The newly updated Interpreta-
tion Note dealing with STC
credits is also addressed.
For the fist time some Cus-
toms draft rules are also cov-
ered. This issue also contains
an update on IASB discussions
and some information regard-
ing IFRS for SMEs.
As always your comments and
suggestions are very welcome.
Please feel free to forward
these to the IAC office to be
addressed in future issues of
the Professional.
2015 marks a significant mile-
stone for the IAC newsletter
which appeared for the first
time in March 2005, a full dec-
ade ago. The newsletter has a
few name changes, from its
humble beginning as ‘The IAC
Newsletter which consisted of
2-4 pages once a quarter to
the Informant in the same for-mat as the current Profession-
al.
The name was changed from
‘The Informant’ to ‘The Profes-
sional” to align with the IAC
Zimbabwe’s publication.
Over the years we addressed
various topics within the tax
arena, including Capital Gains
Tax, Donations tax, Corporate
Tax, Personal Income Tax,
Estate Duty and Value-Added
Tax.
Even though the focus was on
tax, various other disciplines
were also covered over the
years, including:
Practical “How to”s;
Labour Law;
Industrial Psychology;
Accounting;
Internal Audit;
Valuations;
Employee relationships.
We wish to thank our mem-
bers for their support over the
last 10 years and look forward
to the future to continuously
improve this publication.
It is therefore our pleasure to
welcome our members to the
first issue of the Professional
for 2015.
This issue focuses on some
aspects of the long awaited Tax
Amendment Acts of 2014
which were promulgated on 20
January 2015.
IAC Newsletter—Tenth anniversary
INSTITUTE OF
ACCOUNTING
AND COMMERCE
January 2015 Volume 6, Issue 1
The Professional
Special points of
interest:
Budget speech:
25 February 2015
Inside this issue:
CCMA
Dividend tax and
STC credits
3
4
Customs payments
Learnership allow-
ances
5
7
Debtor allowances
PPP-improvements
Tax free invest-
ments
8
10
Category F ven-
dors
Tax compliance
11
IASB update
IFRS for SMEs
12
Contact details 14
Death Announcement—William Keith (Bill) Shellard 1942—2015
Dear members, it is with great sadness that we inform you of the passing of one of our long serving
members, Mr William Keith (Bill) Shellard. Mr Shellard was an active member on the Gauteng Regional
Committee and served as an Assessor at the IAC for many years.
On behalf of the management, staff and members, we express our sincere condolences to the Shellard
family and friends of Bill.
Page 2 The Professional
SHELF COMPANIES
REGISTRATION OF NEW COMPANIES
Henze
l S
erv
ices
(P
ty)
Lim
ited
1988/0
06
587/0
7
Pro
fessio
nal C
om
pany S
ecre
taria
l Servic
es
Shelf company for R 1 005
From R 631 to Register a new company
From R 1 223 to Convert a CC into a private company
Re-instatement of deregistered CCs and companies
Special resolutions including replacement of old MOI with
new MOI
Change name, directors, shareholders, year-end, registered of-
fice and auditors of companies
Name reservations
Act as Company Secretary
Annual returns
Filing of company and CC forms
Copies of Company and CC documents
Publication of notices in Government Gazette and newspapers
Address: PO Box 35857, Menlo Park 0102
Tel (012) 346 4343
Fax (086) 274 5631
Email [email protected]
The Commission for Concilia-
tion, Mediation and Arbitra-
tion (CCMA) is a dispute res-
olution body established in
terms of the Labour Relations
Act, 66 of 1995 (LRA). It is an
independent body which does
not belong to and is not con-
trolled by any political par-
ty, trade union or business.
The Governing Body is the
supreme policy making body
of the CCMA and consists of :
a chairperson,
three state representatives;
three representatives from
organised labour and
three representatives from
organised business;
all of whom are nominated by
NEDLAC and the Director of
the CCMA nominated by the
Governing Body.
Each provincial office has a
team of full time commission-
ers supported by an additional
complement of part-time
commissioners. They concili-
ate, facilitate, mediate and in
some instances arbitrate, to prevent and settle industrial
disputes. Convening Senior
Commissioners (CSCs) have
been appointed in each prov-
ince and their role is to moni-
tor the professional standards
of the CCMA and to assist in
the allocation of cases to com-
missioners.
