Taxa7311 Mo

IIE Learn Module Outline TAXA7311
Taxation 3A
TAXA7311
MODULE OUTLINE 2022
(First Edition: 2019)
This guide enjoys copyright under the Berne Convention. In terms of the Copyright Act, no 98 of
1978, no part of this manual may be reproduced or transmitted in any form or by any means,
electronic or mechanical, including photocopying, recording or by any other information storage
and retrieval system without permission in writing from the proprietor.
The Independent Institute of Education (Pty) Ltd is registered with the

Department of Higher Education and Training as a private higher education
institution under the Higher Education Act, 1997 (reg. no. 2007/HE07/002).
Company registration number: 1987/004754/07.
© The Independent Institute of Education (Pty) Ltd 2022 Page 1 of 36

Table of Contents
Introduction ............................................................................................................................................... 3
Using this Module Outline ......................................................................................................................... 4
This Module on Learn ................................................................................................................................ 5
Icons Used on Learn ................................................................................................................................... 6
Module Resources ..................................................................................................................................... 7
Module Purpose ......................................................................................................................................... 8
Module Outcomes ..................................................................................................................................... 8
Module Pacer ........................................................................................................................................... 13

Introduction
Welcome to Taxation 3A which is built on Taxation 2A. In this module, we will still be looking at
the taxation of corporate entities, however, this will be more in-depth and deal with more
complex issues. Understanding and applying the taxation principles contained in this module
opens up many doors in your career. Whether you choose to specialise in tax or not, this subject
is fundamental to being a well-rounded professional working in the corporate world. This is also
a very practical subject and can aid you in your personal life as well.
Students generally find this module difficult as they are introduced to several new concepts. The
content of this module is large, and students find great difficulty in studying towards the exam
as all topics are examinable and a lot of content needs to be covered in order to be adequately
prepared for the exam. Tests and ICE tasks will be given during the course of the semester in
order to assist you with keeping up to date with the syllabus, and to ensure that you are studying
the content on a regular basis, which will also assist with the end of semester exam preparation,
and will ease the volume that needs to be studied. Completing work at home and tackling
homework is essential for passing this module.
The focus of Taxation 2A was the basics of Income Tax and Value-Added Tax (VAT). Taxation 3A
requires a deeper understanding of both Income Tax and VAT as well as the ability to interpret
and apply more difficult sections. You will also be looking at other taxes such as Dividends Tax
and donations and how all these taxes integrate with each other.
The content and volume of this module is vast and, in some instances, very complex, but it can
be mastered with sufficient practice and application. The knowledge obtained from this module
will benefit you greatly in your Honours year (CTA) and the working world. Obtaining an
understanding of the content this year will ease the burden in your future studies.

Using this Module Outline

A Module Outline is a brief summary of the module and is given to you to support your
learning.
The content of this module is on Learn as well as in the prescribed material. You will not
succeed in this module if you focus on this document alone.
To succeed in this module, you will need to:
- Attend lectures/online sessions;

- Go through the material and activities on Learn;
- Read the prescribed material.
Your lecturer will decide when activities are available/open for submission and when these
submissions or contributions are due. Ensure that you take note of announcements made
during lectures and/or posted in the Student Portal and within Learn in this regard.
- Your campus will provide you with details about when your assessments are due.

This Module on Learn

Learn is an online space, designed to support and maximise your learning in an active manner.
Its main purpose is to guide and pace you through the module. In addition to the information
provided in this document, you will find the following when you access Learn:
• A module overview;
• A list of prescribed material;
• A variety of additional online resources (articles, videos, audio, interactive graphics, etc.)
in each learning unit that will further help to explain theoretical concepts;
• Critical questions to guide you through the module’s objectives;
• Collaborative and individual activities (all of which are gradable) with time-on-task
estimates to assist you in managing your time around these;
• Revision questions, or references to revision questions, after each learning unit.
Kindly note:
• Unless you are completing this as a distance module, Learn does not replace your
contact time with your lecturers and/or tutors.
• TAXA7311 is a Learn module, and as such, you are required to engage extensively with
the content on the Learn platform. Effective use of this tool will provide you with
opportunities to discuss, debate, and consolidate your understanding of the content
presented in this module.
• You are expected to work through the learning units on Learn in your own time –
especially before class. Any contact sessions will therefore be used to raise and address
any questions or interesting points with your lecturer, and not to cover every aspect
of this module.
• Your lecturer will communicate submission dates for specific activities in class and/or
on Learn.

Icons Used on Learn
The following icons are used in all your modules on Learn:
Icon Description
A list of what you should be able to do after working through the learning unit.
Specific references to sections in the prescribed work.
Questions to help you recognise or think about theoretical concepts to be

covered.
Sections where you get to grapple with the content/theory. This is mainly
presented in the form of questions which focus your attention and are aimed at
helping you to understand the content better. You will be presented with online
resources to work through (in addition to the textbook or manual references) and
find some of the answers to the questions posed.
Opportunities to make connections between different chunks of theory in the

module or to real life.
Real life or world of work information or examples of application of theory, using

online resources for self-exploration.
REMEMBER:
You need to log onto Learn to:

• Access online resources such as articles, interactive graphics, explanations, video clips, etc., which
will assist you in mastering the content; and
• View instructions and submit or post your contributions to individual or group activities which are
managed and tracked on Learn.

