / IT3(a) certificate(s).

Should you experience any difficulty in completing this form, you are welcome to make contact with your local SARS
office. Visit us, phone us or write to us. We are here to help you.

There are four main categories of information that you are required to provide:
1. Types of income received and / or accrued;
2. Details extracted from your IRP5 / IT3(a) certificate(s) (you will have received these from your employer /
fund / institution);
3. Additional financial information;
4. Details of deductions claimed.

NOTE:
If you received any income, from farming or business activities, please request an IT12BU return from your local
SARS office, and request the SARS office to change the status of your registered taxpayer details accordingly.

Do not include any payments or correspondence which does not relate to this return.

YOUR SIGNATURE

The return must be signed by you

If the return is not signed by you it will be considered as not having been received and will be returned to you. This
could result in penalties for the late rendition of your return.

Completion of the return

If you have received a return, you are required to complete and submit it to your local SARS office, irrespective of
whether or not your net remuneration exceeded R60 000 per annum.

Late rendition or non-submission of the return

You are obliged to make a full and accurate disclosure of all relevant information. Misrepresentation, neglect,
furnishing false information, or non-submission of your return could lead to penalties and / or additional assessments
(together with interest), and / or prosecution.

Objection to an assessment

An objection to an assessment must be substantiated in writing and must reach the SARS branch office shown on the
assessment notice within 30 days after the date of the assessment.

The obligation to pay tax, or interest on unpaid tax, is not suspended by an objection or an appeal.

NOTE:
Should you require any further assistance, contact your local SARS office, or visit the SARS website
(www.sars.gov.za).

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 The form has already been pre-printed with your details. Check to ensure that they are correct. If they have changed,
are incorrect, or are omitted, please complete the white areas of page 1.

Change of address details

In terms of section 67 of the Income Tax Act you are compelled to notify your local SARS office within a 60 day period of
any change of address details in respect of the address used for correspondence. Failure to do so could result in
penalties being levied in terms of Section 75 of the Income Tax Act.

SECTION 1.15 BANKING DETAILS

It is vital that your banking details reflected on your return be correct, in order to prevent refunds being made into
incorrect bank accounts. Indicate any changes to banking details in the white blocks in Section 1.15. Electronic
transfers are effected by utilising the branch number of your bank, and not the name of the bank.

NOTE:
No refund will be paid into the bank account of a third party or agent.

SECTION 2: RENTAL INCOME: INFORMATION BROUGHT FORWARD FROM 2005

Based on the information supplied in the rental schedule in your previous income tax return submitted to SARS a
unique identifier was created and allocated to each individual property / asset. For easy identification of the unique
identifier relating to a specific property / asset, the information previously received has been pre-printed in this section
of the return to assist you in the completion of the rental schedule on page 6 and 7 of your current return.

Please ensure that the description / address details relating to the unique identifier created is correct. If not, update the
rental schedule on pages 6 and 7 of your current income tax return with the correct details relating to the unique
identifier number created by SARS. Should you have incurred a loss in the previous year and the loss was disregarded
(ring-fenced) in the calculation of your taxable income, the loss will be indicated as a "0" in the profit / loss column of
this section. Please note that the profit / loss column will also indicate "0" if no profit / loss was derived in respect of the
trade relating to a specific unique identifier number.

SECTION 3: INCOME RECEIVED AND / OR ACCRUED

General Information

As from the 2002 tax year, all South African residents will be taxed on their worldwide income - although certain
categories of income activities undertaken outside South Africa will be exempt from South African tax. “Resident”, in
terms of the Income Tax Act, means any -
• person who is ordinarily resident in the Republic; or
• person who is not at any stage during the relevant year of assessment ordinarily resident in the Republic, but who -
- is physically present in the Republic for a period exceeding 91 days (or part days) during the relevant
year of assessment, as well as during each of the five years preceding the year of assessment; and
- was physically present in the Republic for a period exceeding 915 days (or part days) in aggregate
during the preceding five years of assessment,
in which case that person will be a resident with effect from the first day of the relevant year of assessment, but does
not include any person who is deemed to be exclusively a resident of another country for purposes of the application of
any agreement entered into between the governments of the Republic and that other country for the avoidance of
double taxation.

Foreign taxes paid by these residents will, on receipt of proof of payment of such taxes, be considered as a credit
against South African tax liability.

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SECTION 10(1)(o)(ii) EXEMPTION

Section 10(1)(o)(ii) exempts from income tax any remuneration received or accrued to a person in respect of services
rendered outside the Republic for or on behalf of any employer, if that person was outside the Republic -

• for a period or periods exceeding 183 full days in aggregate during any 12-month period commencing or
ending during that year of assessment; and

• for a continuous period exceeding 60 full days during that period or periods.

Should you have received income which you consider exempt as described above, you need to declare the amount
received in Schedule 6 “Receipts and Accruals which you consider non-taxable”.

NOTE:
Proof of entry into, and exit from, the Republic must be available on request, if required.

SECTION 3.1 TYPE OF INCOME

Please indicate the type of income received and / or accrued to you by marking the “yes” or “no” block in part 3.1 and
complete the relevant part 3 and / or schedules 1 to 6 on pages 5 to 8 of your return.

NOTE:
If you received income from farming or business, etc., please request an IT12BU return from your local SARS office,
and request the SARS office to change the status of your registered taxpayer details accordingly.

SECTION 3.2 MAIN SOURCE OF INCOME

Use the table below (arranged alphabetically for ease of reference) to determine the sector in the economy from which
your main income is derived, and fill this in in part 3.2.

SOURCE SOURCE
DESCRIPTION CODE DESCRIPTION CODE
Agencies and other services 34 Mining and quarrying 02
Agriculture, forestry and fishing 01 Other manufacturing industries 18
Bricks, ceramics, glass, cement and similar products 11 Paper, printing and publishing 08
Catering and accommodation 23 Personal and household services 32
Chemicals and chemical, rubber and plastic products 09 Public administration 26
Clothing and footwear 05 Recreation and cultural services 31
Coal and petroleum products 10 Research and scientific institutes 28
Construction 20 Retail trade (including mail order) 22
Educational services 27 Scientific, optical and similar equipment 17
Electricity, gas and water 19 Social and related community services 30
Employment (Director of a Company / Member of CC) 35 Specialised repair services 33
Financing, insurance, real estate and business services 25 Textiles 04
Food, drink and tobacco 03 Transport equipment (excl. vehicles, parts and accessories) 16
Leather, leather goods and fur (excl. footwear & clothing) 06 Transport, storage and communication 24
Machinery and related items 14 Vehicles, parts and accessories 15
Medical, dental and other health and veterinary services 29 Wholesale trade 21
Metal 12 Wood, wood-products and furniture 07
Metal products (except machinery and equipment) 13

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 Example:

• You receive salary income from a retail shop. You would then have to select code 22 (Retail trade) from the list
above. Therefore, your main income source code will be 3522.

• Should you be in receipt of pension, you need to select code 25 (Financing, insurance, etc.). Therefore, your main
income source code will be 3525.

• If you are in the employment of one of the departments of the national or provincial government, you need to
select code 26 (Public administration). Therefore, your main income source code will be 3526.

SECTION 3.3 INCOME SHOWN ON YOUR IRP5 AND / OR IT3(a)

Are you in receipt of an IRP5 or IT3(a) in respect of income received?

Complete section 3.3 of your return by transcribing the information reflected on your IRP5 or IT3(a) certificate(s).