The CCMA conciliates work-
place disputes, arbitrate dis-
putes that remain unresolved after conciliation, facilitate the
establishment of workplace
forums and compile and pub-
lish statistics about its activi-
ties.
Commission for Conciliation, Mediation and Arbitration
Referring a dispute to the CCMA
proof of delivery needs to be
retained. The applicant has to
submit the referral form and
proof of delivery to the
CCMA who will inform both
parties of the date, time and
venue of the first hearing.
Conciliation
The first meeting is generally
known as a conciliation. Only the parties, trade union or
employer’s organisation rep-
resentatives and the CCMA
commissioner attends this
meeting. Legal representation
is not allowed at this stage.
The purpose of this meeting is
to reach and agreement that is
acceptable to both parties.
If no agreement is reached,
the CCMA commissioner will
issue a certificate to that ef-
fect. Depending on the nature
of the dispute, it may be re-
ferred to the CCMA for arbi-
tration or the Labour Court.
Arbitration
The aggrieved party needs to
complete a request for arbi-
tration form (aka LRA Form
7.13) in order to request arbi-
tration. A copy of the form
has to be served on the other
party. The request for arbitra-
tion should be applied for
within 3 months from the date
the CCMA commissioner
issued the certificate.
Arbitration is more formal
than conciliation. Witnesses
may be called and supporting
documents need to be lodged
as evidence. Parties may also
cross-examine each other and legal representation is al-
lowed.
The CCMA commissioner will
make a final and binding deci-
sion (arbitration award) within
14 days.
If a party does not comply
with the arbitration award,
the aggrieved party can re-
quest an order of the Labour
Court to enforce the arbitra-
tion award.
Review
A party may apply to the La-
bour Court on the basis of an
alleged defect with a CCMA
commissioner's rulings or
awards. The party who alleges
such a defect must apply to
the Labour Court to set aside
the award within 6 weeks of
the award being served.
Employees can refer a dispute
with their employer (and vice
versa) to the CCMA on vari-
ous matters, including dismis-
sals, wages, working condi-
tions and discrimination. Inde-
pendent contractors can how-
ever not refer disputes to the
CCMA as they are not in an
employee/employer relation-
ship.
It is very important to take
immediate steps if there is a
labour problem as there are
certain time limits within
which the dispute needs to be
lodged, e.g. in the case of an
unfair dismissal, the dispute
must be lodged within 30 days
from the date the dispute
arose. In the case of an unfair
labour practice, the dispute
has to be lodged within 90
days and in discrimination
cases, within 6 months.
The first step is to lodge a
CCMA referral form, (aka
LRA form 7.11). These forms
are available from the CCMA
offices, Department of Labour
and the CCMA website.
www.ccma.org.za
Once the form is completed, a
copy thereof has to be deliv-
ered to the other party and
You can have
everything you
want in life if
you just help
enough people
get what they
want in life.
Zig Ziglar
Page 3 Volume 6, Issue 1
Dividends payable to the fol-
lowing beneficial owners are
exempt from Dividends Tax if
the required “declaration” and
“undertaking” are submitted
to the company or withhold-
ing agent in time:
South African resident
companies
Government (all three
spheres)
Public Benefit Organisa-
tions (approved in terms of
section 30(3) of the Act)
Mining rehabilitation trusts
(section 37A of the Act)
Section 10(1)(cA) persons
Section 10(1)(d) funds
(e.g. pension funds, provi-
dent funds and medical
schemes)
Section 10(1)(t) persons
(e.g. CSIR and SANRAL)
Shareholders in a regis-
tered micro business (6th
Schedule to the Act)
(insofar as dividends do not
exceed R200,000 per year)
Non-residents receiving
dividends from foreign
companies listed on the
Johannesburg Stock Ex-
change
Portfolios of collec-
tive investment schemes in
securities
Any person to the extent
that the dividend consti-
tutes income of that per-
son
Any person to the extent
that the dividend was sub-
ject to the STC
Fidelity or indemnity funds
contemplated in section 10
(1)(d)(iii)
Dividends paid by a REIT
( r e a l e s -
tate investment trust) or a
controlled property com-
pany (as defined in section
25BB) received or accrued
before 1 January 2014
(insofar as it does not con-
sist of a dividend in specie)
A small business funding
entity under section 10(1)
(cQ)
A natural person in respect
of a dividend paid on or
after 1 March 2015, for a
tax free investment.
of 15% of the amount of any
dividend paid by any company
other than a headquarter
company.