Module Resources
Prescribed Material (PM) for SAICA, 2022. SAICA Student Handbook Volume 3.
this Module 2021/2022. LexisNexis.
ISBN: 9780639014050
Stiglingh M, 2022. SILKE: South African Income Tax.

LexisNexis
ISBN: 9780639013978
Alex Brettenny/Amanda Singleton. 2022. A Student’s Guide

to Advanced Tax.
ISBN: 9780620961561
Recommended Readings, Please note that a number of additional resources and links
Digital, and Web Resources to resources are provided throughout this module on the
Learn platform. You are encouraged to engage with these as
they will assist you in mastering the various objectives of
this module. They may also be useful resources for
completing any assignments. You will not, however, be
assessed under examination conditions on any additional or
recommended reading material.
Module Overview You will find an overview of this module on Learn under the
Module Information link in the Course Menu.
Assessments Find more information on this module’s assessments in this
document and on the Student Portal.

Module Purpose
The purpose of this module is for students to critically examine complex tax rules and
regulations in order to calculate Value-Added Tax, taxable income and other taxes for
various corporate entities.
Module Outcomes
MO1 Analyse the VAT implications of a transaction.
Calculate normal Income Tax for a corporate entity, applying relevant tax rules
MO2
and regulations correctly.
Calculate the tax payable or refundable by the taxpayer for the year of
MO3
assessment.
MO4 Calculate different taxes for a specific year of assessment.

Assessments
Integrated Curriculum Engagement (ICE)

Minimum number of ICE activities to complete 4
Weighting towards the final module mark 10%
Formatives Test 1 Test 2

Weighting 20% 20%
Duration 1 hour 1 hour
Write/Submit after After session 12 After session 28
Learning Units covered LU1 – 3 LU1 – 6
Resources required None None
Summative Examination
Weighting 50%
Duration 3 hours
Total marks 120
Open/Closed book Open book
Resources required None
Learning Units covered All

Limited open-book assessments:

A limited open book approach is followed by SAICA for the Initial Test of Competence (ITC).
All IIE Bachelor of Accounting modules follow a similar approach for all tests and examinations.
The following textbooks may be taken into the assessment venue

SAICA Handbooks:
• Volume 1: International Financial Reporting Standards that form part of the SAICA
handbooks, part A1 and A2 and part B1, B2 and B3 (5 books)
• Volume 2A: International Audit Standards;
• Volume 2B: SAICA and IRBA pronouncements;
• Volume 2C: Local legislation;
• Volume 2D: The King Code;
• Volume 3: The SAICA Tax Legislation Handbook.
Textbook instructions
1. Students are permitted to bring only ONE printed version of the textbooks.
2. Only properly bound standard publishers’ editions are permissible. Photocopies, printed
copies of electronic versions, loose sections or isolated pages of texts are prohibited.
3. Students are permitted to highlight, underline, sideline and flag in the permitted texts.
Writing in the permitted texts is prohibited. Writing on flags is permitted for reference and
cross-referencing purposes only (name or number of the standard, statement or section).
4. Any contravention of these regulations will be dealt with as misconduct and shall be dealt
with in terms of the appropriate misconduct policy.

Assessment Preparation Guidelines

Format of the Assessment Preparation Hints
Test 1
The test for this module will • Ensure that you work through all the relevant activities,
assess your understanding exercises and revision questions on Learn and in your
of Learning Units 1 – 3 of textbook.
this module and will include • Brainstorm possible questions based on the learning
a series of short and outcomes and objectives provided. Then complete these
medium-length questions, as practise tests.
as well as one longer • During both your preparation for the test and during the
question. You will be test itself, pay attention to the instruction words (like list,
expected to apply, as well as apply, describe, etc.) and to the mark allocations of each
recall information as per question to ensure that you are able to provide the
your objectives for these correct depth and detail in your answers.
learning units. • Make sure that you have mastered the objectives in
Learning Units 1 – 3.
Test 2
The test for this module will • Ensure that you work through all the relevant activities,
assess your understanding exercises and revision questions on Learn and in your
of Learning Units 1 – 6 of textbook.
this module and will include • Brainstorm possible questions based on the learning
a series of short and outcomes and objectives provided. Then complete these
medium-length questions, as practise tests.
as well as one longer • During both your preparation for the test and during the
question. You will be test itself, pay attention to the instruction words (like list,
expected to apply, as well as apply, describe, etc.) and to the mark allocations of each
recall information as per question to ensure that you are able to provide the
your objectives for these correct depth and detail in your answers.
learning units. • Make sure that you have mastered the objectives in
Learning Units 1 – 6.
Examination
The examination will assess • Make sure that you practise answering the sample
all learning units in this questions in the brief so that you become familiar with the
module and will include kinds of questions likely to appear in the examination itself.
both theory and
application-type questions. • Ensure that you work through all the activities, exercises
and revision questions on Learn and in your textbook. You
must have completed close readings of your prescribed
material to ensure that you have prepared adequately for
your examination for this module.