Example of the income section of an IRP5 and / or IT3(a) certificate

CODE DESCRIPTION RF IND AMOUNT
3601 Salary Y 100 000
3605 Annual payment N 20 000 All the items need to
be reflected in part
3701 Travel allowance N 40 000 3.3 of your return.
3713 Other allowance taxable N 3 000
3901 Gratuity N 10 000
3705 Subsistence non-taxable N 1 000

Did you receive a lump sum payment from your employer or your pension / provident fund?

Complete section 3.3 of your return by extracting the information reflected on the applicable IRP5 and / or IT3(a). The
exempt portion will be calculated by SARS.

Did you receive income from a retirement annuity fund?

Complete section 3.3 of the return by extracting the information reflected on the applicable IRP5 and / or IT3(a).

NOTE:
All income items reflected on an IRP5 / IT3(a) must be reflected in section 3.3 of the return. This includes salary
income, gratuities, lump sum payments, annuities, etc.

Gross retirement-funding income

Should the section on your IRP5 certificate that relates to gross remuneration have an amount indicated next to code
3697 - Gross retirement-funding income - you need to fill this amount in next to the code 3697 reflected in part 3.3 of
your return.

Example of the gross remuneration section of an IRP5 and / or IT3(a) certificate

CODE DESCRIPTION AMOUNT
3695 Gross taxable annual payments
3696 Gross non-taxable income
3697 Gross retirement-funding income XXXXXXX This amount must
3698 Gross non-retirement-funding income be completed in part
3.3 of your return.
3699 Gross remuneration

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 SECTION 4: TAX CREDITS AND REASONS FOR NON-DEDUCTION

If you are in receipt of more than one IRP5 and / or IT3(a) certificate, the information in respect of each certificate
must be recorded.

Example of the employees’ tax deduction section of an IRP5 certificate

CODE DESCRIPTION AMOUNT
4101 Standard Income Tax on Employees - SITE 4 500.00
4102 Pay As You Earn - PAYE 21 888.68
4103 Total Employees’ tax 26 388.68

Information required in respect of IRP5

Record the IRP5 number, employer’s (PAYE) reference number, gross remuneration (3699) and the Standard
Income Tax on Employees (SITE) and Paye As You Earn (PAYE) (see example of SITE and PAYE above).

Information required in respect of IT3(a)

Complete the IT3(a) number, employer’s (PAYE) reference number and gross, remuneration (3699). Instead of
employees' tax please complete the reason code for non-deduction of employees' tax e.g. 02 (see example of code
for non-deduction below).

CODE DESCRIPTION
02 Earned less than tax threshold
03 Independent contractor Reason Code 02

The IRP5 / IT3(a) number and the employer’s (PAYE) reference number can be found on the top left hand side of your
IRP5 / IT3(a), whereas the gross remuneration (3699) can be found on the gross remuneration section of your IRP5 / IT3(a).

SECTION 5: DEDUCTIONS

SECTION 5.1 MEDICAL AND DENTAL EXPENDITURE

SECTION 5.1.1 MEDICAL AND DENTAL CONTRIBUTIONS

Claim the contributions to your Medical Aid Scheme. This would normally be reflected next to code 4005 on your IRP5.

Please note that, should a medical benefit be reflected next to code 3810 on your IRP5, it represents the fringe
benefit in respect of medical contributions. This means that the contributions to the medical fund are paid on behalf of
yourself by your employer. As your employer is in fact paying the medical contributions, you may not claim this
amount. Only amounts actually paid by yourself may be claimed and will qualify to be considered as a deduction.

SECTIONS 5.1.2 - 5.1.3 NON-RECOVERABLE MEDICAL EXPENSES

Claim the following amounts ACTUALLY PAID BY YOURSELF and not recovered from your medical aid, in respect
of yourself, your spouse and your qualifying children or stepchildren:

• Services rendered and medicines supplied by a registered medical practitioner, dentist, optometrist,
homeopath, naturopath, osteopath, herbalist, physiotherapist, chiropractor or orthoptist;

• Hospitalisation in a registered hospital or nursing clinic;

• Home nursing by a registered nurse;

• Medicines prescribed by a registered physician and acquired from a registered pharmacist; and

• Medical expenses incurred and paid outside the Republic.

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 SECTION 5.1.4 PHYSICAL DISABILITY

Claim the amount of expenses incurred and not recovered from your medical aid and supply details of how the amount
was calculated. Please specify the nature of the disability suffered by yourself, your spouse or qualifying children (e.g.
glasses, diabetes, etc.).

SECTION 5.1.5 HANDICAPPED PERSON

A “HANDICAPPED PERSON” is a blind person, a deaf person, or a person who, as a result of a permanent disability,
requires a wheelchair, calliper or crutch to assist him or her to move from one place to another, or a person who
requires an artificial limb. It also includes a person who suffers from a mental illness as defined in the Mental Health
Act, 1973 (Act No. 18 of 1973).

In order for the medical expenses to be classified as expenses in respect of “handicapped”, the following
documentation must be submitted:

Blind person - A letter on a letterhead confirming the diagnosis and classification of the taxpayer, signed by a
professional person trained to use a Snellen chart.

Deaf person - Four categories are statistically kept by DEAFSA (Deaf Federation of South Africa), namely, persons who
are profoundly deaf, persons who are severely hard of hearing, persons who are moderately hard of hearing, or persons
who have a mild hearing loss. For purposes of the Income Tax Act, a person who is profoundly deaf and a person who is
severely hard of hearing are impaired to such an extent that he or she cannot use hearing as primary means of
communication. Confirmation of the severity of deafness from DEAFSA or a similar institution must be submitted.

Mental illness - Confirmation is required, by way of a medical report, from either a psychiatrist or a registered
psychologist, clearly stating that such person is mentally ill as defined by the Mental Health Act. This confirmation must be
done on an annual basis.

The allowable medical deduction is subject to the following limitations:

1. TAXPAYERS UNDER THE AGE OF 65 YEARS

That portion of the expenses referred to above, which exceeds 5% of your taxable income before deducting
medical expenses, will qualify as a deduction, i.e.:

A taxpayer receives a salary of R87 000.00 from which an amount of R6 525.00 is deducted in respect of
pension contributions. The taxpayer also receives pension income of R36 000.00 per annum.

Income - Salary R 87 000.00

Less: Pension contributions 6 525.00
R 80 475.00
Plus: Pension income 36 000.00
R116 475.00

Limitation of medical deduction: R116 475.00 x 5%

= R 5 824.00

Thus: The first R5 824.00 of the medical expenses will, therefore, not be allowed as a deduction. All
expenses must be claimed, as the calculation will be done by SARS.

2. TAXPAYERS 65 YEARS AND OLDER

If you are 65 years of age, or older, you are allowed to deduct all expenses referred to above, without any limitation.

3. HANDICAPPED PERSON
Where you, your spouse, qualifying child or stepchild is a “handicapped person”, that portion of expenses referred
to above which exceeds R500 qualifies for deduction. In other words, the first R500 does not qualify as a deduction.

YOUR CLAIM WILL NOT BE CONSIDERED IF THE FOLLOWING DOCUMENTATION IS NOT ATTACHED TO YOUR
RETURN TO SUBSTANTIATE YOUR CLAIM:

• Proof of contributions paid to your medical fund by yourself.

• Medical fund statement in respect of expenses not recovered: Please attach the statement received from your
6 IT12SB
 medical fund during February 2006 indicating the accumulative amount in respect of the amount paid by you for
claims submitted and not recovered from the medical fund.
• Other amounts not submitted to / recovered from your medical fund: Complete the schedule of expenditure on
page 24 of this brochure and attach to page 11 of your return.

