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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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ú Or more than 80% of the income of the company is derived during the tax year from one client;

ú Where such company throughout the year of assessment, employs three or more full-time employees who are on a full-time basis engaged in the business of such company of rendering any such service, other than any employee who is a shareholder or member of the company or is a connected person in relation to such ú Person

–  –  –

Was any service rendered on behalf of the company rendered by a connected person in relation to the • company?

Yes” or “No” must be selected. If “No” is selected, the company will not be regarded as a Personal Service Provider and the error message below will be displayed. If “Yes” is selected, complete the next question.

How many full-time employees are on a full-time basis engaged in rendering any service of the company, • excluding those who are shareholders or members or are connected to such shareholder or member?

If this value exceeds two, the company will not be regarded as a Personal Service Provider and the error message below will be displayed. If this value is not in excess of two, complete the next question.

Note: All the questions below must be completed with a “Yes” or “No”. If any of the following three questions is “No”, the company will not be regarded as a Personal Service Provider and the error message below will be displayed.

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SMALL BUSINESS CORPORATION

This section of the return will only display if the question “Is the company a Small Business Corporation as defined in s12E?” in the “Information to create this income tax return” is “Yes”

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58 | COMPREHENSIVE GUIDE TO THE ITR14 RETURN FOR COMPANIES

CONTRIBUTED TAX CAPITAL

This section of the return will only display if the question “Is the company resident in South Africa for income tax purposes?” in the “Information to create this income tax return” is “Yes”

Note:

The Contributed Tax Capital sections will repeat according to the numeric value entered in the question • “How many different classes of shares have been issued by the company?” on the “Information to create this income tax return” page.

If 4 Contributed Tax Capital sections were created, it is mandatory that all 4 must be completed. If incorrectly • created, refer back to the “Information to create this income tax return” to rectify.

Note:

Companies must have a Contributed Tax Capital (CTC) register in place for each class of share, which • reflects its CTC balance as at 1 January 2011. CTC consists of a company’s pure share capital and share premium. This excludes any capitalised reserves as at 1 January 2011, but includes any consideration received after that date for the issue of shares, reduced by any subsequent distribution of CTC.

The company’s CTC opening balance as at 1 January 2011 must have been calculated as follows:

• ú The value of the company’s share capital and share premium prior to 1 January 2011

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The definition (applicable from 1 January 2011) of a dividend is linked to the CTC concept. If a company • is distributing an amount to shareholders, an important question is whether the amount is a dividend or a reduction of CTC. A reduction of CTC will not constitute a dividend.

–  –  –

Description of class of shares • Complete the description of class of shares in the 3 rows of 17 blocks each provided.

For Close Corporations, the definition of a “share” (any unit into which the proprietary interest in the company is divided) according to the Companies Act includes the members’ interests in a close corporation. Members’ interest therefore must be regarded as a class of share The distinction between different types of shares (e.g. ordinary, preference, redeemable etc.) must be declared separately. Furthermore, if the company has only issued one class of ordinary shares (for example) then a general description would be in order. However, if classes A, B and N ordinary shares have been issued then each class of ordinary share must be specified separately i.e. if there are ult with different rights for the different shareholders they must be declared separately.

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60 | COMPREHENSIVE GUIDE TO THE ITR14 RETURN FOR COMPANIES

URBAN DEVELOPMENT ZONE (s13quat) This section of the return will only display if the question “Did the company qualify for an Urban Development Zone deduction (s13quat)?” in the “Information to create this income tax return” is “Yes”

Note:

A deduction in respect of the Urban Development Zone (UDZ) allowance will be allowed in the determination • of the taxable income of a person that constructed, improved or purchased a building from a developer, provided all the requirements are complied with. When claimed, the tax incentive reduces the taxable income.

The incentive is not limited to the taxable income and can create an assessed loss. This allowance (the UDZ allowance) is applicable in respect of the – ú Erection, extension or improvement of or addition to an entire building;





ú Erection, extension, improvement or addition of part of a building representing a floor area of at least 1 000 m²; or ú Purchase of such a building or part of a building directly from a developer on or after 8 November 2005, provided that certain requirements are met.

A person will only qualify for the UDZ allowance in respect of a building or part of the building constructed, • improved or purchased directly from a developer within an urban development zone (UDZ), if the building or that part of the building is used solely for the purposes of that person’s trade and was brought into use for these purposes on or before 31 March 2014.

The following questions must be completed with a “Yes” or “No”:

61 | COMPREHENSIVE GUIDE TO THE ITR14 RETURN FOR COMPANIES

Is the building for which the company is claiming an allowance in an approved demarcated zone?

• If “No” is selected, the error message below will tell you that an UDZ allowance cannot be claimed.

Did the company receive a certificate issued by the municipality confirming that the building for which the • company is claiming an allowance is in an urban development zone?

If “No” is selected, the error message below will tell you that an UDZ allowance cannot be claimed.

Did the company erect, extend, add or improve the building for which the company is claiming an allowance • with the sole purpose of disposing thereof directly on completion?

If “Yes” is selected, the error message below will tell you that an UDZ allowance cannot be claimed.