You will be expected to • Pay close attention to the instruction words (like list, apply,
respond to short, theory- describe, analyse, etc.) and to the mark allocations of each
based questions, as well as question to ensure that you provide the correct depth and
to three literary analysis detail in your answers.
essay-type questions). • Make sure that you are comfortable in responding to all the
objectives for all learning units.
• Brainstorm possible questions based on the learning
outcomes and objectives provided.

Module Pacer
Code Programme Contact Sessions Credits
TAXA7311 BAC312 48 + 5 Learn 12
Learning Unit 1 Value-Added Tax (VAT)
Overview:
In Taxation 2, you learnt the basics of VAT. In this learning unit, we will now be looking at VAT
in more detail. VAT is a separate tax and is levied in accordance with its own rules as per the
Value-Added Tax Act No. 89 of 1991.
You previously learnt how to calculate output and input tax as well as the amount that is owed
to/by SARS at the end of the VAT period. The payment made to SARS requires an
understanding of the administrative process, so you will need to know when a person should
register for VAT, the different payment categories that are available, when the return must be
submitted and paid, and whether or not an invoice is valid in order for input VAT to be claimed.
Accounting for the input and output tax is vital to your understanding of how it is treated in
the real world and thus you must be able to provide the necessary journal entries for any
transaction.
You also learnt how to determine the VAT treatment of a particular transaction, i.e., when
output tax is levied and when input tax can be claimed. This includes learning the special rules
such as the exempt and zero-rated supplies for output tax and the type of goods that will lead
to input vat being denied.
All the above was covered in Taxation 2A and is still important in this module.
In this learning unit, you will need a deeper knowledge and understanding of these concepts.
In addition to this, you will also learn what are deemed supplies and when output tax should
be levied on such supplies. With regards to input tax, you will have to determine when input
tax must be apportioned and be able to identify the scenarios when notional input tax can be
claimed on second hand good. And lastly, you will need to know how to account for
adjustments to both output and input tax when there is a change in use of goods.
If you are a contact student, you will likely spend eight sessions on this learning unit.
Please work through Themes 1 – 4 on Learn, together with the relevant sections of your
prescribed source/s. To ensure that you are working towards mastering the objectives for this
learning unit, please complete the following activities on Learn:

Activity Estimated
Time on Task
1.1.1 Calculate net VAT payable 60 minutes
1.2.1 The accounting basis and administration 60 minutes
1.3.1 Calculating output tax 90 minutes
1.4.1 Calculating input tax 30 minutes
1.5.1 Discuss the VAT treatment with change in use adjustments 120 minutes
Estimated total time for this learning unit’s activities 6 hours
Students generally struggle with this topic not only because of the volume, but also because
of the level of detail you are expected to know. There are many rules and exceptions to the
rules and this may become very confusing. It is imperative that you are able to distinguish
between output and input tax as well as understanding the difference between a zero rated
(taxable) and an exempt supply. Marks will not be awarded if these are incorrectly identified.

Learning Unit 1: Theme Breakdown

Sessions: Theme 1: The calculation of VAT Prescribed Material (PM)
1–8
Academic Week: LO1: Calculate output or input tax on an Silke: Chapter 31
1–2 amount that is inclusive of VAT or SAICA Student Handbook
Related exclusive of VAT. Volume 3: Value-Added
Outcome: LO2: Calculate output or input tax on an Tax Act
MO1 amount that is exclusive of VAT.
LO3: Calculate the net VAT payable to or
refundable by SARS at the end of a
particular VAT period.
LO4: Supply the journal entries to record
transactions and the VAT effect of
such transactions.
Theme 2: The accounting basis and Silke: Chapter 31
administration SAICA Student Handbook
LO5: Explain how the VAT system works. Volume 3: Value-Added
LO6: State when a taxpayer needs to Tax Act
register as a vendor.
LO7: Describe the different categories of
vendors:
o Describe their various tax
periods.
LO8: Identify the accounting basis to be
applied to the vendor.
LO9: Determine when returns are to be
submitted:
o Determine when payments
must be made.
Theme 3: Output tax Silke: Chapter 31
LO10: Determine when output vat must be SAICA Student Handbook
levied on the supply of goods and Volume 3: Value-Added
services. Tax Act
LO11: Determine when a supply is a zero-
rated supply or exempt.
LO12: Apply the value and timing rules of a
supply.

LO13: Determine when output tax must be

levied on a deemed supply:
o Calculate output tax on deemed
supplies in accordance with the
prescribed rules.
Theme 4: Input tax Silke: Chapter 31
LO14: List the requirements of a valid VAT SAICA Student Handbook
invoice that enable input tax to be Volume 3: Value-Added
claimed. Tax Act 1
LO15: Based on the value and timing rules
addressed under output tax,
determine the input tax that can be
claimed on a transaction.
LO16: Identify transactions where input tax
will be denied.
LO17: Determine when notional input tax
can be claimed on second-hand
goods.
LO18: Apply the apportionment rules to
calculate the amount of input tax
that can be claimed where a
business is not making 100% taxable
supplies.
Theme 5: Adjustments Silke: Chapter 31
LO19: Identify a total and a partial change SAICA Student Handbook
in use. Volume 3: Value-Added
LO20: Calculate the adjustments to output Tax Act
and input tax when there is a change
in use of goods purchased.