If the benefits allocated by your medical fund, in respect of certain medical procedures, are exhausted, you must
submit proof from the medical fund in this regard.

Claim all the qualifying expenses. The limitation will be calculated by SARS.

Receipts must be available on request to substantiate your claim.

SECTION 5.2 DONATIONS

Did you make any donations?

List the donations made and attach the original Section 18A receipts to page 11 of this return. Claim the total amount,
as the allowable deductions will be determined programmatically by SARS.

SECTIONS 5.3 - 5.8 PENSION FUND, RETIREMENT ANNUITY FUND, PROVIDENT FUND AND INCOME
PROTECTION CONTRIBUTIONS

Did you contribute to a pension fund or provident fund?

Complete sections 5.3 and / or Section 5.7 by using the information reflected on your IRP5(s).

Should you have made any arrear pension contributions the amount must be claimed in part 5.4 of the return and
proof of such amounts declared must be attached to enable SARS to consider such claims.

NOTE:
The pension contributions will be limited to 7.5% of your retirement-funding income (3697).

The contributions made to a provident fund will not be considered as a deduction. The aggregate amount of
contributions not taken into account as a deduction will, however, be incorporated in the calculation of the taxable
benefit on exit from such fund.

Did you contribute towards a retirement annuity fund?

Use the amount reflected on the certificate received from the applicable institution to complete section 5.5.
Contributions reflected on the IRP5 will no longer be considered as a deduction.

Your claim will be limited to the greater of either:

• 15% of taxable income, excluding income from retirement-funding employment (this amount will be reflected
next to the code 3698 on your IRP5). When determining taxable income, the following deductions must NOT be
taken into account:
- capital development expenditure (farming)
- donations
- retirement annuity fund contributions
- medical and dental expenses
- expenditure in respect of soil erosion works, or
• R 3 500 less allowable pension fund contributions, or
• R 1 750.

Claim the actual contributions, as the calculation will be done by SARS.

Any excess amount will be carried forward to the succeeding year of assessment.
Arrear retirement annuity fund contributions must be claimed at section 5.6 of the return.

NOTE:
Only a member’s contributions during the year of assessment will be considered as a deduction, i.e. you may not
claim contributions made on behalf of a third party (e.g. wife, child).

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 Did you make any Income Protection Contributions?
Use the amount reflected on the certificate received from the applicable institution to complete part 5.8.

NOTE:
Deductions will be considered in respect of policies where it covers you against the loss of income as a result of illness,
injury, disability or unemployment and where the amount payable in terms of the policy constitutes or will constitute
income as defined.

SECTION 5.9 TRAVELLING EXPENSES

Please turn to page 21 of this brochure to assist you in completing your travelling claim. Enter the result of the
calculation in section 5.9 of your return.

SECTION 5.10 SUBSISTENCE

Did you receive a subsistence allowance?

Should your allowance be reflected as code 3704 (local) and / or 3754 (foreign), you need to determine the amount of
your claim, based on the actual amount expended or the amounts deemed to be expended i.r.o. section 8(1)(c)(i) of
the Income Tax Act.

Claim the amounts expended in section 5.10 and attach a schedule detailing the following:
• The period in respect of which expenses are claimed;
• The destination where the money was spent;
• The total number of days for which expenditure is claimed; and
• Specify whether local or foreign expenditure.

Receipts for the amounts must be available to prove your claim, if requested by SARS.

Should your allowance be reflected as code 3705 (local) and / or 3755 (foreign), on assessment, it is a non-taxable
allowance and will not be included in the determination of your tax liability. This being the case, you need not calculate
your claim and need not enter an amount next to code 4017( local) and / or 4019 (foreign) of part 5.10.1 and / or 5.10.2
of your return.

If the allowance received by you pertains to local as well as foreign subsistence allowance and you claim against such
allowance, you need to claim separately in respect of local and foreign expenditure. The amount claimed must be
reflected next to code 4017 for local and / or 4019 for foreign expenditure respectively on your return.

SECTION 5.11 OTHER EXPENSES

If you incurred any other expenses, please provide full details of such expenses and enter the amount of your claim in
section 5.11.

Study at private residence

The deduction of any expenses relating to any residence or domestic premises is prohibited except in respect of such
part as may be occupied for purposes of trade. Such part of the premises will only be regarded as being used for trade if:

• It is specifically equipped for purposes of your trade; and

• It is used regularly and exclusively for such purposes.

If the income against which the deduction is claimed flows from the holding of employment or an office no deduction is
allowable, unless:

• Your income from such employment or office is derived mainly from commission or other variable payments
which are based on your work performance and your duties are mainly performed otherwise than in an office
which is provided to you by your employer; or
• Your duties are mainly performed in the study at your private residence.

8 IT12SB
The following guidelines are given with regard to a claim for a home study. Full details in support of your claim must be
submitted with your return. Documentation in substantiation of the claim is to be kept and only submitted on request.

• There must be a direct relationship between the incurring of the expenses on a study and the production of
income.

• You must, in terms of the requirements of a service contract with your employer, be required to maintain a study
at your private residence.

• The study may be used only for business purposes.

• To enable SARS to decide whether you are entitled to a deduction for a study or not, the following questions are
to be answered / details supplied:

- What is the nature of your occupation, and why is it necessary to maintain a study at your home?

- A copy of your service contract, service regulations or personnel code.

- Does your employer place an office at your disposal at your workplace? Full details of any restrictions in the
use of this office are to be furnished, as well as a letter of confirmation from your employer.

- Is your work of such a nature that you are expected to work at home after hours? Full details of how frequently
you use the home study as well as a statement confirming the use thereof is required from your employer.

- Are you required to use the home study to interview or supply information to clients or employees after hours?

- Is your home study specifically equipped for purposes of your trade?

- Is your study used regularly and exclusively for your work?

- To what extent is the study indispensable to the proper carrying out of your tasks?

• Should you qualify for a deduction the amount will be calculated on the following basis:

A
B x Total Costs

Where A = The area in m² of the area specifically equipped and used regularly and exclusively for trade, and

B = The total area in m² (including any outbuildings and the area used for trade) of the residence, and

Total costs = The costs incurred in the acquisition and upkeep of the property. (Excluding expenses of a
capital nature.)

Repairs specifically made to the study will not be apportioned, but allowed in full. Repairs to the building in
general are not included in total costs.

Limitation of deductions (Section 23(m) of the Income Tax Act)

General deductions in the determination of your taxable income, Section 11 and other relevant sections of the Income
Tax Act, will be considered only if your remuneration (income from employment) consists mainly or wholly from
commission based on sales. “Wholly or mainly” meaning more than 50% of your gross remuneration (salary-type of
income).

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 The only expenditure items that will be considered as a deduction are the following:

• Contributions to a pension or retirement annuity fund;

• Legal expenses actually incurred in respect of any claim, dispute or action arising in the course of the
ordinary operations undertaken by you;

• Depreciation (wear and tear) of an asset;

• Bad debts;

• Provision for bad debts; and

• Premiums paid in terms of an insurance policy that covers you solely against the loss of income as a result of
illness, injury, disability or unemployment, and in respect of which the amounts received in terms of that policy will
be included as income.

Example 1
A taxpayer received pensionable salary of R40 000 and commission income of R130 000 on sales. The taxpayer
contributed R3 000 to an approved pension fund and incurred commission-related business expenses of
R70 000. Since more than 50% of the taxpayer's remuneration consists of commission, the restrictions of
Section 23(m) do not apply. The R70 000 commission-related expenses might, therefore, be considered. The
pension fund contribution is unaffected by the introduction of Section 23(m), and remains deductible.

