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10 Cards in this Set
- Front
- Back
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The Main Types of VAT affecting a business entity |
VAT Income Tax |
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VAT |
14% on Vatable supplies VAT vendors - Charge VAT - Claim VAT Non Vendors - Don't charge - Don't claim Vat vendors must keep a record of vAT - Input VAT (VAT on purchases) - Output VAT (VAT charged on sales) |
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Income tax |
28% of taxable profits (ie the portion of the profit before tax that is taxable) Incurred * Current (charged) * Deferred (next chapter) Current *Estimate of current year assessment * Adjustment to previous year estimates |
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Differences between accounting profits and taxable profits Temporary Differences Non Temporary difference |
Temporary differences: These cause deferred tax * Depreciation (IFRS expense) (Tax Act: deductible allowance - often a different amount) * Income received in advance (IFRS LIability) (Tax act income) * Expense prepaid (IFRS Assets) (Tax act: Expense) * Non capital profit on sale of asset (IFRS Income) (Tax Act Recoupment- often a different Amount) * Loss on sale of asset (IFRS expense) (Tax Act a deductible scrapping allowance - often a different amount) |
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Non Temporary differences - Permanent Differences - These cause reconciling items in the rate recon |
* Capital profit (IFRS Income) (Tax Act: part or all of this may be capital gain, 50% of which is taxable- the rest is exempt, being a non temporary difference) * Dividends income (IFRS Income) (Tax act generally all exempt ie- not taxable) * Fines (IFRS Expense) (Tax Act: non deductible) * Donations (IFRS Expense) (Tax Act: generally non deductible) |
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Dividends Tax replaces Secondary Tax on Companies (STC) |
* A tax on the share holder * The entire 15% is deducted from the dividends declared * The company withholds the tax and pays it over to the tax authorities * The tax is not part of the tax expense line item * Exemptions arise only in a limited number of circumstances * Unused STC credits may be carried forward for use by shareholders in reducing their dividends tax (expires after 3 years) |
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Key |
POSA- Profit on sale of asset CP- Capital Profit NCP- Non Capital Profit NCL- Non Capital loss on Sale CA- Carrying amount AD Accumulated Depreciation TPoSA- Taxable profit on sale of asset CG- Capital Gain BC- Base Cost TCG- Taxable Capital Gain TB- Tax Base Recoup_ Recoupment SA- Scrapping Allowance AW&T Accumulated Wear & Tear |
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Calculation of income Tax - Converting accounting profit into taxable profits |
Profit before tax Adjustment for noon temporary difference (less exempt income and nondeductible expenses) Less exempt dividends income Less Exempt Capital profit - Less capital profit - Add taxable capital gain Add nondeductible fines Add nondeductible donations Profit before tax that the accountant knows will be taxable at some stage Adjust for Temporary Differences Add Depreciation Less Wear & Tear Less Non capital profit on sale (or add loss on sale) (SP(Limited to CP)- CA Add recoupment on sale (SP (Limited to CP) - TB; or Less scrapping allowance on sale Add income received in advance (C/balance) Less income received in advance (O/balance) Less prepaid expenses (C/balances) Add prepaid (O/balance) Add provisions (c/b) Less provisions (o/b) Taxable profit or (loss) Income tax (28% of taxable profits) |
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Useful Comparative calculations relating to the sale of non current assets Accountant |
PoSA- Proceeds- CA = (CP + NCP) CP= Proceeds - Costs *Part of CP may be exempt from tax (Exempt CP= CP- TCG) NCP/(NCL)= proceeds (limited to cost)- CA CA = Cost - AD |
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Useful Comparative calculations relating to the sale of non current assets Tax Authority |
TPoSA= TCG + Recoup CG= Proceeds - Base Cost TCG= CG x inclusion rate (66.6% for companies and 33.3% for individuals in SA) Recoup/ (SA)= Proceeds (limited to cost) - TB TB= Cost - AW&T |