If “No” is selected, the following currency field (15 blocks) must be completed in Rands (No Cents):

▫ If No, state the total amount incurred for the erection, extension, addition or improvement of the building Did the company purchase the building or part thereof from a developer?

If “Yes” is selected, the following currency field (15 blocks) must be completed in Rands (No Cents):

▫ If Yes, state the purchase price of the building or part thereof ▫ State the amount of the purchase price deemed to be cost incurred by the company in terms of s13quat(3B) Did the company use the building erected, extended, improved or added on to in use solely for the trade of • the company during the year of assessment?

If “No” is selected, the error message below will tell you that an UDZ allowance cannot be claimed.

Did the company incur costs for the erection, extension or addition relating to low cost housing (s13quat(3A))?

62 | COMPREHENSIVE GUIDE TO THE ITR14 RETURN FOR COMPANIES

SHARES

The following questions must be completed with a “Yes” or “No”:

Was there any change in shareholder’s interest during the year of assessment (excluding listed companies)?

• Did the company convert par value shares to no par value shares during the year of assessment?

If “Yes” is selected, the following currency field (15 blocks) must be completed in Rands (No Cents):

▫ If “Yes”, specify the value

63 | COMPREHENSIVE GUIDE TO THE ITR14 RETURN FOR COMPANIES

BALANCE SHEET

The figures to be used for completion are the figures reflected in the annual financial statements of the • Company (not the group or consolidated annual financial statements).

–  –  –

Capital and Reserves

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

• ▫ Non-distributable reserves ▫ Other capital and reserves Please provide descriptions relating to other capital and reserves listed above: This free text field must only • be completed if a value exceeding R0 (zero) was entered in the field “Other capital and reserves”. The maximum length is 3 rows of 17 blocks If the company has a debit balance (assessed loss) then complete the “Non-distributable reserves” / “Other • capital and reserves” field with a negative value (e.g. -10000).

If the company has a credit balance then complete the “Non-distributable reserves” / “Other capital and • reserves” field then complete this field with a positive value (e.g. 100000) Total Capital and Reserves: 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

Non-Current Liabilities

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

• ▫ Long-term loans ▫ Other non-current liabilities Please provide descriptions relating to other non-current liabilities listed above: This free text field must only • be completed if a value exceeding R0 (zero) was entered in the field “Other non-current liabilities”. The maximum length is 3 rows of 17 blocks) Total Non-Current liabilities: 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 Current Liabilities

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65 | COMPREHENSIVE GUIDE TO THE ITR14 RETURN FOR COMPANIES

completed if a value exceeding R0 (zero) was entered in the field “Other current liabilities”. The maximum length is 3 rows of 17 blocks Total Current liabilities: 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

INCOME STATEMENT

The figures to be used are the figures reflected in the annual financial statement of the Company (not the group or • consolidated annual financial statements).

When completing the Gross Profit / Loss part of the return, the normal accounting meaning attached to the terms • reflected in the tax return must be followed. In the event that a company does not have any cost of sales, for example a property rental company, the turnover and gross profit will be the same amount.

–  –  –

Net Profit – Subtotal: This currency fields (15 blocks) will automatically be calculated on eFiling or for non-eFilers when • the SARS agent captures the return in the branch. Either a net profit or net loss applies. If a net profit applies, the net loss field is not applicable. If the net figure is R0 (zero), then this value applies to the net profit field.

Net Loss – Subtotal: This currency fields (15 blocks) will automatically be calculated on eFiling or for non-eFilers when • the SARS agent captures the return in the branch. Either a net profit or net loss applies. A loss is indicated as a positive value in the net loss field.

–  –  –

In all instances where the accounting and tax treatment of items are different, the full accounting amount must be reversed and similarly the full tax treatment amount disclosed.

For example: Prepayment is claimed for accounting purposes on the income statement but is limited by s. 23H. The • portion that is limited (not allowed) must be added back as a credit adjustment. If the relevant payment is on the balance sheet, then only the qualifying portion must be indicated under the ”Special allowances not claimed” section.

Please take note of the following provisions in the Income Tax Act, 1962 (Act No. 58 of 1962):

Section 12M allows as a deduction an amount paid by an employer as a lump sum to a former employee who retired • on the grounds of old age, ill health, or infirmity or to a dependant of that former employee or under a policy of insurance taken out with an insurer solely in respect of one or more former employees who retired on the grounds of old age, ill health, or infirmity, or their dependants, but only to the extent that the lump sum is to be used to make contributions to a medical scheme or fund registered under the Medical Schemes Act, or under a similar provision in another country The payment to the individual has to be that he or she can pay the future medical scheme payments. Where the payment is to an insurer, the policy must be only for the retired employee and his or her dependants. If the policy only relates partly to medical scheme coverage, only that part of the premium is deductible. No deduction is allowed if the employer or a connected person to the employer has any further obligation or retains any further obligation (even a contingent obligation) to pay any other amount in respect of any shortfall under the policy.

S. 12O provides a 100% tax exemption (with effect from 1 January 2012) in respect of all receipts and accruals in • respect of films of which principal photography commences on or after 1 January 2012, but before 1 January 2022.



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