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The meaning of expenditure actually incurred in the context of share-based payments for trading stock or services renderedNguta, Mbulelo January 2015 (has links)
Section 11(a) of the Income Tax Act 58 of 1962 entitles taxpayers to a deduction in respect of expenditure actually incurred, provided that all the other requirements of section 11 and section 23 of the Act have been met. A company may issue its own shares, credited as fully paid up, as a payment for trading stock or services rendered, as was the case in C:SARS v Labat Africa (2011) 74 SATC 1. The question that was raised by this decision is whether the issue of shares constitutes “expenditure” as contemplated in section 11(a) of the Act. It is trite that a share in a company is a bundle of rights which entitle the holder to dividends when declared and to a vote in shareholders’ meetings and that a share does not come into the hands of a shareholder by way of transfer from the company, but is rather created as a bundle of rights for him in the company. In C: SARS v Labat Africa, the Supreme Court of Appeal decided that to issue shares as a payment for goods is not expenditure as contemplated in section 11(a) of the Act. The Act does not define “expenditure”. It has been interpreted in certain cases as a payment of money or disbursement, while it has been interpreted as the undertaking of a legal obligation in other cases. The Labat Africa case has been criticised for its interpretation of expenditure on the grounds that it is contrary to the principle that “actually incurred” does not mean “actually paid”. This research has argued that, in the context of the Labat Africa case, which related to an issue of shares in payment for goods, Harms AP’s judgment was concerned with showing why a share issue is not expenditure. He could not have intended to deny a deduction to transactions such as credit purchases.
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The deductibility of future expenditure on contract in terms of section 24CCalitz, Johanna Eliza 04 1900 (has links)
Thesis (MAcc)--Stellenbosch University, 2015. / ENGLISH ABSTRACT: Section 24C of the Income Tax Act No. 58 of 1962 (‘the Act’) provides for a deduction of
future expenditure that will be incurred by the taxpayer in the performance of his
obligations under a contract from which the taxpayer derived income.
Due to uncertainties regarding the meaning of certain words and phrases used in section
24C, the first aim of this assignment was to determine the meaning of the word
‘expenditure’ and the phrase ‘will be incurred’ as used in section 24C. The second aim was
to establish how a taxpayer will prove with certainty that he will incur future expenditure in
the performance of his obligations under a contract. This was done by discussing the
effect of contractual terms and other circumstances and by taking into account certain
additional guidelines regarding the interpretation of section 24C provided for in
Interpretation Note: No. 78 (‘IN 78’).
It was established that the word ‘expenditure’ means the amount of money spent, including
the disbursement of other assets with a monetary value. The word ‘expenditure’ also
specifically includes the voluntary payments and disbursements of assets. The word
‘expenditure’ can also include a loss if the word ‘loss’ can be equated to the word
‘expenditure’.
The phrase ‘will be incurred’ implies that the taxpayer will, in a subsequent year of
assessment, have an unconditional obligation to pay for expenditure, which must arise
from the taxpayer’s obligations to perform under the contract.
Contractual terms and other circumstances can indicate whether there is certainty that
future expenditure will be incurred as aforementioned. Conditions and warranties are
contractual terms that indicate that there is uncertainty regarding the taxpayer’s obligations
to perform under the contract. A time clause in a contract can indicate that there is
certainty regarding the taxpayer’s obligations to perform under the contract. Similar
contracts with similar conditional obligations to perform cannot be grouped together in
order to determine the probability, and thus the certainty, that future expenditure will be
incurred in the performance of the taxpayer’s obligations under a contract. The probability
that a taxpayer will perform his unconditional obligation under the contract must, however,
be proved in order to demonstrate that there is certainty regarding the incurral of the future
expenditure.
IN 78 does not specify whether a loss which can, in certain circumstances, be equated to
the word ‘expenditure’, is deductible under section 24C. This should be clarified. The new
undefined phrases (a high degree of probability, inevitability, certainty and potentially
contractually obligatory), as used in IN 78, might cause confusion when interpreting
section 24C. These phrases should be defined and it should be explained how the high
degree will be measured.
Lastly, is was shown that an anomaly occurs regarding trading stock at hand at the end of
a year of assessment, which will be utilised in a subsequent year of assessment in the
performance of the taxpayer’s obligations under a contract. Such trading stock does not
represent ‘future expenditure’ and must be excluded from the section 24C allowance.
However, due to the interplay between section 24C and section 22(1), the taxpayer does
not receive any tax relief for the expenditure actually incurred to acquire the closing trading
stock in the year in which such trading stock is acquired. It is, therefore, questioned
whether the established interpretation of section 24C is in agreement with the Legislator’s
original intention with section 24C namely, to match income received under a contract with
the related deductible expenditure. / AFRIKAANSE OPSOMMING: Artikel 24C van die Inkomstebelastingwet No. 58 van 1962 (‘die Wet’) voorsien ʼn
aftrekking vir toekomstige onkoste wat deur die belastingpligtige aangegaan sal word in
die nakoming van sy verpligtinge ingevolge ʼn kontrak waaruit hy inkomste verkry het.