Example 2
A taxpayer received pensionable salary of R60 000 and commission of R60 000 on sales. The taxpayer
contributed R4 500 to a pension fund and incurred commission-related expenses of R10 000. Since not more
than 50% of the taxpayer's remuneration consists of commission, the restrictions of Section 23(m) will apply and
the commission-related expenditure will not be considered. The pension fund contribution is unaffected by the
introduction of Section 23(m), and remains deductible.

For further information in this regard please refer to the Interpretation Note No. 13 on the SARS website
www.sars.gov.za or contact your local SARS branch office.

SECTION 6: DIRECTORS OF COMPANIES / MEMBERS OF CLOSE CORPORATIONS

Please indicate whether you are a director of a company or a member of a close corporation, as this information
directly influences your taxpayer classification status.

PART 1 INCOME FROM INVESTMENTS

Investment income constitutes income primarily derived from an investment with any financial institution or company,
such as a bank or unit trust administrator. Dividends received in respect of local investments, excluding dividends
derived from property trusts, are not taxable. Dividends received from foreign investments are taxable and must be
declared in section 2.3 and section 3 of Schedule 1.

NOTE:
Dividends received from investments in unit trusts could be indicated as foreign dividends, local dividends, foreign
interest or local interest. This information will be reflected on the certificate received from the relevant institution and
must be recorded next to the applicable reference in section 2 of schedule 1.

10 IT12SB
PART 2 GROSS AMOUNTS RECEIVED FROM INVESTMENT INCOME

The gross amounts received must be reflected on the Investment Schedule, as the exemptions will be applied
programmatically by SARS.

All investment income received by or accrued to you or your minor children must be declared (including investment
income which has not been paid to you but has been utilised, accumulated or re-invested for you or your minor
children's benefit). Where interest is claimed as a deduction against investment income received, full particulars
(i.e. amounts invested / borrowed, interest rates, date of each loan and investment) must be furnished.

Example Gross Taxable

FOREIGN DIVIDEND INCOME RECEIVED
The R1 600 foreign dividend income received will be exempt, as it
is less than R2 000. The balance of R400 (R2 000 – R1 600) will be R1 600
offset against the foreign interest received.
FOREIGN INTEREST RECEIVED
R900 foreign interest has been received, of which R400 will be R900 R500
exempt (the balance not offset against foreign dividends). R500
will, therefore, be included in taxable income.
LOCAL INTEREST RECEIVED
The total exemption in respect of investment income is R15 000 of
which R2 000 has already been utilised against foreign investment
income. The balance of R13 000 will now be offset against the R13 600 R600
R13 600 received in respect of local interest, leaving a balance of
R600 which will be included in taxable income.
RESULT OF CALCULATION
In the determination of tax liability an amount of R1 100 will be included
as taxable investment income. The R500 not exempt on foreign R1 100
investment income plus the R600 in respect of local investment
income.

All income from foreign and local interest received must be listed in part 1 of Schedule 1. If you are married OUT OF
community of property or UNMARRIED, the total income from foreign and local interest received must be reflected in
part 2 of Schedule 1. If you are married IN community of property, only 50% of the income must be declared in part 2
of Schedule 1. The other 50% is taxable in the hands of your spouse.

If you received income from foreign dividends you must complete parts 2.3 and 3 of Schedule 1. An income advice in
respect of any investment must be obtained from the institution where your funds are invested and attached to page
11 of the return.

The exemption applicable to the 2006 year of assessment is R15 000 if you are under the age of 65 years and
R22 000 if you are 65 years of age and older. Should your investment income therefore exceed R25 000 if you are
under the age of 65 years and R32 000 if you are 65 years or older, and your taxable income exceeds R80 000, you
need to register as a provisional taxpayer. If, however, you are 65 years of age or older and your taxable income does
not exceed R80 000, you will not be required to register as provisional taxpayer.

The interest exemption will be offset against foreign dividends, foreign interest and local interest received. The
exemption on foreign investments, i.e. foreign dividends and foreign interest is, however, limited to R2 000 and will
be offset in the following order: foreign dividends, foreign interest and local interest, as illustrated in the example
above in respect of a taxpayer under the age of 65 years.

NOTE:
The exemption will be applied programmatically by SARS.

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 PART 3 FOREIGN DIVIDENDS

Foreign dividends have been taxable in South Africa from 23 February 2000. A foreign dividend means any dividend
received or accrued to a person from a foreign entity or, in the case of a resident company, a dividend to the extent that
it is declared from profits derived before it became a resident.

Amount to be included in gross income

The following choice can be made:

- whether to be taxed on the net foreign dividend, i.e. the gross dividend minus the foreign tax paid; or

- to be taxed on the gross dividend income, in which case the foreign tax paid can be claimed and will be considered
as a tax credit.

The same principle applies where a South African unit trust distributes a foreign dividend to a resident unit holder.

Any amount of interest actually incurred in the production of foreign dividend income will be allowed as a deduction
against such income. The amount of interest to be deducted is limited to the amount of foreign dividends included in
gross income.

Where the allowable interest exceeds taxable foreign dividends, it is reduced by any foreign dividends that are not
included in taxable income and the remaining balance carried forward to the next year of assessment. The amount
carried forward may be offset against future foreign dividends.

For further details refer to the Interpretation Note No 18 on the SARS website www.sars.gov.za or contact your local
SARS office.

Background on Section 20A - Ring-fencing of assessed losses of certain trades

With effect from the 2005 year of assessment section 20A has been incorporated in the Income Tax Act. This section
provides that, subject to certain tests, an assessed loss incurred by a natural person may not be set off against any
income derived by the person otherwise than from carrying on that trade. The effect is that trading losses will in
certain circumstances and / or in respect of certain identified trades, be subject to potential ring-fencing unless the
“facts and circumstances test” provided for in subsection (3) indicates that the trade constitutes a business in respect
of which there is a reasonable prospect of deriving taxable income within a reasonable period of time.

A pre-requisite for the application of Section 20A is that, in the year in which the ring fencing is applied, the taxpayer’s
taxable income (before taking into account the set-off of any assessed loss incurred in carrying on any trade during
that year of assessment and the balance of assessed loss carried forward from the previous year) equals or exceeds
the amount at which the maximum marginal tax rate chargeable in respect of individuals becomes applicable. In
respect of the 2006 year of assessment the maximum marginal tax rate will apply to taxable income in excess of
R300 000.

In the case of certain identified trades listed in Section 20A (2)(b) of the Income Tax Act, the potential ring-fencing will
be applied in the 2005 year of assessment, unless the “facts and circumstances test” indicates that the particular
activity constitutes a business which has a reasonable prospect of deriving taxable income within a reasonable
period of time.

The potential ring-fencing can be applied in respect of losses from all the identified trades or other trades, in terms of
the three-out-of-five-year-rule, and ring-fencing of any trade loss (excluding farming activities) will occur in terms of
the six-out-of-ten-year-rule.

12 IT12SB
Identified trades Section 20A (2)(b)

The identified trades listed in Section 20A (2)(b) are as follows:

• Any sport practised by the taxpayer (or relative),

• Dealing in collectibles by the taxpayer or any relative;

• The rental of residential accommodation, unless at least 80% of the residential accommodation is used by
persons who are not relatives of that person for at least half of the year of assessment;

• The rental of vehicles, aircraft or boats, unless at least 80% of the vehicles, aircraft or boats are used by persons
who are not relatives of that person for at least half of the year of assessment;

• Animal showing by the taxpayer or any relative;

• Farming or animal breeding (unless the taxpayer carried on the farming or animal breeding on a full time basis);

• Any form of performing or creative arts; and

• Gambling or betting.