Section 64J(1) stipulates that a
dividend paid by a company is
not subject to dividends tax to
the extent that the dividend
does not exceed the STC
credit of the company and the company has by the date of
payment notified the person
to whom the dividend is paid
of the amount by which the
dividend reduces the STC
credit of the company.
Both section 64E(1) and sec-
tion 64J(1) refer to a dividend
“paid” by a company. The STC
credit of a company can there-
fore only be applied against a
dividend that is paid by a com-
pany.
Section 64J(5) provides that
the STC credit of a company
on or after the third anniver-
sary of the effective date is
deemed to be nil, i.e. the STC
credits will effectively cease
A draft BGR was published on
28 January 2015 whereby
public comments were re-
quested on or before 20 Feb-
ruary 2015. The purpose of
this draft BGR is to clarify that
STC credits are not available if
a dividend is declared before
1 April 2015, but paid on or
after that date.
STC credits originated under
the previous Secondary Tax
on Companies regime before
the introduction of Dividend
Tax. As a transitional dispen-
sation, these STC credits
were allowed to reduce the
Dividend Tax liability. This
ensured that profits previously
subject to STC were not
taxed again under the Divi-
dend tax regime.
Income Tax Act
Section 64E(1), which came
into operation on 1 April
2012, provides that, subject to
paragraph 3 of the Tenth
Schedule to the Act, dividends
tax must be levied at the rate
on 1 April 2015.
The STC credit of a company
must be applied against any
dividend paid by that company
before 1 April 2015. A divi-
dend paid by a company on or
after 1 April 2015 cannot be
reduced by any STC credit,
since the STC credit of a com-
pany on or after 1 April 2015
is deemed to be nil.
Under section 64J(7) a compa-
ny that pays a dividend will be
liable for any dividends tax
that is subsequently not with-
held by another person as a
result of an inaccurate notifi-
cation provided by that com-
pany.
Ruling
If company pays dividend
before 1 April 2014, the re-
maining STC credits may be
applied against these dividends
paid by the company. STC
credits cannot be applied if
dividend was declared before
1 April 2015, but only paid
thereafter.
Dividend tax—Exemptions
Termination of STC credits
Happiness is
not something
you postpone
for the future;
it is something
you design for
the present.
Jim Rohn
Page 4 The Professional
The Fourth Batch of Customs
Control Rules were published
for public comments on 28
January 2015. The due date
for comments is 20 February
2015.
The Commissioner indicated
under rule 32.1 that the fol-
lowing payment methods
would be acceptable:
Cash payments;
Checque payments;
Payment by electronic funds
transfer, (including payment
effected by using SWIFT
message in the case of inter-
national payments);
Credit push payment initiat-
ed through eFiling, and
Debit or credit card pay-
ments.
If the person making the pay-
ment is registered for eFiling,
payment must be made using
the credit push payment facili-
ty on eFiling.
Cash payment conditions
Cash payments may be made
at any Customs Office during
office hours. The maximum
amount of cash that may be
paid per transaction is limited
to:
R 2 000 in bank notes;
R 50 in R5 coins;
R 20 in R2 coins;
R 20 in R1 coins;
R 5 each in 10c to 50c
coins, and
50c in 5c coins.
These limitations do not apply
to payments at place of entry
or exit made by travelers and
crew members entering or
leaving South Africa.
All cash payments must be
rounded off to the nearest 5
cents to the benefit of the
person making the payment.
Furthermore, all cash pay-
ments must be accompanied
by a payment advice notice
that is not older than 7 calen-
dar days.
Checque payments
All cheque must be signed and
made out to “South African
Revenue Service” in any of the
official languages of the Repub-
lic and the payment must be
reflected in Rand.