Learning Unit 2 Income Tax
Overview:
We will now be looking at Income Tax in more detail. Income Tax is a separate tax and is levied
in accordance with its own rules as per the Income Tax Act No. 58 of 1962.
In this learning unit, you will need to identify a specific type of taxpayer and from that,
determine at what rate that taxpayer should be taxed. Taxpayers such as “small business
corporations” and “microbusinesses” have to meet certain requirements before they can
register as such taxpayers. You will need to know what these requirements are and apply them
in a practical scenario.
You will also need to know how to calculate taxable income and the tax liability for that
taxpayer per the framework. A microbusiness is taxed using the turnover tax method, which
requires you to know how to calculate “qualifying turnover” and “taxable turnover”.
This learning unit merely provides a foundation. The detail of how taxable income is calculated
(based on the framework and the relevant legislation) will be covered in separate learning
units. It should be noted that the integration between Income Tax and VAT will be much more
in-depth and complex from what you were exposed to in Taxation 2A.
If you are a contact student, you will likely spend four sessions on this learning unit.
Activity Estimated Time

on Task
2.1.1 Calculate the tax liability for a microbusiness 60 minutes
2.2.1 Calculate the VAT and Income Tax implications 60 minutes
While this module is not very difficult, students tend to struggle with the new concepts,
elements of the Income Tax framework and the tax liability framework are often confused,
which leads to many errors in their calculations. Students also confuse the rates applicable to
a particular taxpayer. It is recommended that you familiarise yourself with the terminology in
this study unit and thoroughly understand the frameworks as these will form the basis of what
you will cover over the rest of the semester.


Sessions: Theme 1: Different taxpayers Prescribed Material (PM)
9 – 10
Academic Week: LO1: Identify different taxpayers. Silke: Chapter 23
3 LO2: Determine the manner in which SAICA Student Handbook
Related each respective taxpayer should Volume 3: Income Tax Act
Outcomes: be taxed. S12E(4) only.
MO2 LO3: Apply the requirements for a
MO3 taxpayer to register as a
“microbusiness”.
LO4: Apply the requirements for a
taxpayer to register as a “small
business corporation”.
LO5: Calculate a taxpayer’s taxable
income per the framework.
LO6: Calculate a taxpayer’s tax liability
or refund per the framework.
LO7: Calculate the following of a
microbusiness:
• “qualifying turnover”;
• “taxable turnover”; and
• the tax liability or refund.
Theme 2: The impact of VAT on Income Silke: Chapter 31.33 only.
Tax SAICA Student Handbook
LO8: Determine the impact of VAT on Volume 3: Income Tax Act
transactions included in the S23C.
Income Tax calculation.

Learning Unit 3 Income
Overview:
In Learning Unit 2, you learnt the framework of how to calculate taxable income. Learning
Units 3 to 6 will break down that framework into its individual components and deal with each
one separately.
The first component is “Income”. The Income Tax Act defines income as “gross income” less
exempt income (i.e. income items which are not taxed). “Gross income” is specifically defined
in section 1 of the Act and most exemptions available to taxpayers are contained is section 10
of the Act.
In this learning unit, we will be looking at what makes up gross income per definition and you
will learn to apply the various components of that definition (with related case law) to
determine if an amount is gross income. We will also look at certain scenarios when the
definition is overridden, and the amount is included because it is a special inclusion.
We will then move on to exempt income and you will learn to identify when an entire entity
or just a stream of income is exempt from tax. Please note that for both of these, we will only
be looking at what pertains to a business entity and thus this learning unit does not contain all
the specific inclusions and exemptions included in the Act. These will be covered later in your
studies.
Although the content of this learning unit is exactly the same as Taxation 2A, the application
of these rules will be more complex in this module.

on Task
3.1.1 Discuss if an amount is gross income 60 minutes
3.2.1 Discuss if an amount is gross income (with special inclusions) 60 minutes
3.3.1 Exempt income 60 minutes

This topic is usually tested in a theory or discussion type question and students generally
struggle with this. The principles of the “gross income” definition and the relevant case law
are easy to understand, but sometimes difficult to apply and discuss, especially those relating
to “capital in nature”. The only way to combat this is to practice questions.
It is important to note that because you will now be delving into a framework, each learning
unit builds on the one before and you must keep up to date. Missing lectures or falling behind
will inevitably lead to unnecessary confusion.


Sessions: Theme 1: The “Gross income” definition Prescribed Material (PM)
11 – 12
Academic Week: LO1: State the criteria contained in the Silke: Chapter 3
4 definition of gross income (together SAICA Student Handbook
Related with the applicable case law). Volume 3: Income Tax Act
Outcomes: LO2: Apply the principles of relevant case S1: Gross income
MO2 law to illustrate the meaning of the definition.
MO3 terms used in the gross income
definition.
Theme 2: Gross income – Special inclusions Silke: Chapter 4
LO3: Identify the special inclusions of gross SAICA Student Handbook
income specifically for a business Volume 3: Income Tax Act
entity, namely: S1: Gross income
o (c) Services rendered or voluntary definition – for special
awards; inclusions only read the
o (g) Lease premiums; paragraphs noted under
o (gA)“Know-how” payments; LO3.
o (h) Lease Improvements;
o (jA) Sale of assets similar to
trading stock;
o (k) Dividends;
o (lC) Government grant;
o (m) Key-man insurance policies;
o (n) Recoupments and other
inclusions.
LO4: Calculate the amount that should be
included in gross income for various
recipients based on information
provided.
Theme 3: Exemptions Chapter 5 (par 5.3 only)
LO5: Identify entities which are exempt SAICA Student Handbook
from tax. Volume 3: Income Tax Act
LO6: Identify income that is exempt from – only read the sections
tax for a business entity, namely: noted under LO6.
o S10(1)(k) Local dividends;
o S10B Foreign dividends; and
o S12P Government grants.