The three-out-of-five-year-rule

The three-out-of-five-year-rule applies to any trade that is not included in the list of identified trades mentioned
above. The current year must be taken into account in determining the three-out-of-five-year-rule. Losses incurred in
respect of other trading activities not listed above could, therefore, be subject to potential ring-fencing as from the
2007 year of assessment in terms of Section 20A (2)(a). This would occur if the specific trading activity has realised a
loss for three consecutive years, commencing with the 2005 year of assessment. Should any trading activity realise
a profit in any one of the three years mentioned above, the potential ring-fencing is delayed, as illustrated in the
following example:

Year of assessment Trading activity Profit / Loss realised

2005 Rental property A Loss realised
2006 Rental property A Profit realised
2007 Rental property A Loss realised
2008 Rental property A Loss realised

Due to the fact that the trading activity (rental income is considered to be trading income) has realised a loss in three-
out-of-five-years (where that person has, during the five year period ending on the last day of that year of
assessment, incurred an assessed loss in at least three years of assessment), ring fencing could be applied in the
2008 year of assessment. Should the taxpayer realise a profit in the 2008 year of assessment and a loss in 2009, the
ring fencing would only apply as from the 2009 year of assessment.

The trades, in respect of which the three-out-of-five-year-rule applies includes:

• rental of residential accommodation, where at least 80% of the residential accommodation is used for at least
half of the year of assessment by persons who are not relatives;

• the rental of vehicles, aircraft or boats, where at least 80% of the vehicles, aircraft or boats are used by
persons for at least half of the year of assessment who are not relatives of that person;

• farming or animal breeding carried on, on a full time basis; and

• any other trade not specifically identified.

IT12SB 13
 Facts and circumstances

In respect of both the identified trades, as well as the other trades listed above, ring-fencing can be avoided in terms
of subsection (3) of Section 20A. This section provides an escape route in terms of which the taxpayer can prove that
the particular activity constitutes a business which has a reasonable prospect of deriving taxable income within a
reasonable period of time. The factors to which special regard must be had, are the following:

• The proportion of the gross income derived from that trade in relation to the amount of allowable deductions
incurred in carrying on that trade;

• The level of activities carried on by the person or the amount of expenses incurred by the person in respect of
advertising, promoting or selling, in carrying on that trade;

• Whether that trade is carried on in a commercial manner, taking into account -

- The number of full time employees appointed to that trade;

- The commercial setting of the premises where the trade is carried on;
- The extent of the equipment used exclusively for the purpose of carrying on the trade; and
- The time the person spends at the premises conducting that business.

• The number of years of assessment in which assessed losses were incurred in relation to the total number of
years that the specific trade was carried on, taking the following into account -

- Any unexpected events giving rise to the losses; and

- The nature of the business involved

• The business plans and any changes thereto to ensure that the business will in future derive taxable income.

• The extent to which any asset attributable to the trade is available for recreational use or personal consumption
by the person or any relative of the person.

The six-out-of-ten-year-rule

Where losses have been realised in at least six-out-of-ten-years of assessment the “facts and circumstances test”
will, in terms of subsection (4), no longer be available to prevent the ring-fencing of a loss in respect of the trades
identified in subsection (2)(b). This means that where a loss pertaining to an identified trade was not ring-fenced
after having applied the “facts and circumstances test”, the loss will, however, be ring-fenced where the specific
trade has incurred a loss in at least six-out-of-ten-years of assessment. The “facts and circumstances” escape
route will, therefore, no longer be available to prevent the ring-fencing of the specific trade loss. Although this
provision applies to all identified trades, subsection (7), however, specifically provides that this rule will not be
applicable to farming activities. This is in recognition of the fact that many forms of legitimate farming activities
entail long-term losses before the expectation of profit can be realised.

Losses to be taken into account

In the application of both the three-out-of-five-year-rule, and the six-out-of-ten-year-rule, any losses incurred on or
before 29 February 2004 will not be taken into account.

For further details refer to the Brochure on Section 20A, which is available on the SARS website www.sars.gov.za or
contact your local SARS office.

Completion of the rental schedule

The rental schedule on page 6 and 7 of your return comprises of 3 parts:

14 IT12SB
1. Determination of profit / loss in the letting of property / asset

Please complete this part in full. This part comprises of the minimum information used to calculate the rental profit /
loss.

Please note that each trading activity is evaluated separately for the application of the potential ring fencing.
Financial statements must therefore be drawn up separately and the profit or loss declared separately in respect
of each property / asset (rental income).

In certain circumstances where more than one property / asset is let, the letting of such properties / assets could
be considered as a single trade. Should this be the case the profit / loss must be declared as a single entry in
which case a combined set of financial statements can be prepared and submitted. To enable SARS to consider
rental income as a single trade, the information requested in part 2 of the schedule must be completed.

Married in community of property

If you are in receipt of rental income and you are married in community of property you must declare 50% of the
profit / loss of such income. The other 50% will be included in the taxable income of your spouse.

2. Information required in respect of the letting of property / asset

Complete this part in full. Refer to the information in paragraph 1 above.

In the case of the renting of residential property as well as vehicles, aircraft or boats, cognisance must be taken of
the exclusion from the “identified trade” of any rental trade where at least 80% of the rental accommodation or
assets were used for at least half the year of assessment by persons who are not related to the taxpayer.

3. Local income received in the letting of property / asset

This part comprises of 6 sections namely:

 Address of property / Description of Asset

Use the pre-printed details on part 2 of your return to complete the rental schedule. If the address of the property /
description of asset is incorrect on the pre-printed details, please complete the schedule with the correct details.

 Unique Identifier

The unique identifier on part 2 of your return was created by SARS and allocated to each property / asset as
per information received on your previous return. When completing the rental schedule on pages 6 and 7 of
your return the unique identifier number on part 2 must be used in the unique identifier column.

Should you have acquired a property / asset during the year of assessment, please make sure that you complete
the address of the property / description of the asset to enable SARS to create a unique identifier number that will
relate to the specific asset. This means that you do not have to complete the unique identifier column if the
property / asset were acquired in the current year of assessment.

Where you declared rental income in the 2005 income tax return and the assessment in respect of the relevant
return has not yet been finalised a unique identifier number will not be available as yet. Should this be the case
this column must not be completed on the income tax return.

 Gross Income

The gross rental income must be completed in the gross income column. Please note that income accrued
from various properties / assets must be reflected separately as specific motivation must be submitted to
SARS to consider such income as derived from a single trade.

IT12SB 15
  Profit / Loss

The net rental profit / loss must be completed in the profit / loss column.

 Yes or No Indicator

Please read the question carefully and tick the yes or no block to indicate whether you want the loss to be ring-
fenced or not. Should you indicate “yes” the loss, if incurred, will not be taken into account in the determination
of your taxable income. Should you indicate that the loss should not be ring-fenced you will have to
substantiate the decision by submitting the documentation referred to in the paragraph dealing with “facts and
circumstances” (escape clause), refer to page 14 of this brochure, to support the claim. The documentation
must be based on the factors specifically mentioned in the relevant paragraph. If no supporting documentation
is supplied a loss in respect of a trade listed in Section 20A(2)(b) could be ring fenced.

 Source Code

Use the following list of source codes to complete this section. Should you be unsure as to which codes to use
leave this field blank for SARS to complete.