Checque payments will not be
accepted if two cheques made
out to the South African Rev-
enue Service had been
“referred to drawer” in the
three years preceding the date
of payment.
Cheques exceeding R10 000
must be bank guaranteed. The
daily limit for cheque payment
per person per day is R50
000, irrespective of the num-
ber of cheque payments re-
quired to be made on that
day.
No post-dated cheques will be
accepted and all cheque pay-
ments must be supported by a
payment advice notice that is
not older than seven calendar
days.
EFT payments
Electronic funds may only be
transferred through internet
banking facilities of banks where SARS is listed on the
bank’s preconfigured benefi-
ciary ID listing, by selecting
the applicable SARS benefi-
ciary identification code.
In the case of electronic fund
transfers effected by using
SWIFT message payments may
be done only through the
internet banking facilities of a
bank which supports payment
effected by using SWIFT mes-
sage; and the SARS beneficiary
identification code for foreign
payments must be indicated.
All EFT payments must be
supported by a payment ad-
vice notice which must be
submitted to SARS.
the transaction or transactions being set-
tled, and
the amount to be paid;
The payment reference number is the
unique 19-digit number allocated by the cus-
toms authority to identify a payment and to
ensure the correct allocation of the payment
in a notice demanding payment of an amount
owed to the Commissioner.
The payment advice notice is a notice
generated by the customs authority upon
request by a person liable for a debt, in
respect of a payment to be made by that
person, which reflects –
the name of the person making pay-
ment;
the relevant payment reference num-
ber;
Draft Customs Rules—Batch 4—Payment methods
Payment advice notice and reference number
Today I will do
what others
won’t, so
tomorrow I can
accomplish
what others
can’t.
Jerry Rice
Page 5 Volume 6, Issue 1
According to Draft Rule 32.6,
the following conditions apply
in respect of debit or credit
card payments.
Payments by debit or credit
card may be made by a
traveler or a crew member
when entering or leaving
the Republic at the place of
entry or exit or, in the case
of rail travelers and crew, at
the rail travelers terminal
where that traveler or
crew member is pro-
cessed through the Pas-
senger Processing Sys-
tem; or
in the case of a trusted
or frequent traveler,
where that traveler is
processed at a self-
service facility for trust-
ed or frequent travelers;
payment must be in Rand;
the traveler or crew mem-
ber or other person tender-
ing the card must be the
account holder; and
only approved debit or
credit cards as indicated on
notice boards at the rele-
vant traveler terminal or
Customs Office may be
accepted.
Draft Customs Rules—Debit and credit card payments
Draft Customs Rules—Payment of debt in instalments
the kind and amount of the
debt owed to the Commis-
sioner;
the reason why the appli-
cant cannot pay the debt in
a single payment;
whether the applicant antici-
pates income or other re-
ceipts which can be used to
satisfy the debt, including a
list of such anticipated in-
comes or receipts indicating
the date when the income
or receipt is expected;
details of the applicant’s
assets, investments and
policies, including a descrip-
tion of the asset, the type of
investment or policy, the
name of the institution and
the relevant values and, if
applicable, maturity dates;
details of the applicant’s
debtors and creditors in-
cluding names and contact
details and amounts owed
or owing;
details of contracts or ten-
ders awarded to the appli-
cant, if any, including the
name of the institution or
contracting party, the con-
tract or tender number, the
contract or tender value
and the commencement and
completion dates;
the proposed repayment
period, which may not ex-
ceed a period of twelve
months; and
the name and contact de-
tails of the applicant’s audi-
tor or financial adviser.
The application must be sup-
ported by
Certified bank statements
for a period of 6 months
preceding the application;
Evidence of the applicant’s
financial position, e.g. audit-
ed financial statements;
Documentary evidence of
assets, investments, debtors,
creditors, tenders and other
contracts awarded to the
applicant.
The Commissioner may ap-
prove or refuse the applica-
tion and the applicant is enti-
tled to be notified of the deci-
sion. After being notified of
the approval if the application,
the applicant must complete
an instalment payment agree-
ment which will be published
on the SARS website. The
agreement must be signed by the parties to the agreement
and submitted manually to-
gether with the other sup-
porting documents to any
Customs Office.
