A research report submitted to the Faculty of Commerce, Law and Management in partial fulfilment of the requirements for the degree of Master of Commerce specialising in Taxation / Taxpayers are broadly financed in two ways, namely through the use of debt and equity. The returns on capital and debt are treated differently from an income tax perspective (SARS 2013). The interest expense incurred by taxpayers in the production of income by a person carrying on a trade, are deductible in determining taxable income, subject to certain conditions and limitations. The number of provisions contained in the Income Tax Act of 1962 (the Act) which deal with the tax treatment of interest income and interest expenditure have gradually increased over time. There are numerous aspects to be borne in mind by resident and foreign companies when considering the income tax and withholding tax implications which may arise in respect of transactions giving rise to interest income and interest expenditure (SAICA 2015). This is affirmed by the number of provisions in the income tax act dealing with the deductibility of interest primarily dealt with in section 24J of the Act as well as indicated by the 2014 amendments to section 8F, the introduction of section 8FA, sections 23M and 23N into the legislation. The purpose of this report is to assess whether the Department of National Treasury (National Treasury) have taken the number of provisions of the deductibility of interest too far. / NG (2020)

Thesis (MComm)--Stellenbosch University, 2004. / ENGLISH ABSTRACT: The aim of this study is to determine the applicability of the various South African Income Taxation Act sections on the deduction of software costs. A distinction is made between the various deduction sections in the Income Taxation Act that are applicable to software costs. By doing this an appropriate taxation deduction is recommended for the different types of software costs that the taxpayer incurs. Software assets and expenditure can be divided into various categories based on the acquisition agreement. The rights and assets that are obtained, differ for each category of software cost. In some instances a copyright is obtained and in other instances only a right of use is obtained. Furthermore the taxpayer receives intellectual property, an intangible asset, and/or a tangible asset. A literature study and an analysis of the different types of software costs and the four concerned Income Taxation Act sections serve as background for the consideration of the applicability of each specific deduction section in the Income Taxation Act on the various categories of software costs. By using the information obtained in the literature study and the analyses, a recommendation is made of the most applicable deduction article for each category of software cost. / AFRIKAANSE OPSOMMING: Hierdie studie het ten doel om die toepaslikheid van die verskillende Suid-Afrikaanse Inkomstebelastingwetsartikels, op die aftrekking van sagtewarekoste te bepaal. 'n Onderskeid word getref tussen die verskillende aftrekkingsartikels wat van toepassing is op sagtewarekoste in die Inkomstebelastingwet. Sodoende word 'n geskikte belastingaftrekking vir die verskillende tipes sagtewarekoste voorgestel wat deur elke belastingpligtige aangegaan word. Sagtewarebates of -uitgawes kan in verskillende kategoriee verdeel word na aanleiding van die verkrygingsooreenkoms wat aangegaan is. Die regte en bates wat verkry word verskil ten opsigte van elke kategorie sagtewarekoste. In sommige gevalle word 'n outeursreg verkry en in ander gevalle slegs 'n gebruiksreg. Verder kan of intellekuele eiendom, 'n ontasbare bate, en/of 'n tasbare bate verkry word. 'n Literatuurstudie en analise van die verskillende tipes sagtewarekoste en die vIer betrokke Inkomstebelastingwetsartikels dien as agtergrond vir die oorweging van die toepaslikheid van elke spesifieke aftrekkingsartikel in die Inkomstebelastingwet op die onderskeie kategoriee sagtewarekoste. Daama word die inligting wat bekom is in die literatuurstudie en analise gebruik om die mees toepaslike aftrekkingsartikel vir elke kategorieë sagtewarekoste voor te stel.

In the 2011/2012 Budget Speech delivered by the Minister of Finance, Pravin Gordhan, it was announced that a 15% withholding tax on gambling winnings above R 25 000 was to be introduced with effect from 1 April 2012. This treatise was undertaken to critically analyse the different elements of the proposed new withholding tax. It was established that the fiscus already benefits significantly from the gambling industry and levies and taxes from the gambling industry dwarf the revenue SARS collect from other forms of taxes such as Donations tax and Estate Duty tax. The necessity, therefore, of taxing gambling winnings in the hands of the individual is debatable. A comparison with the three foreign countries used by the Minister as an example of countries who have successfully implemented a withholding tax on gambling winnings exposed operational or other characteristics which bear no significant relationship to the situation in which the industry operates in South Africa. Probably the most significant difference is the fact that in the three foreign countries, losses are deductible and only the net gains are taxed. Although it iv could add to an already seemingly administrative-intensive legislation, it is submitted that taxing gambling winnings and ignoring losses suffered by gamblers will be disproportionately unfair towards the taxpayer. The many questions raised in this treatise illustrate the level of uncertainty still surrounding the new proposed gambling tax. It is hoped that communication will be provided by SARS as soon as possible to address the issues at hand. This would go a long way in ensuring that the implementation of the proposed withholding tax on gambling winnings is as smooth and efficient as possible.