Learning Unit 4 Deductions
Overview:
You are now moving on to the next part of the taxable income framework: deductions. These
are all the costs that can be deducted from “income”. As a recap, the term “income” means
“Gross income” less exempt income and it is imperative that you understand that meaning for
this module. Not all costs incurred by a business can be claimed as a deduction for tax.
This learning unit guides you through how to assess which costs are deductible and which are
not by applying the definition of section 11(a) (general deduction formula) and the related
case law. You will also learn how to calculate certain specific deductions in accordance with
rules prescribed in the Income Tax Act. Lastly, you will learn how to identify costs or expenses
which are not allowed as a deduction (prohibited by section 23).
Although the content of this learning unit is similar Taxation 2A, there are a number of new
sections that need to be learnt and the application of these rules will be more complex in this
module.

on Task
4.1.1 Discuss the tax treatment of a transaction 60 minutes
4.2.1 Calculate taxable income 60 minutes
4.3.1 Prohibited deductions 60 minutes
Similarly to the previous learning unit, students tend to struggle with the discussion and theory
type questions. Applying the criteria of the general deduction formula (section 11(a)) as well
as the relevant court cases prove to be quite challenging. Students also find it difficult to
remember the rules for each specific deduction. There are a lot of new sections which are
introduced in this learning unit and each one comes with its own rules. Students tend to
confuse these rules. However, if you practice consistently, you will find that applying these
rules become much easier.


Sessions: Theme 1: General deduction formula Prescribed Material (PM)
13 – 20 (Positive test S11(a) and negative test
S23(g))
Academic Week: LO1: State the criteria contained in S11(a) Silke: Chapter 6
5–6 (together with the applicable case SAICA Student Handbook
Related law). Volume 3: Income Tax Act
Outcomes: LO2: Apply the principles of relevant case S11(a)
MO2 law to illustrate the meaning of the
MO3 terms used in the general deduction
formula (S11(a)).
Theme 2: Specific deductions Silke: Chapter 12, 14 and
LO3: Calculate the various specific 15.
deductions (including trading stock) SAICA Student Handbook
that are available to the taxpayer in Volume 3: Income Tax Act
accordance with the Income Tax Act. – only read the sections
These include: noted under LO3.
o S7B – Timing of accrual and
incurral of variable remuneration;
o S11(c) – Legal fees;
o S11(cA) – Restraint of trade;
o S11(d) – Repairs;
o S11(gB) – Renewal of patents,
designs, copyrights and
trademarks;
o S11(gC) – Acquisition of patents,
designs and copyrights;
o S11(i) – Bad debts;
o S11(j) – Allowance for doubtful
debts;
o S11(l) – Contributions to pension
funds, provident funds and
medical aids;
o S11(lA) – Broad-based employee
share schemes;
o S11(m) – Annuities paid to
employees and dependants;
o S11A – Pre-trade expenditure
o S11D – Research and
development;
o S12H – Learnership agreements;

o S18A – Donations to Public

Benefit Organisations;
o S20 – Set off of assessed losses;
o S22 – Trading stock (including
recoupments);
o S24 – Credit agreements and
debtors allowances;
o S24C – Allowance in respect of
future expenditure on contracts;
o S24I – Gains and losses on foreign
exchange transactions;
o S25D – Determination of taxable
income in foreign currency.
Theme 3: Prohibited deductions Silke: Chapter 6
LO4: Identify costs which are prohibited SAICA Student Handbook
from being deducted. These include: Volume 3: Income Tax Act
o S23(c) – insured losses; S23 – only read the
o S23(d) – Tax, penalties, interest paragraphs and sections
and levies; noted under LO4
o S23(e) – Provisions;
o S23(f) – Expenses incurred to
produce exempt income;
o S23(g) – Non-trade expenditure;
o S23(l) – Expenditure relating to
restraint of trade payments;
o S23(o) – Fines and corrupt
activities;
o S23(q) – Expenses relating to
foreign dividends;
o S23B – Prohibition of double
deductions;
o S23C – Reduction of the cost or
market value of certain assets;
o S23F – Acquisition or disposal of
trading stock (Anti-avoidance);
o S23H – Limitation of certain
deductions (prepaid expenditure).