All payments must be sup-
ported by a payment advice
which must be submitted to
SARS.
A person who is liable for
Customs Duty but unable to
pay the debt in a single pay-
ment, may apply to the Com-
missioner via eFiling for per-
mission to pay the debt in
instalments. The application
may also be submitted in pa-
per format on a Form to be
published on the SARS web-site and submitted to any
Customs Office.
Application
The application must reflect
the following information
about the applicant:
The applicant’s customs
code, or if the applicant
does not have a customs
code, the applicant’s name,
physical address and contact
details;
if the applicant is a natural
person, identity or passport
number; and
if the applicant is a juristic
entity, the name of the per-
son authorised to act on
behalf of the entity, as well
as that person’s physical
address, contact details,
identity or passport number
and capacity;
Furthermore, the following
information must also be in-
cluded in the application:
the reference number of
any document that demand-
ed payment of the debt;
Too many
people are
thinking the
grass is greener
on the other side
of the fence,
when they ought
to just water the
grass they are
standing on.
Amar Dave
Page 6 The Professional
Section 12H provides an annu-
al allowance and a completion
allowance to employers who
entered into a qualifying learn-
ership agreement with an
employee.
The annual allowance of
R30 000 is subject to a pro
rata reduction when the num-
ber of full months in a year of assessment is less than 12.
The completion allowance is
limited to R30 000 when the
learnership is for a period of
less than 24 full months. For
longer agreements the com-
pletion allowance is R30 000
multiplied by the number of
consecutive 12-month periods
covered by the agreement.
The allowances are increased
to R50 000 for learnerships
entered into with disabled
employees.
Interpretation Note 20 was
updated on 30 January 2015
to provides clarity on the
interpretation and application
of section 12H which provides
deductions for registered
learnership agreements.
The amendments to section
12H by the Taxation Laws
Amendment Act No. 43 of
2014 was been taken into
account in the updated IN and
are effective from 20 Janu-
ary 2015 and applicable to all
learnership agreements en-
tered into on or after that
date.
Registered learnership
agreement
A registered learnership
agreement refers to an agree-
ment that is registered under
the Skills Development Act
which was entered into by the learner and employer before 1
October 2016. The term
‘learner’ also includes an ap-
prentice.
Until 31 December 2012, the
deduction was only available
to those learnership agree-
ments which had been official-
ly registered with a SETA. In
practice registrations were
often delayed because of a
variety of reasons.
With effect from 1 January
2013, any learnership agree-
ment which has not been
registered from the inception
of the agreement will be
deemed to have been regis-
tered on the date it has been
entered into, provided it is
registered within 12 months
after the last day of the em-
ployer’s year of assessment.
Annual allowance
The employer will qualify for
the annual allowance if :
the learner is a party to a
registered learnership
agreement with the em-
ployer during any year of
assessment ;
the agreement was entered
into pursuant to a trade
carried on by that employ-
er; and
the employer has derived
“income” from that trade.
The allowance only applies to
a period during which a learn-
er is a party to a registered
learnership agreement with an
employer. Thus an employer
will not qualify for the annual
allowance during any period in
which –
learnership agreement is
not registered, subject to
the deeming provision
previously mentioned or
the learner is not in em-
ployment.
The definition of “employer”
in section 12H(1) merely clari-
fies or expands the meaning of
that term. A learner who has
not yet commenced employ-
ment cannot have an agree-
ment with an “employer”
because there is no employ-ment relationship between
them.
during the year of assess-
ment; and
the employer has derived
“income” from that trade.
The deduction must be made
against income derived from
the particular trade in which
the employee is employed.
This means that there must at
least be some income from
the particular trade in order
to achieve the deduction. The
wording does however not,
prevent the allowance from
An employer qualifies for the
completion allowance if –
the learner is a party to a
registered learnership
agreement with the em-
ployer during any year of
assessment ;
the agreement had been
entered into pursuant to a
trade carried on by the
employer;
the learner successfully
completes the learnership
creating a loss from the partic-
ular trade. There is also noth-
ing in the wording to prevent
such a loss from being set off
against income from another
trade.
SARS requires adequate proof
of the successful completion
of the learnership agreement
in order to allow the comple-tion allowance, e.g. confirma-
tion of successful completion
provided by the SETA with
which the learnership agree-
ment is registered.
