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«COMPREHENSIVE GUIDE TO THE ITR14 RETURN FOR COMPANIES 1 | COMPREHENSIVE GUIDE TO THE ITR14 RETURN FOR COMPANIES CONTENTS 1. INTRODUCTION 2. HOW TO ...»

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Note:

The PAYE credits Available section will be repeated according to the numeric value completed in the question “Spec ify the number of IRP5 certificates” field on the “Information to create this income tax return” page.

The following fields must be completed for each PAYE Credits Available section:

–  –  –

FOREIGN TAX CREDITS: Taxable Foreign Sourced Income of Resident Companies – s6quat (excluding foreign capital gain / loss) This section of the return will only display if the question “Will the company be claiming any Foreign Tax credits not relating to Capital Gain transactions in terms of s6quat?” in the “Information to create this income tax return” is “Yes” During the assessment process the information in this section is used when calculating the allowable amount in foreign tax credits in terms of s. 6quat.

138 | COMPREHENSIVE GUIDE TO THE ITR14 RETURN FOR COMPANIES

Relief from double taxation • ú A South African resident is subject to normal tax on income derived worldwide (i.e. income derived from sources within and outside of the Republic of South Africa). However, any income which is derived by a resident from a foreign source may have been or may be subjected to tax in a foreign country, resulting in double taxation on this amount. S. 6quat grants relief from any potential double taxation, in that any foreign taxes payable in respect of income derived from a foreign source which is included in the taxable income of a resident, may (subject to certain conditions) be allowed as a rebate against normal income tax payable in South Africa by the resident.

–  –  –

Qualifying amounts of income derived from foreign sources • ú In order to qualify for a rebate in terms of s. 6quat, the foreign taxes must be payable in respect of any of

the following items of income, provided it was included in the resident’s taxable income:

–  –  –

The carry forward of an excess amount of foreign tax credits • ú Where the sum of foreign taxes payable exceeds the amount of the rebate, the excess amount may be carried forward to the immediately succeeding year of assessment. This excess amount will be ranked as a foreign tax credit available for set off against the normal tax payable in that year of assessment, in respect of foreign taxable income after the qualifying foreign taxes for that year have been taken into account.

Instances where no rebate is forthcoming • ú No foreign tax relief will be granted where the foreign taxes do not qualify for the rebate, for example if the actual source of the amount is located in South Africa. In such instances the amount may qualify as a deduction in terms of s.6quat (1C) in determining taxable income for a particular year of assessment. The foreign taxes must have been incurred in respect of the resident’s trading operations and must be proved to be payable without a right of recovery. A resident may not elect to claim the foreign taxes either as a rebate or alternatively as a deduction. Only those foreign taxes that do not qualify for a rebate may be considered as a deduction.

–  –  –

All fields listed in this section are compulsory for completion. If a specific field is not applicable to the company, a zero • (0) must be completed for the field.

Net losses: This currency field (15 blocks) must be completed in Rands (No Cents) for Foreign income.

–  –  –

Foreign Tax Credits: This currency field (15 blocks) will automatically be calculated on eFiling or for • non-eFilers when the SARS agent captures the return in the branch as the sum of Foreign Tax Credits.

FOREIGN TAX CREDITS: Taxable South African sourced Income – s6quin (already included in taxable income) This section of the return will only display if the question “Will the company be claiming any Foreign Tax credits not relating to Capital Gain transactions in terms of s6quin?” in the “Information to create this income tax return” is “Yes” S.6quin provides for a tax credit to be claimed in respect of tax withheld or imposed by a foreign country.

The declaration of foreign tax withheld (FTW01) together with relevant material in respect of foreign tax withheld • must be submitted to SARS within 60 days from the date the tax was withheld or paid to 6quin@sars.gov.za. The Declaration of Foreign Tax Withheld (FTW01) can be downloaded on www.sars.gov.za.

The declaration together with relevant material must be retained by the taxpayer until requested by SARS.

• The amount of income must be from a source within the Republic and received by or accrued to a resident for services • rendered.

With the submission of the ITR14 return the currency must be translated to RSA currency at the last day of the year of • assessment by applying the average exchange rate for the year of assessment.

The tax credit may be in respect of an amount of tax levied by any sphere of the government of any country ú Other than the Republic, and

–  –  –

Where a DTA is not concluded between the Republic and the other country a tax credit may also be in respect of the • amount of tax imposed in terms of the laws of that country.





–  –  –

List the countries where tax was paid: Free text field (maximum length is 3 rows of 53 blocks) •

141 | COMPREHENSIVE GUIDE TO THE ITR14 RETURN FOR COMPANIES

PARTNERSHIPS

This section of the return will only display if the question “Is the company a partner in a partnership?” in the “Information to create this income tax return” is “Yes”

Note:

The Partnerships section will repeat according to the numeric value entered in the question “How many • partnerships” on the “Information to create this income tax return” page.

If 5 Partnerships sections were created, it is mandatory that all 5 must be completed. If incorrectly created, • refer back to the “Information to create this income tax return” to rectify.

–  –  –

TRANSFER PRICING: RECEIVED / RECEIVABLE

This section of the return will only display if the question “Referring to legislation applicable to years of assessment commencing on or after 1 April 2012 (refer to guide for years of assessment prior to 1 April 2012), did the company enter into an affected transaction, as set out in s31(1) “affected transaction” (a), where the company: Received / earned foreign income?” in the “Information to create this income tax return” is “Yes”

142 | COMPREHENSIVE GUIDE TO THE ITR14 RETURN FOR COMPANIES

Note:

Transfer pricing happens whenever two related companies – that is, a parent company and a subsidiary, or • two subsidiaries controlled by a common parent – trade with each other, as when a US-based subsidiary of Company X, for example, buys something from a South African-based subsidiary of Company X. When the parties establish a price for the transaction, they are engaging in transfer pricing.