Thesis (MAcc)--Stellenbosch University, 2012. / ENGLISH ABSTRACT: The requirements of broad-based black economic empowerment (‘BEE’) are set out in the BEE scorecard. When an entity incurs expenditure relating to indirect empowerment measures (i.e. the preferential procurement, enterprise development, skills development and socio-economic development categories on the BEE scorecard), it is unclear whether the expenditure will be deductible for income tax purposes (BEE Partner, 2008). The objectives of the current study are to determine whether such expenditure is deductible and to formulate best practice guidelines for the deduction of the expenditure. The best practice guidelines consist of factors that should be considered when determining whether expenditure is deductible, as well as recommendations on how to justify that such expenditure should, in fact, be deductible. The methodology used was to first consider the requirements of the BEE scorecard, the types of expenditure and the reasons for incurring expenditure towards indirect empowerment measures. The deduction of such expenditure was then considered in a general sense and specifically for each broad category of expenditure. Lastly, the best practice guidelines were formulated based on the conclusions reached. Common expenditure towards indirect empowerment measures of BEE was grouped into broad categories. The different reasons why entities incur such expenditure were identified, as the reason for incurring expenditure can influence whether it is incurred in the production of income (Van Schalkwyk, 2010b:110). It is submitted that expenditure that is excessive or that is incurred for philanthropic purposes would not be incurred in the production of income. Four issues were identified that could preclude a deduction in terms of the general deduction formula (section 11(a)) – notably, that expenditure has to be in the production of income and non-capital in nature to be deductible. In addition to section 11(a), special income tax deductions (sections 12H, 12I or 18A) and capital allowances (sections 11(e), 13sex or 15(a)) could also possibly apply, but only for certain types of expenditure and only in qualifying circumstances. The conclusions drawn as to the deductibility of expenditure are summarised as a guideline for taxpayers. The above-mentioned conclusions, along with the literature examined, were used to formulate general best practice guidelines. One such guideline is that the onus is on taxpayers to show (through one of the ways suggested) that expenditure is in the production of income. Taxpayers should also note that excessive expenditure is not in the production of income and that certain expenditure required by sector charters is more likely to be capital in nature. Furthermore, specific best practice guidelines were submitted for each broad category of expenditure and relate to, for example, the applicability of the identified special deductions and the quantification of non-monetary expenditure. The specific best practice guidelines should be considered when incurring expenditure in a specific category. In summary, even though expenditure towards indirect empowerment measures has been found to be deductible in most cases, there are exceptions of which taxpayers should be aware. The proposed best practice guidelines include guidance that could be considered before incurring expenditure towards indirect BEE measures. / AFRIKAANSE OPSOMMING: Die vereistes van breë-basis swart ekonomiese bemagtiging (‘SEB’) word in die SEB-telkaart uiteengesit. Wanneer ’n entiteit onkostes met betrekking tot indirekte bemagtigingsmaatreëls (die telkaartkategorieë vir voorkeurverkryging, besigheidsontwikkeling, vaardigheidsopleiding en sosio-ekonomiese ontwikkeling) aangaan, is dit nie duidelik of sodanige onkoste vir inkomstebelasting-doeleindes aftrekbaar sal wees nie (BEE Partner, 2008). Die doelwitte van hierdie studie was om te bepaal of sulke onkostes belastingaftrekbaar is en om bestepraktyk-riglyne te formuleer vir die aftrekking van die onkostes. Die bestepraktyk-riglyne bestaan uit faktore wat oorweeg moet word in die bepaling of onkostes belastingaftrekbaar is, sowel as aanbevelings oor hoe aftrekbaarheid geregverdig kan word. Die studiemetodologie het eerstens ’n ondersoek behels na die vereistes van die SEB-telkaart, die soorte onkostes sowel as die redes vir die aangaan van onkostes wat met indirekte bemagtigingsmaatreëls verband hou. Daarna is die belastingaftrekbaarheid van sodanige onkostes in die algemeen sowel as spesifiek vir elke breë kategorie van onkoste oorweeg. Laastens is die bestepraktyk-riglyne opgestel op grond van die gevolgtrekkings wat bereik is. Algemene onkostes wat met indirekte SEB-maatreëls verband hou, is in breë kategorieë gegroepeer. Die verskillende redes waarom entiteite die uitgawes aangaan, is