Identified trade source codes

Profit: Sporting 4280 Loss: Renting of boats 2429
Loss: Sporting 4281 Profit: Local - Rental 4210
Profit: Collectables 4282 Loss: Local - Rental 4211
Loss: Collectables 4283 Profit: Renting of trucks / cars / etc. 2408
Profit: Animal showing 4284 Loss: Renting of trucks / cars / etc. 2409
Loss: Animal showing 4285 Profit: Author / composer / artist 3110
Profit: Gambling 4286 Loss: Author / composer / artist 3111
Loss: Gambling 4287 Profit: Renting of aircraft 2416
Profit: Renting of boats 2428 Loss: Renting of aircraft 2417

Foreign rental income

As rental income is considered to be trading income, any foreign rental income should be declared in the schedule
dealing with “Total taxable foreign income” and should thus not be declared in the “Rental Schedule”.

SCHEDULE 3: CAPITAL GAIN / LOSS

In order to give effect to the proposals relating to Capital Gains Tax (CGT), an Eighth Schedule has been added to the
Income Tax Act. The Schedule determines a taxable gain or assessed loss and Section 26A of the Act provides that
a taxable gain is included in taxable income. The CGT provisions became effective from 1 October 2001.

Determining a capital gain or a capital loss

A CGT event is triggered by the disposal of an asset. Unless such disposal or deemed disposal occurs, no gain or
loss arises. CGT applies to all assets disposed of on or after 1 October 2001 (valuation date). Only the gain or loss
accruing from 1 October 2001 to date of disposal will fall within the CGT regime.

• An asset is defined as widely as possible and includes any property of whatever nature and any interest therein.

• A disposal covers any event, act, forbearance or operation of law, which results in a creation, variation,
transfer or extinction of an asset. It also includes certain events treated as disposals, such as the change in
the use of the asset.

16 IT12SB
 • Once an asset is disposed of, the amount which is received, or which accrues to the seller of the asset,
constitutes the proceeds from the disposal.

• The base cost of the asset is generally the expenditure actually incurred in acquiring the asset, together with
expenditure directly related to its improvement and, direct costs in respect of its acquisition and disposal and
certain holding costs. The base cost does not include any amounts otherwise allowed as a deduction for
income tax purposes.

What is the base cost of an asset held on 1 October 2001?

In order to exclude the portion of the gain relating to the period before 1 October 2001, any one of the following
methods may be used:

• 20% of the proceeds upon realisation can be deemed to be the cost (no records, market value cannot be
determined); OR

• Market value of the asset as at 1 October 2001 (the “valuation date”); OR

• Time apportionment method.

THE ACT LAYS DOWN VARIOUS REQUIREMENTS THAT APPLY WHEN THE MARKET VALUE METHOD IS
USED

Time limit for performing valuations

All valuations must have been done by 30 September 2004. Valuations must be performed as if done on 1 October 2001.

Who may perform valuations?

The Act is not prescriptive and it is the responsibility of the person / entity and the onus of substantiating a valuation
rests with the person/entity.

Requirements for the submission of valuation certificates

Should the market valuation of base cost method be adopted, a copy of the valuation certificate must be lodged with
the relevant return of income when the asset is disposed of. Certain valuations must, however, be lodged sooner, with
the first return of income required to be submitted after 30 September 2004. These categories of assets are set out in
the table below.

Type
Typeofofasset
asset Applies Where
Where market
market value exceeds
Intangible shares Per asset R1 million
Unlisted shares All assets held by the shareholder in the company R10 million
All other assets Per asset R10 million

Loss and gain limitation rules

Certain rules, which are beyond the scope of this brochure, are in place to limit losses and gains when the market
value is used. These rules prevent the creation of fictitious losses from inflated valuations and prevent hardship when
assets are sold above market value on 1.10.2001, but below original cost.

IT12SB 17
 Time apportionment method

This method may be used when a person / entity has records of the date of acquisition and the cost of the asset. The
following formula is used to determine the time apportionment base cost of the asset:

Original cost +
[ Gain x Period held before valuation date
Period held before and after valuation date ]
Improvements or additions made before 1.10.2001 are assumed to have taken place when the asset was acquired.
The period before 1.10.2001 is limited to 20 years. Additions to an asset after valuation date are added to base cost
(not apportioned).

NOTE:
Where no additions or improvements have taken place prior to valuation date, the 20-year limit does not apply.

EXCLUSIONS

Primary residence exclusion

The first R1 million capital gain or loss of a primary residence will, in the case of an individual or special trust type A,
(refer definition of special trust in par (a), Section 1 of the Income Tax Act) be disregarded for CGT purposes. In other
words, where a capital gain or loss exceeds R1 million, the excess would be subject to CGT.

In order for a residence to qualify as a primary residence :

• The interest must be held by a natural person or a special trust type A;

• That person, beneficiary or spouse of either such persons must ordinarily reside therein as their main
residence; and
• The residence must be used mainly for domestic purposes.

A primary residence includes the land upon which it is actually situated and may include other adjacent land which is
used mainly for domestic or private purposes in association with that residence. The total of all the land may, however,
not exceed two hectares. This could also include unconsolidated adjacent land, provided that, upon disposal of the
primary residence, any unconsolidated land is disposed of at the time and to the same person as the primary
residence itself.

Annual exclusion

The annual exclusion of a natural person and a special trust type A in respect of a year of assessment is R10 000. All capital
gains and / or losses are added together and thereafter the total amount of such capital gains and / or losses is reduced by
the annual exclusion of R10 000, limited to the amount of the gain / loss, should the gain / loss be less than R10 000. The
annual exclusion will, however, be applied programmatically by SARS and, therefore, you must declare the gross amounts.

Where a natural person dies during the year of assessment, that person's annual exclusion for that year is increased to R50 000.

NOTE:
The exclusion applies to gains as well as losses.

Inclusion rate to determine taxable income in respect of CGT

Where a net capital gain for the current year of assessment has been determined, such amount is multiplied by the
inclusion rate (25%) to determine the taxable capital gain, which is to be included in the taxable income for the year of
assessment.

18 IT12SB
 The inclusion rate to be used in arriving at the taxable capital gain is set out in the table below:

Type of taxpayer Inclusion rate % Statutory rate

Individuals 25 0 - 40
Trust: Special 25 18 - 40

Please ensure that Schedule 3 is completed in full to avoid SARS requesting the missing information.

Complete Schedule 3 by using the following main asset type source code table:

The local and foreign capital gains / loss must be declared separately on your return.

If foreign tax credits was witheld in respect of foreign capital gains, claim the amount next to code code 4114 in part 4 of
your return.

NOTE:
A capital loss can only be offset against a capital gain.