Learning Unit 5 Capital Allowances
Overview:
In Learning Unit 4, you learnt the criteria to deduct a cost incurred under section 11(a). One
of the requirements for deductibility was that the amount should not be capital in nature.
This, however, does not mean that SARS does not allow a taxpayer to deduct capital
expenditure. In Taxation 2A, you only learnt about the allowances that can be claimed on
assets that were purchased.
In this learning unit, you will learn about the capital allowances that can be claimed on assets
that are purchased (both moveable and immoveable) as well as those that are leased, and you
will learn how to calculate these allowances in accordance with the specific sections of the
Act. We will also look at calculating the tax effect of disposing of an asset, including whether
or not a recoupment can be deferred. And lastly, you will need to identify situations where
there are any limitations on the amount of capital allowances that may be claimed and any
limitations on losses that can be claimed on disposal.
prescribed source/s. To ensure that you are working towards mastering the objectives for
this learning unit, please complete the following activities on Learn:

on Task
5.1.1 Repair versus improvement 30 minutes
5.2.1 Calculate the correct capital allowance 60 minutes
5.3.1 Calculate the taxable income of Storm Limited 120 minutes
5.4.1 Calculate the tax effect on the disposal of an asset 60 minutes
5.5.1 Calculate the deductions for a lease 60 minutes
Estimated total time for this learning unit’s activities 5.5 hours
Every section has its own rules and provisos. This learning unit is done directly after deductions
where there was quite a few new sections to learn and in this learning unit, the volume
increases. You will start to feel overwhelmed at this stage with the various sections and rules.
It is confusing and daunting trying to remember all this information, but remember that an
easy way to combat this is to make sure you keep up to date and practice lots of questions.


Sessions: Theme 1: Terminology Prescribed Material (PM)
21 – 28
Academic Week: LO1: Define the different terms used: Silke: Chapter 13
7–8 o Discuss how such items are SAICA Student Handbook
Related treated in the Income Tax Volume 3: S11(d)
Outcomes: calculation.
MO2 LO2: Distinguish between a repair and
MO3 improvement and determine the
difference in tax treatment of each
one.
Theme 2: Capital allowances for moveable Silke: Chapter 13
assets SAICA Student Handbook
LO3: Calculate the capital allowances that Volume 3: Income Tax Act
are available to the taxpayer in – only read the sections
respect of moveable assets in noted under LO3.
accordance with the Income Tax Act.
Allowances covered include:
o S11(e) – Wear and tear allowance
on other assets (non-
manufacturing assets);
o S12B – Deduction in respect of
certain assets used in farming or
the production of renewable
energy;
o S12C – Deductions on moveable
assets used by manufacturers;
o S12E – Deductions in respect of a
Small Business Corporation;
o S23A – Limitation of allowances
granted for lessors in respect of
certain assets.

Theme 3: Capital allowances for Silke: Chapter 6

immoveable assets SAICA Student Handbook
LO4: Calculate the capital allowances that Volume 3: Income Tax Act
are available to the taxpayer in – only read the sections
respect of immoveable in accordance noted under LO4
with the Income Tax Act. Allowances
covered include:
o S13 – Deductions in respect of
buildings used in the process of
manufacture;
o S13quat – Deductions in respect
of erection or improvements of
buildings in an urban
development zone;
o S13quin – Deductions in respect
of commercial buildings;
o S13sex – Deductions in respect of
certain residential units;
o S13sept – Deductions in respect
of sale of low-cost residential
units on loan account.
Theme 4: Disposal of assets Silke: Chapter 6
LO5: Calculate the effects that the disposal SAICA Student Handbook
of an asset has on taxable income, Volume 3: Income Tax Act
namely: – only read the sections
o Recoupments (S8(4)(a), S8(4)(k)); noted under LO5
o Deductible scrapping losses/
allowances (S11(o));
o Determine when a recoupment
can be deferred in terms of
section S13(3) and S8(4)(e).
Theme 5: Leased assets Silke: Chapter 6
LO6: Calculate the allowances that are SAICA Student Handbook
available in respect of leased assets Volume 3: Income Tax Act
for the lessee and the lessor, namely: – only read the sections
o S11(f) – Allowance granted in noted under LO6
respect of a lease premium paid;
o S11(g) – Allowance in respect of
improvements made to leased
property;

o S11(h) – Allowance granted in

respect leasehold improvements
for the lessor;
o S13 – Allowances granted in
respect of improvements made to
leased manufacturing buildings in
excess of the contract price;
o S12N – Deductions in respect of
improvements not owned by the
taxpayer.
o S8(5) – Recoupment of
deductions previously granted in
respect of leased assets.

Learning Unit 6 Capital gains tax (CGT)
Overview:
When a capital asset is disposed of, the implications are twofold. There is an Income Tax
implication and there is also a capital gains tax (CGT) implication. You learnt the Income Tax
implication (recoupment and scrapping allowance) in Learning Unit 5.
You will now be looking at the CGT implications. You will learn how to determine who needs
to pay CGT and when it needs to be paid. You will learn how to calculate proceeds and base
cost as well as the resulting capital gain or loss. As part of this, you will have to determine if
gains may be deferred or if losses claimed will be limited. From there, you will learn how to
calculate the taxable capital gain using the applicable inclusion rate for the taxpayer. You will
also need to determine the tax treatment (for both Income Tax and CGT) of debt reduction
and the sale of shares. Although the CGT calculation is quite complex, it is merely an additional
step that is added on the calculations you learnt in Learning Unit 5.

on Task
6.1.1 Calculate taxable income with CGT 90 minutes
6.2.1 Calculate the capital gains tax effect on disposal 120 minutes
Estimated total time for this learning unit’s activities 3.5 hours
The calculation of CGT is done in terms of its own unique framework and it is only the end
result that is included in the taxable income calculation. It also has its own definitions. While
there is a lot of volume, students tend to master this topic quite easily if they put in the initial
work in Learning Unit 6 as this topic built on the previous topic. Students, however, still tend
to struggle with the rules of a pre-valuation date asset and the rules for calculating the
valuation date value of an asset using paragraph 26 and 27 of the Eighth Schedule.