Learnership agreements—IN 20 (Issue 5)
Completion allowance
The content of
your character
is your choice.
Day by day,
what you
choose, what
you think and
what you do is
who you
become.
Heraclitus
Page 7 Volume 6, Issue 1
Enhanced allowances
In order to encourage em-
ployers to develop the skills of
persons with a disability, the
annual and completion allow-
ances are increased by
R20 000 for a learner who has
a “disability” as defined in
section 6B(1) at the time of
entering into the learnership
agreement [section 12H(5)].
The criteria prescribed by the
Commissioner relating to
disability are contained in
form ITR-DD “Confirmation
of Diagnosis of Disability”,
which is available on the SARS
website.
Termination
An employer is entitled to
deduct an amount equal to a
pro rata portion of the annual
allowance if the registered
learnership agreement is ter-
minated (whether by the em-
ployee resigning or by the
employer terminating the
learner’s employment).
The employer is not entitled
to deduct any further annual
allowance or the completion
allowance since the learner-
ship agreement is terminated
and the learnership is not
completed.
Reporting
The employer must submit
the information required by
the relevant SETA in the form
and manner indicated by that
SETA.
Learnership allowances—Miscellaneous
Instalment credit agreements and debtor’s allowance
Finance charges must be rec-
ognised on a day-to-day basis
over the period of an instal-
ment credit agreement with
reference to the outstanding
balance under section 24J.
IN 48 does not apply to the
debtors’ allowance and the al-
lowance for contingent develop-
ment expenditure granted to township developers under sec-
tion 24(2).
The debtors’ allowance does
not apply to –
sales on extended credit in
the absence of a condition
suspending the passing of
ownership;
sales subject to a resolutive condition, for example,
when it is agreed that a sale
shall be regarded as can-
celled if the purchase price
is not paid by a certain date;
Leases, if the lessee has an
option to acquire the goods
at the end of the lease. Such
an option is not an agree-
ment of sale, but merely
confers on the holder the
right to enter into such an
agreement at an agreed
price at a future date.
Section 24 also applies to lay-
by agreements of not less than
12 months. Under a lay-by the
buyer pays the purchase price
over a period while the seller
retains possession of the
goods until the purchase price
is paid in full. Ownership pass-
es to the buyer on the date on
which the purchase price is paid in full and the goods are
delivered to the buyer.
Allowance—conditions
Under section 24(1) the debt-
ors’ allowance is granted to
taxpayers only in cases in
which the passing of owner-
ship of the property sold is
subject to a suspensive condi-
tion, namely, payment of the
whole or a certain portion of
the selling price.
In addition, section 24(2) pro-
vides that at least 25% of the
whole of the amount under
the agreement must be due
and payable at least 12 months
after conclusion of the agree-
ment before the debtors’
allowance may be granted. For
this purpose, any deposit pay-
able is regarded as a payment
of a portion of the selling
price within the first 12
months. Deduction is made
under section 11(x).
Interpretation Note 48 dealing
with the above topic was up-
dated on 19 December 2014.
The purpose of IN 48 is to
provide guidance on the appli-
cation and determination of
the debtors’ allowance grant-
ed under section 24(2), as it
applies to instalment credit
agreements.
Section 24 deals with the fol-
lowing two main concepts.
Firstly, in the context of a
disposal by a taxpayer of trad-
ing stock under an instalment
credit agreement, section 24
(1) provides that the whole
amount, excluding finance
charges, is deemed to be in-
cluded in the taxpayer’s gross
income at the time of entering
into the agreement.
This deemed inclusion pre-
vents any argument that the
proceeds under an instalment
credit agreement do not ac-
crue because of a delay in
transfer of ownership.
Secondly, section 24(2) pro-
vides the Commissioner with
the discretion to grant a debt-
ors’ allowance to the taxpay-
er, thereby allowing the profit
under the instalment credit
agreement to be taxed on a
cash-flow basis.
Don’t let life
discourage you;
everyone who
got where he is
had to begin
where he was.