SOURCE CODES
Description of assets
Local Foreign
assets assets
Fixed / immoveable assets (e.g. land, buildings, mineral rights)........................................................................ 6502 6530
LOSS: Fixed / immoveable assets (e.g. land, buildings, mineral rights).............................................................. 6503 6531
Primary residence (e.g. house, townhouse, flat, boathouse, caravan).............................................................. 6504 6532
LOSS: Primary residence (e.g. house, townhouse, flat, boathouse, caravan)................................................... 6505 6533
Financial instruments - Listed (e.g. shares, units in unit trusts, bonds, futures, options)..................................... 6506 6534
LOSS: Financial instruments - Listed (e.g. shares, units in unit trusts, bonds, futures, options)......................... 6507 6535
Financial instruments - Unlisted (e.g. shares, debentures, promissory notes, bonds, options, forward
contracts, swaps, debt).................................................................................................................................... 6508 6536
LOSS: Financial instruments - Unlisted (e.g. shares, debentures, promissory notes, bonds, options, forward
contracts, swaps, debt).................................................................................................................................... 6509 6537
Intangible assets (e.g. goodwill, trade marks, patents, copyrights, franchises, licences, fiduciary, usufructuary
and other like interests).................................................................................................................................... 6510 6538
LOSS: Intangible assets (e.g. goodwill, trade marks, patents, copyrights, franchises, licences, fiduciary,
usufructuary and other like interests)................................................................................................................ 6511 6539
Foreign currency.............................................................................................................................................. 6512 N/A
LOSS: Foreign currency................................................................................................................................... 6513 N/A
Plant and machinery........................................................................................................................................ 6514 6540
LOSS: Plant and machinery............................................................................................................................. 6515 6541
Other moveable property used for business purposes (e.g. aircrafts, boats, motor vehicles, office furniture
and equipment)................................................................................................................................................ 6516 6542
LOSS: Other moveable property used for business purposes (e.g. aircrafts, boats, motor vehicles, office
furniture and equipment).................................................................................................................................. 6517 6543
Other moveable property not used for business purposes excluding personal use asset (e.g. Krugerrands,
personal use boats < 10 metres and personal use aircraft < 450 kg).................................................................. 6518 6544
LOSS: Other moveable property not used for business purposes excluding personal use asset (e.g.
Krugerrands, personal use boats < 10 metres and personal use aircraft < 450 kg)............................................ 6519 6545

IT12SB 19
 Foreign income received should be declared as follows:

• Remuneration income for which an IRP5 was issued - section 2.3 of the return reflecting the income
code on the IRP5;

• Foreign dividends received - Schedule 1 sections 2 and 3;

• Foreign interest received - Schedule 1 section 1 and 2;

• Foreign capital gain/loss - Schedule 3 section 2;

• Any other foreign taxable income received not specifically addressed above must be declared in South African
currency in Schedule 4 (refer to Interpretation Note No.18 on the SARS website www.sars.gov.za.).

Foreign currency translation

A resident who derives income measured in a foreign currency must, in translating the taxable income to
Rand, make an election between either -

• the spot rate; or

• the average exchange rate for the relevant year of assessment.

The average exchange rates can be obtained from the SARS website www.sars.gov.za,<Forms>,<Income
Tax>, <Average exchange rates for a year of assessment>.

Did you pay any foreign taxes?

Claim the amount of foreign taxes paid in respect of foreign dividends, foreign interest, other foreign income or
foreign CGT transactions in section 4 of your return next to the applicable codes 4111, 4112, 4113 or 4114.

NOTE:
(i) Should you have elected to be taxed on net foreign dividends, your claim in respect of foreign taxes paid
on foreign dividends received will not be considered.
(ii) Your claim in respect of foreign taxes paid will be limited in terms of Section 6quat of the Income Tax Act, to the
amount of South African tax payable in relation to the foreign income received, by applying the following formula:

Foreign Taxable Income x Normal Tax Payable

Total Taxable Income

The taxes which are attributable to foreign taxable income (including capital gains) will on assessment, in aggregate,
be limited to the amount of normal tax due in respect of such gains.

What proof will be accepted as proof of payment of foreign taxes?

Proof of payment of foreign taxes will include the following:

• Where foreign taxes have been withheld at source, the original documentation issued by the applicable
institution.
• Where foreign taxes have not been withheld at source, an assessment or receipt issued by the relevant tax
authority.

For further information, contact your local SARS office, or visit the SARS website (www.sars.gov.za).

20 IT12SB
If you are in receipt of any other local income not yet declared, you need to complete Schedule 5. State the nature and
source of the income. Should the space in the schedule be insufficient, record the total amount and attach a separate
schedule to page 11 of your return detailing the amount, nature and sources of the various amounts.

Complete Schedule 6 if you received any income which you consider not taxable, and furnish full details of the nature
and amounts received.

Did you receive a travel allowance?

Please complete page 9 of your return in order to claim Travelling Expenses. Travelling expenses may be claimed
according to one of the following methods:

(i) Where accurate records of expenses have been kept, complete sections 1, 2 and 4 on page 9 of your return to
calculate your claim. Note must be taken of the specified write off period and cap on the cost of the vehicle
relating to the claim of actual motor vehicle expenditure. In respect of the 2006 year of assessment the amount
will be capped at R360 000.

(ii) Where no records of expenses have been kept, use the information in the “scale of costs in respect of
motor vehicles” and complete sections 1, 2 and 3 on page 9 of your return to calculate your claim.

If the vehicle was used for a period of less than 365 days, the fixed cost component must be reduced pro rata on a day-
to-day basis.

Unless accurate records of kilometres travelled for both business and private purposes were kept, the first 16 000
km travelled will be deemed to be for private purposes. Business kilometres travelled are deemed to be equal to the
difference between total kilometres travelled and 16 000 km - provided that the business kilometres do not exceed
16 000 kilometres.

NOTE:
Should you calculate your travel claim based on actual kilometres travelled, such kilometres must be substantiated by
way of a log book. The following minimum information relating to business kilometres travelled should be reflected to
enable SARS to consider the claim:

• Date on which you travelled.

• The destination to and from.
• The kilometres travelled.

NOTE:
Your claim will not be considered if section 2 on page 9 of your return has not been completed. The value at the
beginning of the year of assessment will only apply if you complete part 4 (actual expenditure) of this schedule.

IT12SB 21
 Scale of costs in respect of motor vehicles
WHERE THE VALUE OF THE VEHICLE - FIXED COST FUEL COST MAINTENANCE
R c c
Does not exceed R40 000 14 489 34,5 21,6
exceeds R40 000 but does not exceed R60 000 19 869 36,2 22,4
exceeds R60 000 but does not exceed R80 000 25 068 36,2 22,4
exceeds R80 000 but does not exceed R100 000 30 893 40,7 27,8
exceeds R100 000 but does not exceed R120 000 35 578 40,7 27,8
exceeds R120 000 but does not exceed R140 000 40 732 40,7 27,8
exceeds R140 000 but does not exceed R160 000 46 157 45,0 37,7
exceeds R160 000 but does not exceed R180 000 51 930 45,0 37,7
exceeds R180 000 but does not exceed R200 000 57 332 51.1 41,6
exceeds R200 000 but does not exceed R220 000 63 287 51.1 41,6
exceeds R220 000 but does not exceed R240 000 68 697 51.1 41,6
exceeds R240 000 but does not exceed R260 000 74 287 51.1 41,6
exceeds R260 000 but does not exceed R280 000 78 992 53,9 49,8
exceeds R280 000 but does not exceed R300 000 83 744 53,9 49,8
exceeds R300 000 but does not exceed R320 000 88 854 53,9 49,8
exceeds R320 000 but does not exceed R340 000 94 322 53,9 49,8
exceeds R340 000 but does not exceed R360 000 99 240 59,8 65,5
exceeds R360 000 99 240 59,8 65,5

Example

You own a vehicle with a “value” of R47 250 and receive a travelling allowance of R2 000 per month for the full year. During
the year of assessment you travelled 45 000 kilometres and have not kept accurate records of business and private trips.