As gevolg van onsekerhede ten opsigte van die betekenis van sekere woorde en frases
wat in artikel 24C gebruik word, was die eerste doelstelling van hierdie navorsingswerkstuk
om die betekenis van die woord ‘onkoste’ en die frase ‘aangegaan sal word’,
soos wat dit in artikel 24C gebruik word, te bepaal. Die tweede doelstelling was om vas te
stel hoe 'n belastingpligtige met sekerheid sal bewys dat hy toekomstige onkoste sal
aangaan in die nakoming van sy verpligtinge ingevolge ʼn kontrak. Dit is gedoen deur die
effek van kontraksbedinge en ander omstandighede te bespreek en deur sekere
bykomende riglyne ten opsigte van die interpretasie van artikel 24C, soos vervat in
Interpretasienota No. 78 (‘IN 78’), in ag te neem.
Daar is vasgestel dat die woord ‘onkoste’ die bedrag van geld wat bestee word, insluitend
die uitbetaling van ander bates met 'n geldwaarde, beteken. Die woord ‘onkoste’ sluit ook
spesifiek vrywillige betalings en uitbetalings van bates in. Die woord ‘onkoste’ kan ook 'n
verlies insluit, indien die woord ‘verlies’ gelyk gestel kan word aan die woord ‘onkoste’.
Die frase ‘aangegaan sal word’ impliseer dat die belastingpligtige, in 'n daaropvolgende
jaar van aanslag, 'n onvoorwaardelike verpligting sal hê om vir onkostes te betaal. Hierdie
onkostes moet ontstaan weens die belastingpligtige se verpligtinge ingevolge die kontrak.
Kontraksbedinge en ander omstandighede kan aandui of daar sekerheid is dat die
toekomstige onkoste, soos hierbo genoem, aangegaan sal word. Voorwaardes en
waarborge is kontraksbedinge wat daarop dui dat daar onsekerheid is rakende die
belastingpligtige se verpligtinge om ingevolge die kontrak op te tree. ʼn Tydsklousule in 'n
kontrak kan aandui dat daar sekerheid is rakende die belastingpligtige se nakoming van sy
verpligtinge ingevolge die kontrak. Soortgelyke kontrakte, met soortgelyke voorwaardelike
verpligtinge kan nie saam gegroepeer word ten einde te bepaal of dit waarskynlik, en
gevolglik seker is dat toekomstige onkoste in die nakoming van ʼn belastingpligtige se
verpligtinge ingevolge die kontrak aangaan sal word nie. Die waarskynlikheid dat 'n belastingpligtige sy onvoorwaardelike verpligting ingevolge die kontrak sal nakom moet
egter bewys word ten einde aan te dui dat daar sekerheid is dat toekomstige onkoste
aangegaan sal word.
IN 78 spesifiseer nie of 'n verlies wat, in sekere omstandighede, gelyk gestel kan word aan
die woord ‘onkoste’, ingevolge artikel 24C aftrekbaar is nie. Duidelikheid hieromtrent moet
verskaf word. Die nuwe, ongedefinieerde frases ('n hoë graad van waarskynlikheid,
onafwendbaarheid, sekerheid en potensieel kontraktueel verpligtend (vry vertaal)), soos in
IN 78 gebruik, kan moontlik verwarring veroorsaak wanneer artikel 24C geïnterpreteer
word. Hierdie frases moet gedefinieer word en daar moet verduidelik word hoe ʼn hoë
graad gemeet gaan word.
Laastens blyk dit dat 'n teenstrydigheid ontstaan ten opsigte van handelsvoorraad op
hande aan die einde van 'n jaar van aanslag, wat in 'n daaropvolgende jaar van aanslag
deur die belastingpligtige in die nakoming van sy verpligtinge ingevolge 'n kontrak gebruik
sal word. Sodanige handelsvoorraad verteenwoordig nie ‘toekomstige onkoste’ nie en
moet by die artikel 24C toelaag uitgesluit word. Die belastingpligte ontvang egter, weens
die wisselwerking tussen artikel 24C en artikel 22(1), nie ʼn belastingverligting vir die
onkoste werklik aangegaan in die jaar waarin sodanige handelsvoorraad verkry is nie. Dit
word dus bevraagteken of die bewese interpretasie van artikel 24C in ooreenstemming is
met die Wetgewer se oorspronklike bedoeling met artikel 24C, naamlik, om inkomste
ontvang ingevolge ʼn kontrak met die verwante aftrekbare uitgawes te paar.
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