Richard L. Evans
Page 8 The Professional
The amount of the debtors’ allow-
ance is based on the gross profit
percentage applied on qualifying
outstanding debtors at the end of
the taxpayer’s year of assessment
(excluding finance charges and
VAT) and reduced by –
bad debts under section 11(i),
and
any allowance for doubtful
debts under section 11(j).
Finance charges and VAT must
also be excluded from turnover (sales) and cost of sales in
determining the gross profit percentage which is calculated
as follows:
[(sales – cost of sales) / sales] × 100 = gross profit %
or
(gross profit / sales) × 100 = gross profit percentage
The gross profit should include other forms of income
such as delivery charges, fees for maintenance contracts
and insurance premiums.
Debtor allowance
Debtor allowance—Basis
applicable gross profit per-
centage to be applied to the
instalment debtors outstand-
ing at the end of a year of
assessment (excluding bad and
doubtful debts, VAT and fi-
nance charges). An important
condition for accepting a glob-
ular method is that it must be
consistently applied. It will be unacceptable to SARS if a
taxpayer switches from one
method to another simply to
exploit the allowance. A
switch should only be made
for a very sound reason, such
as an upgrade to the account-
ing system. Below follows the
various acceptable globular
methods that may be used to
calculate the average gross
profit percentage.
Aged-debtor basis
Under the aged debtor
method, the outstanding
debtors at the end of the year
of assessment are aged and
allocated across the years of
assessment to which they
arose. The applicable gross
profit percentage for each
year of assessment is then
applied to the debtors that
arose during that year of as-
sessment. [Refer to example 3
of IN 48]
Moving-weighted average
If aging of the individual debt-
ors is not possible the taxpay-
er could use the moving-
weighted-average method.
It involves determining a mov-
ing-weighted-average percent-
age based on each year’s sales
and gross profit while also
taking into account the aver-age period of the relevant
agreements. The average
gross profit percentage is then
applied to the total outstand-
ing debtors (excluding bad and
doubtful debts, VAT and fi-
nance charges). [Refer to ex-
ample 4 of IN 48.]
Current year’s gross profit
percentage
It is acceptable use the cur-
rent year’s gross profit per-
centage if the taxpayer’s gross
profit remains constant from
year to year, provided that the
level of variation over the
previous year of assessment
does not exceed 2%. The 2%
variation is not the simple
difference between the previ-
ous year’s percentage and the
current year’s percentage, but
rather the percentage varia-
tion over the previous year’s
percentage. [Refer to exam-
ple 5 of IN 48.]
The purpose of the debtors’
allowance is to grant an allow-
ance equal to the gross profit
element of the outstanding
debtors at the end of each
year of assessment.
Individual basis
The manual determination of
the allowance on a debtor-by-debtor basis is simple when
there is a single debtor or a
few debtors. In other words,
the specific gross profit per-
centage applicable to each
debtor is applied to that debt-
or. This method could also be
applied when there are nu-
merous instalment debtors
and the taxpayer has a sophis-
ticated computer system capa-
ble of determining the exact
gross profit percentage appli-
cable to each debtor. Such a
method would be the most
accurate and would be the
ideal method most acceptable
to SARS.
Globular basis
Not all taxpayers have sophis-
ticated accounting systems
capable of handling an individ-
ual debtor-by-debtor determi-
nation of the gross profit per-
centage and it is therefore
necessary for SARS to accom-
modate globular methods
which involve estimating the
Keep away from
people who try
to belittle your
ambitions. Small
people always
do that, but the
really great
make you feel
that you, too,
can become
great.
Mark Twain
Page 9 Volume 6, Issue 1
Section 12NA was introduced
to allow a deduction where a
person actually incurred ex-
penditure to effect an im-
provement to land and/or
buildings in terms of an obliga-
tion under a PPP if the SA
Government holds the right of
use or occupation of the
building. For purposes of this section Government includes
the national, provincial and
local spheres.
The deduction is equal to the
expenditure actually incurred
which has not been allowed to
be deducted under section
12NA divided by the number
of years (including that year of
assessment) for which the
taxpayer will derive income
under the PPP agreement or
25 years, whichever is lesser.
The expenditure taken into
account to determine the
deduction must be reduced by
any amount received from
Government for the purpose of effecting the improvement
or building if the amount falls
within section 10(1)(zI).