Sessions: Theme 1: Framework for calculating Prescribed Material (PM)
29 – 36 Capital Gains Tax (CGT)
Academic Week: LO1: Determine the difference between Silke: Chapter 17
10 – 11 how residents and non-residents are SAICA Student Handbook
Related subject to CGT. Volume 3: Income Tax Act –
Outcomes: LO2: Determine when CGT is applicable. 8th Schedule
MO2 Theme 2: Calculating the taxable capital Silke: Chapter 17
MO3 gain or assessed capital loss SAICA Student Handbook
LO3: Calculate proceeds. Volume 3: Income Tax Act –
LO4: Calculate base cost of a pre- 8th Schedule
valuation date asset.
LO5: Calculate base cost of a post-
valuation date asset.
LO6: Determine if capital losses need to
be limited.
LO7: Determine if a capital gain may be
deferred (rollover provisions per par
65 and 66).
LO8: Determine the Income Tax and CGT
effect of the reduction of debt (s19
and par 12A of the 8th schedule).
LO9: Determine when the sale of shares
is capital or revenue in nature and
the tax treatment thereof (S9C).
LO10: Calculate the aggregate and net
capital gain.
LO11:Determine the inclusion rate
applicable for a particular taxpayer.

Learning Unit 7 Provisional tax
Overview:
In Learning unit 2, you were introduced to the taxation process. You also learnt how to
calculate the tax payable or refundable, which is the tax calculated per the specified rate of
that particular taxpayer less any prepaid taxes. There are two methods of prepaying over taxes
to SARS, namely provisional tax and employees’ tax.
Any taxpayer will need to prepay their taxes before the end of the year of assessment. The
true taxable income for that taxpayer has not yet been calculated for the year and thus will
need to be estimated.
In this learning unit, we will be looking exclusively at provisional tax, who is required to pay it,
when is it paid over and how the calculations for the first, second and third provisional
payment is performed. Employees’ tax will only be covered in Taxation 3B.

on Task
7.1.1 Determine if a person is a provisional taxpayer 60 minutes
7.2.1 Calculate the provisional tax payments 60 minutes
This is a relatively easy learning unit, however, students tend to confuse payment dates. The
second provisional payments prove to be the most challenging because of the choices that
need to be made to determine what to base the payment on. Once this is understood, the
calculations are simple and students master this topic quite easily.


Sessions: Theme 1: Provisional taxpayers Prescribed Material (PM)
37 – 38
Academic Week: LO1: List the type of taxpayers who are Silke: Chapter 11
13 required to pay provisional tax. SAICA Student Handbook
Related Volume 3: Income Tax Act –
Outcome: 4th Schedule
MO3 Theme 2: Calculation of provisional tax Silke: Chapter 11
payments SAICA Student Handbook
LO2: Calculate the first, second and third Volume 3: Income Tax Act –
provisional payments in accordance 4th Schedule
with the Fourth Schedule of the
Income Tax Act.

Learning Unit 8 Donations Tax
Overview:
Donations Tax is similar to Capital Gains Tax (CGT) as both are taxes on the transfer of wealth.
When a resident donates property, it triggers Donations Tax. In this learning unit, you will learn
how to identify when a disposal of property is a donation and which scenarios will be seen as
deemed donations. You will need to determine in any specific or general exemptions apply to
a donation and from that information you must be able to calculate the Donations Tax payable
as well as determine who should pay the tax and when.
As a donation is seen as a disposal of an asset for CGT purposes, you will also have to know
how these two taxes interact with one another as a portion of the Donations Tax payable may
be added to base cost. You will be required to know how to calculate this portion.

on Task
8.1.1 Discuss the tax implications of various donations 60 minutes
8.1.2 Donations tax summary 60 minutes
Estimated total time for this learning unit’s activities 120 minutes
This is a relatively easy learning unit as a standalone topic and students tend to master this
quite easily. However, it may become confusing when integrated with CGT. As long as students
understand each tax separately, it is easier to see how they link together.


Sessions: Theme 1: Donations Tax Prescribed Material (PM)
39 – 40
Academic Week: LO1: Identify when a disposal of property is Silke: Chapter 26
13 a donation. SAICA Student Handbook
Related LO2: Identify situations where certain Volume 3: Income Tax Act
Outcome: transactions could be deemed – S54 to S64
MO4 donations.
LO3: Explain which donations are specifically
exempt from Donations Tax.
LO4: Calculate the amount of the general
annual exemption.
LO5: Calculate the Donations Tax payable on
any donation at the applicable tax
rate.
LO6: Identify the person liable for the
payment of Donations Tax.
LO7: Indicate the time period in which
Donations Tax will be payable.
LO8: Calculate the amount of Donations Tax
that can be added to base cost.
LO9: Determine the Income Tax treatment
of a donation.