The claim in respect of travelling expenses is determined as follows:

Total kilometres are limited to 32 000

Less: Kilometres deemed to be private use 16 000
Kilometres deemed to be business use 16 000

Fixed cost element (see table of scales) R 19 869

The fixed cost element per kilometre is therefore:

19 869 x 365 = 44.1 cents

45 000 365

The fuel cost element per kilometre is (see table of scales) 36.2
The maintenance cost per kilometre is (see table of scales) 22.4
Total cost per kilometre 102.7

Total cost of business travel:

Business km x total cost per km (i.e. 16 000 km x 102.7 cents) = R16 432. This amount must be reflected next
to code 4014 in part 5 of the return.

NOTE:
If you incurred travelling expenses in the production of income, your claim may be calculated in part 4 on page 9 of
your return and the amount of your claim reflected in section 5.9.2 of the return.

22 IT12SB
This section is required if you are a director of a company / member of a close corporation and / or are in receipt of
gross investment income in excess of R100 000. Should there be a discrepancy in the assets compared to a prior year,
it is suggested that an explanation of such discrepancy is attached to your return.

Declare the amounts in respect of local and foreign assets and liabilities in this Schedule and attach a list to page 11 of
your return detailing each individual foreign asset.

Should you reply in the affirmative to any of the questions in this Schedule of your return, you need to submit the
following information:

1. Acquisition of fixed property

Submit a schedule with a description and location (address) of the asset, as well as the purchase price thereof.

2. Disposal of fixed property

Submit a schedule with a description and location (address) of the asset disposed of and indicate the amount
received in respect of the disposal.

3. Acquisition of moveable assets such as a motor vehicle, caravan, boat, etc.

Submit a schedule with a description of all the assets of which the market value exceeds R30 000 and indicate the
individual purchase price of such assets.

4. Disposal of moveable assets

Submit a schedule with a description of all the assets of which the market value exceeds R30 000 and indicate the
amount received in respect of each disposal.

5. Donations received
Submit a schedule of all donations received in excess of R30 000, with a description of the donation, the value
thereof and the name, address and identity number of the donor.

6. Donations made
Submit a schedule of all donations made in excess of R30 000, with a description of the donation made, the value
thereof and the name, address and identity number of the donee.

7. Inheritance received
Submit a schedule detailing all bequests, the value of which exceeds R30 000, together with a description and
value of each such bequest.

8. Beneficiary of a trust
Submit a schedule reflecting the name, registered address and income tax reference number (if applicable), as
well as the name of the country where the trust is registered.

9. Transfer of funds
Submit a schedule detailing the amounts transferred and how they were utilised.

10. Capital gains tax

Should you reply in the affirmative to any of the questions (a) to (g), you need to attach the schedules and
information requested.

IT12SB 23
 "

24 IT12SB
SCHEDULE OF MEDICAL EXPENSES NOT SUBMITTED TO / OR RECOVERED FROM YOUR MEDICAL FUND
DETAILS OF MEDICAL EXPENSES NOT SUBMITTED TO / RECOVERED FROM YOUR MEDICAL FUND
Please note that expenditure will not be considered if this schedule is not completed in full and attached to page 11 of your return.

Was the claim

Prescription submitted to Reason for non-submission to medical fund /
Date Supplier / Doctor medication the fund? Amount
Yes / No Reason for non-reimbursement by medical fund
Yes / No

If space provided is not sufficient, an additional schedule must be attached. TOTAL:

Summary of information furnished in your return to assist you in calculating
your tax liability
GENERAL INFORMATION

If you received foreign income, the allowable deductions in respect of DONATIONS , RETIREMENT ANNUITY FUND
CONTRIBUTIONS, and MEDICAL AND DENTAL EXPENSES, will be proportioned in the ratio your foreign and local
income bears to the total income, before offsetting the above-mentioned deductions. For further details refer to the
relevant Interpretation Note No. 18 on the SARS website www.sars.gov.za, or contact your local SARS office.

Statutory rates of tax applicable to individuals

WHERE THE TAXABLE INCOME -
Does not exceed R80 000 18% of each R1 of the taxable income
Exceeds R80 000 but does not exceed R130 000 R14 400 plus 25% of the amount by which the taxable
income exceeds R80 000
Exceeds R130 000 but does not exceed R180 000 R26 900 plus 30% of the amount by which the taxable
income exceeds R130 000
Exceeds R180 000 but does not exceed R230 000 R41 900 plus 35% of the amount by which the taxable
income exceeds R180 000
Exceeds R230 000 but does not exceed R300 000 R59 400 plus 38% of the amount by which the taxable
income exceeds R230 000
Exceeds R300 000 R86 000 plus 40% of the amount by which the taxable
income exceeds R300 000

Tax rebates for 2005

Rebates: primary rebate R6 300 - 65 years and older R 4 500

The example below illustrates the calculation of tax liability and the application of the rebates.

Example:

Your taxable income is R167 025.00

Tax on R130 000.00 (as per statutory rates) = R 26 900.00

Plus:

30% of R37 025.00 (R167 025.00 - R130 000.00) = R 11 107.50

Total liability before rebates R 38 007.50

Less:

Applicable rebate (under 65 years) R 6 300.00

Tax liability R 31 707.50

Please note that SITE (which is the amount of income tax that relates to the first R60 000 of your remuneration (e.g.
salary) is only refundable in certain conditions, even though your taxable income may be under the tax threshold, as
SITE is payable per income period.

IT12SB 25
 CALCULATION OF TAX LIABILITY
Note: If you received Foreign Income refer to paragraph under “general information” on page 25 of this
brochure before calculating your tax liability.
INCOME
All items reflected in part 3 of your return but excluding non-taxable amounts
Local investment income (Schedule 1, part 2.1)
Foreign interest (Schedule 1, part 2.2)
Foreign dividends (Schedule 1, part 2.3)
Local rental income (Schedule 2)
Other local income (Schedule 5)
Sub-total
LESS: EXEMPTIONS
Exempt investment income (R15 000 if you are under the age of 65 years and R22 000 if you are
65 years and older). Refer to the example in the paragraph dealing with investment income to
determine the apportionment of the exemption in respect of local and foreign investment income.
Sub-total
LESS: DEDUCTIONS
Pension fund contributions (parts 5.3 / 5.4 of your return)
Retirement annuity fund contributions (parts 5.5 / 5.6 of your return)
Income protection contributions (part 5.8 of your return)
Any other deductions not specifically addressed, e.g. travelling, but excluding donations
and medical deductions (parts 5.9, 5.10 and 5.11 of your return)
Sub-total
ADD: (IF LOSS, DO NOT INCLUDE IN CALCULATION)
Calculated capital gain (Schedule 3)
Less: annual exclusion (R10 000)
Sub-total (Aggregate capital gain)
Aggregate capital gain x 25% (inclusion rate)
Total taxable foreign income (Schedule 4) (Excluding foreign investment income)
Sub-total
LESS:
Donations (part 5.2 of your return)
Sub-total (a)
LESS:
Medical (part 5.1 of your return)
Medical deduction code 4008
Less: 5% of sub-total (a)
Allowable medical deduction
OR Medical deduction code 4009 (handicapped person)
Less: Limitation
Allowable medical deduction
OR: If you are older than 65 years there will be no limitation
TAXABLE INCOME
Normal tax on taxable income (see tax rates, page 25 of this brochure)
LESS:
Rebates (see page 25 of this brochure)
TOTAL TAX PAYABLE
LESS:
SITE (refer to the SITE (4101) column in part 4 of your return)
PAYE (refer to the PAYE (4102) column in part 4 of your return)
Foreign taxes paid (refer to page 20 of this brochure for limitations)
Provisional tax paid (if applicable)
TAX PAYABLE BY/TO YOU

26 IT12SB