If two unrelated companies trade with each other, a market price for the transaction will generally result. This • is known as “arms-length” trading, because it is the product of genuine negotiation in a market. This arm’s length price is usually considered to be acceptable for tax purposes.

For years of assessment commencing before 1 April 2012, the data to be provided in the Transfer pricing • Received and Receivable section of the return is for direct transactions between persons (as described in section 31(2)(a) and (b) of the “old section 31”). Reference to the words ‘operation, scheme, agreement or understanding directly or indirectly entered into’ should be ignored.

All fields listed in this section are compulsory for completion. If a specific field is not applicable to the • company, a zero (0) must be completed for the field.

–  –  –

The columns are subdivided into the following categories:

• ú Total Aggregate Value – Local ú Total Aggregate Value – Foreign: Connected ú Total Aggregate Value – Foreign: Non-connected

143 | COMPREHENSIVE GUIDE TO THE ITR14 RETURN FOR COMPANIES

TRANSFER PRICING: PAID / PAYABLE

This section of the return will only display if the question “Referring to legislation applicable to years of assessment commencing on or after 1 April 2012 (refer to guide for years of assessment prior to 1 April 2012), did the company enter into an affected transaction, as set out in s31(1) “affected transaction” (a), where the company: Incurred expenditure?” in the “Information to create this income tax return” is “Yes” All fields listed in this section are compulsory for completion. If a specific field is not applicable to the • company, a zero (0) must be completed for the field.

For years of assessment commencing before 1 April 2012, the data to be provided in the Transfer Pricing Paid • and Payable section of the return is for direct transactions between persons (as described in section 31(2)(a) and (b) of the “old section 31”). However, interest paid/ payable includes indirect financial transactions such as back to back arrangements. Reference to the words ‘operation, scheme, agreement or understanding directly or indirectly entered into’ should be ignored. Please refer to section 31(3) of the “old section 31” read together with Practice Note 2 of 14 May 1996 for further guidance relating to the calculation of the financial assistance to fixed capital ratio for years of assessment commencing prior to 1 April 2012.

The following currency fields (15 blocks) must be completed in Rands (No Cents) for each column:

• Purchase of goods ú

–  –  –

TRANSFER PRICING SUPPORTING INFORMATION

This section of the return will only display if the question “Did the company enter into an affected transaction as defined in s31 where the company: Received / earned foreign income?” in the “Information to create this income tax return” is “Yes”

Select “Yes” or “No” for the following questions:

Does the company have transfer pricing documentation that supports the pricing policy applied to each • transaction between the company and the foreign connected person during the year of assessment as being at arm’s length?

Please note that this question must be answered as “NO” if:

o The transfer pricing documentation supporting the pricing policy applied does not cover each transaction with the company and the foreign connected person; or o Where such documentation is incomplete at the time of completing this return and is not available for immediate submission to the SARS if requested.

Did the company conduct any outbound transaction, operation, scheme, agreement for no consideration with a • connected person that is tax resident outside South Africa?

Did the company transact with a connected person that is tax resident in a tax haven / low tax jurisdiction?

• Please note that for the purposes of answering the question the term ‘tax haven/ low tax jurisdiction” means: any country with an effective corporate tax rate that is less than 75% of South Africa’s statutory corporate tax rate.

Did the company make a year-end adjustment to achieve a guaranteed profit margin?

Please note that this question must be answered “YES” if:

o A year end adjustment was made to achieve a guaranteed profit margin either for the company itself OR for a foreign connected person.

146 | COMPREHENSIVE GUIDE TO THE ITR14 RETURN FOR COMPANIES

INDUSTRY RELATED INFORMATION

MINING AND QUARRYING

This section of the return will only display if the main industry code starts with 05, 06, 07, 08 or 09 the in the “Information to create this income tax return”.

Select “Yes” or “No” for the following questions:

Did the company conduct mining operations in more than one separate and distinct mine?

• Did the company acquire a mining operation as a going concern during the year of assessment?

• Did the company acquire / dispose of mining property and equipment as envisaged in s37?

• Specify the % of the company’s total turnover that relates to the buy-in of minerals.

• Did the company conduct prospecting outside South Africa?

• Did the company conduct mining / mining operations where the company is not the legal owner of the mining • right?

Note: A company that conducted mining activities must complete the GEN-001 mining schedule available on • www.sars.gov.za. The completed GEN-001 must be attached as a relevant material to the ITR14.

CONSTRUCTION

This section of the return will only display if the main industry code starts with 41, 42 or 43 in the “Information to create this income tax return”.

Select “Yes” or “No” for the following questions Did the company have any creditor’s retentions with sub-contractors of services?

147 | COMPREHENSIVE GUIDE TO THE ITR14 RETURN FOR COMPANIES

Did the company incur any losses on contract work in progress which is required to be declared as into trading • stock in terms of s22(3)?

For all tax allowances claimed under s12B, s12C and 11(e), did the company bring the assets into use in the year • that the allowance was claimed?

WHOLESALE AND RETAIL TRADE

This section of the return will only display if the main industry code starts with 45, 46 or 47 in the “Information to create this income tax return”.

Select “Yes” or “No” for the following question:

Did the company enter into an agreement to disclose the debtor’s book to a 3rd party?



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