bepaal, aangesien dit kan beïnvloed of die uitgawe in die voortbrenging van inkomste is of nie (Van Schalkwyk, 2010b:110). Daar word aangevoer dat onkoste wat oormatige is of onkostes met betrekking tot filantropiese doeleindes nie as deel van die voortbrenging van inkomste beskou kan word nie. Vier kwessies is geïdentifiseer wat ’n aftrekking ingevolge die algemene aftrekkingsformule (artikel 11(a)) kan verhoed – die belangrikste is dat die onkostes in die voortbrenging van inkomste aangegaan moet word en nie kapitaal moet wees om afgetrek te kan word. Benewens artikel 11(a), kan spesiale belastingaftrekkings (artikel 12H, 12I of 18A) en kapitaaltoelaes (artikel 11(e), 13sex of 15(a)) ook moontlik geld, maar slegs vir sekere soorte onkostes en in omstandighede wat daarvoor in aanmerking kom. Die gevolgtrekkings oor die belastingaftrekbaarheid van onkostes word uiteindelik as ’n riglyn vir belastingbetalers opgesom. Bogenoemde gevolgtrekkings, tesame met die bestudeerde literatuur, is gebruik om algemene bestepraktyk-riglyne te formuleer. Een so ’n riglyn is dat die bewyslas op die belastingbetaler rus om (op een van die voorgestelde maniere) aan te toon dat onkostes in die voortbrenging van inkomste aangegaan word. Belastingbetalers moet ook daarop let dat oormatige onkostes nie as deel van die voortbrenging van inkomste beskou kan word nie en dat sekere onkostes ingevolge die vereistes van sektorhandveste meer waarskynlik kapitaal van aard sal wees. Spesifieke bestepraktyk-riglyne is voorts vir elke breë kategorie van onkostes voorgestel, byvoorbeeld met betrekking tot die toepaslikheid van die geïdentifiseerde spesiale aftrekkings en die kwantifisering van nie-monetêre onkostes. Hierdie spesifieke bestepraktyk-riglyne behoort in ag geneem te word wanneer onkostes in ’n spesifieke kategorie aangegaan word. Ter samevatting behoort belastingbetalers daarop bedag te wees dat hoewel onkostes met betrekking tot indirekte bemagtigingsmaatreëls in die meeste gevalle belastingaftrekbaar is, daar wel sekere uitsonderings is. Die voorgestelde bestepraktyk-riglyne bied derhalwe leiding oor die faktore wat oorweeg kan word voordat onkostes met betrekking tot indirekte bemagtigingsmaatreëls aangegaan word.

Thesis (MAcc (Accountancy))--University of Stellenbosch, 2006. / The potential buyer of a business evaluates the attractiveness of the transaction by considering the financial status of the business being sold. In determining the financial status of a business it is more important to determine the nature of the assets and liabilities recorded on the balance sheet rather than the mere existence thereof. Included in the liabilities are accounting provisions recorded in terms of the Generally Accepted Accounting Practice (GAAP) to reflect a fair representation of the financial status. Although these provisions are made for accounting purposes, they cannot necessarily be deducted under the terms of the Income Tax Act, no 58 of 1962. The tax deductibility of accounting provisions has long been a potential contention when a business is sold. The Income Tax Act has specific sections that must be applied in determining the deductibility of accounting provisions, for example, section 11(a), which is the general deduction formula; section 23(g), which prohibits expenses not laid out for the purposes of trade; and section 23(e), which does not allow a deduction when a reserve fund is created (for example a leave pay provision). In conducting this study, seven types of accounting provision generally recorded by businesses were identified: the bonus provision, leave pay provision, warranty provision, settlement discount and incentive-rebate provision, post employment provision, retrenchment cost provision and other provisions. These provisions are discussed in view of their possible income tax deductibility, and relevant case studies were identified to confirm the possible deductibility of these accounting provisions. In this study, the transfer of accounting provisions during the sale of a business is considered for the purposes of both the buyer and seller. The tax implications for the buyer and seller are then evaluated, as well as the subsequent treatment of the accounting provisions for the purposes of the buyer. Because the wording of the purchase contract is extremely important when a business is acquired, three examples of the wording of a purchase contract are discussed as well as the income tax implications thereof. The extent of the advice given by a tax practitioner will depend on the allegiance of the practitioner (either for the buyer or seller) and will determine how the contract will be concluded. In conclusion a tax practitioner would want to assist his client to obtain the most effective tax position for the transaction and therefore each purchase contract must be reviewed on its own set of facts.