Learning Unit 9 Dividends Tax
Overview:
When we looked at Learning Unit 3, we saw that dividends received by a shareholder (also
known as a beneficial owner) are exempt from tax, but this does not mean that dividends
received are tax free. In this learning unit, you will learn how to identify if a distribution is a
dividend or contributed tax capital. Once a distribution has been made, you will need to
determine if the company is subject to Dividends Tax and whether or not the beneficial owner
is exempt from paying Dividends Tax. If Dividends Tax is payable on a distribution, you need
to know who has to pay it over to SARS.
You will also need to know how Dividends Tax interacts with Income Tax by calculating the tax
effect of a dividend distribution for both the company and the beneficial owner.

on Task
9.1.1 Calculation of dividends tax 60 minutes
9.1.2 Dividend Tax 120 minutes
Once again, this is a relatively easy learning unit as a standalone topic. It may become tricky
when integrating it with Income Tax. If students understand Learning Unit 3 and 6, this should
not be a problem.


Sessions: Theme 1: Dividends Tax Prescribed Material (PM)
40 – 44
Academic Week: LO1: Distinguish between a dividend as Silke: Chapter 19
14 defined and contributed tax capital. SAICA Student Handbook
Related LO2: Determine if a company is subject to Volume 3: Income Tax Act –
Outcome: Dividends Tax on distributions made. S64D to S64N
MO4 LO3: Determine is a beneficial owner is
exempt from Dividends Tax.
LO4: Calculate the Dividends Tax payable
on a dividend distribution.
LO5: Determine who needs to pay the
Dividends Tax on particular
distribution.
LO6: Calculate the Income Tax effect of a
dividend distribution for the
company paying the dividend.
LO7: Calculate the Income Tax effect of a
dividend distribution for the
beneficial owner receiving the
dividend.

Taxa7311 Mo

Uploaded by

Copyright:

Available Formats

Taxa7311 Mo

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Taxa7311 Mo

Uploaded by

Copyright:

Available Formats

IIE Learn Module Outline TAXA7311

The Independent Institute of Education (Pty) Ltd is registered with the

© The Independent Institute of Education (Pty) Ltd 2022 Page 1 of 36

© The Independent Institute of Education (Pty) Ltd 2022 Page 2 of 36

© The Independent Institute of Education (Pty) Ltd 2022 Page 3 of 36

Using this Module Outline

To succeed in this module, you will need to:

- Attend lectures/online sessions;

© The Independent Institute of Education (Pty) Ltd 2022 Page 4 of 36

This Module on Learn

© The Independent Institute of Education (Pty) Ltd 2022 Page 5 of 36

Icons Used on Learn

The following icons are used in all your modules on Learn:

Specific references to sections in the prescribed work.

Questions to help you recognise or think about theoretical concepts to be

Opportunities to make connections between different chunks of theory in the

Real life or world of work information or examples of application of theory, using

You need to log onto Learn to:

© The Independent Institute of Education (Pty) Ltd 2022 Page 6 of 36

Stiglingh M, 2022. SILKE: South African Income Tax.

Alex Brettenny/Amanda Singleton. 2022. A Student’s Guide

© The Independent Institute of Education (Pty) Ltd 2022 Page 7 of 36

© The Independent Institute of Education (Pty) Ltd 2022 Page 8 of 36

Integrated Curriculum Engagement (ICE)

Formatives Test 1 Test 2

© The Independent Institute of Education (Pty) Ltd 2022 Page 9 of 36

Limited open-book assessments:

The following textbooks may be taken into the assessment venue

© The Independent Institute of Education (Pty) Ltd 2022 Page 10 of 36

Assessment Preparation Guidelines

© The Independent Institute of Education (Pty) Ltd 2022 Page 11 of 36

© The Independent Institute of Education (Pty) Ltd 2022 Page 12 of 36

© The Independent Institute of Education (Pty) Ltd 2022 Page 13 of 36

© The Independent Institute of Education (Pty) Ltd 2022 Page 14 of 36

Learning Unit 1: Theme Breakdown

© The Independent Institute of Education (Pty) Ltd 2022 Page 15 of 36

LO13: Determine when output tax must be

© The Independent Institute of Education (Pty) Ltd 2022 Page 16 of 36

Learning Unit 2 Income Tax

Activity Estimated Time

© The Independent Institute of Education (Pty) Ltd 2022 Page 17 of 36

Learning Unit 2: Theme Breakdown

© The Independent Institute of Education (Pty) Ltd 2022 Page 18 of 36

Learning Unit 3 Income

Activity Estimated Time

© The Independent Institute of Education (Pty) Ltd 2022 Page 19 of 36

© The Independent Institute of Education (Pty) Ltd 2022 Page 20 of 36

Learning Unit 3: Theme Breakdown

© The Independent Institute of Education (Pty) Ltd 2022 Page 21 of 36

Learning Unit 4 Deductions

Activity Estimated Time

© The Independent Institute of Education (Pty) Ltd 2022 Page 22 of 36

Learning Unit 4: Theme Breakdown

© The Independent Institute of Education (Pty) Ltd 2022 Page 23 of 36

o S18A – Donations to Public

© The Independent Institute of Education (Pty) Ltd 2022 Page 24 of 36

Learning Unit 5 Capital Allowances

Activity Estimated Time

© The Independent Institute of Education (Pty) Ltd 2022 Page 25 of 36