Section 12NA does not apply
if the person effecting the
improvements to the land or
building is a person carrying
on any banking, financial ser-
vices or insurance business.
Even though the Taxation
Laws Amendment Act of 2014
was only promulgated in 2015,
section 12NA is deemed to
have come into operation on
1 January 2013.
Section 12NA therefore ap-
plies to expenditure incurred to effect improvements during
any year of assessment com-
mencing on or after 1 January
2013.
Satisfies SARS that, within
5 years of that year of as-
sessment, the person is
likely to incur an amount of
expenditure on repairs to
any ship used by that per-
son for purposes of that
person's trade.
In order to determine the
amount of the deduction, the
estimated costs of those re-
pairs and the date on which
Section 24P was introduced to
allow the deduction of ex-
penditure on repairs to any
ship, notwithstanding section
23(e). SARS will allow a de-
duction for every year of as-
sessment if that person
Is a resident;
Carries on any business as
owner or charterer of any
ship; and
the repairs are likely to be
incurred must be taken into
account. The amount of the
deduction allowed in any year
of assessment must be includ-
ed in the person’s income in
the following year of assess-
ment.
This section is deemed to
have come into operation on
12 December 2013.
Public Private Partnerships—Improvements to property
Allowance—Future repairs to certain ships
Tax free investments
and should be disregarded
when determining the aggre-
gate capital gain or loss for
any year of assessment.
Contribution limitation
Contributions to the tax free
investment is limited to
R30 000 in aggregate during
any year of assessment and
R500 000 in total. The contri-butions must be paid in cash.
Transfers between tax free
investments of the same per-
son should not be taken into
account in calculating the an-
nual or total contributions.
If a person contributes more
than the annual limitation, 40%
of the excess (i.e. contribution
exceeding R30 000) is regard-
ed as normal tax payable dur-
ing that year of assessment in
respect of that investment.
The minister will publish regu-
lations prescribing the re-
quirements to which the in-
vestments must conform in
order to be regarded as tax
free investments.
The Financial Services Board
will be responsible for super-
vising and enforcing compli-
ance to these regulations.
Section 12T comes into oper-
ation on 1 March 2015.
Tax free investments are de-
fined in the newly promulgat-
ed section 12T of the Income
Tax Act as any financial instru-
ment or policy as defined in
section 29A which is adminis-
tered by a person or entity
designated by notice by the
Minister in the Gazette. The
instrument/policy must be owned by a natural person (or
his/her deceased/insolvent
estate which is deemed to be
the same person as the natu-
ral person for contributions
made.
Any amount received or ac-
crued under such investment
is exempt from normal tax
It isn’t what you
have, or who you
are, or where
you are, or what
you are doing
that makes you
happy or
unhappy. It is
what you think
about.
Dale Carnegie
Page 10 The Professional
The fourth-monthly VAT cate-
gory for vendors was intro-
duced in 2005 to assist small
retailers. Vendors could regis-
ter under this category if the
vendor made taxable supplies
of R1.5 million over a 12
month period. There were
however less than 1 000 ven-
dors registered under this category accounting for mere-
ly R44 million output tax and
deducting R23 million input
tax.
Section 27 of the VAT Act
was therefore amended to
delete the definition of
‘Category F’ as well as any
reference thereto in section
27. [Refer to section 28 of the
Tax Administration Laws
Amendment Act of 2014.]
This amendment comes into
operation on 1 July 2015 and
applies to tax periods com-
mencing on or after that date.
According to the Memoran-dum on the Objectives of the
Tax Administration Laws
Amendment Bill, vendors
registered under category F
will be moved to category A
or B which are bimonthly
categories. Consequently,
these vendors will be required
to submit VAT returns every
two months instead of every
four months.
Court cases
CSARS v Africa Cash & Carry (Pty) Ltd & 18 Others — Preservation order
TC-VAT 1005 JHB — Zero or standard rating of amount iro building houses
Draft documents for public comment
Draft Binding General Ruling (Dividends Tax) — Termination of STC credits
(20/2/2015)
Fourth batch of Customs Control Rules (20/2/2015)
Draft comprehensive guide to CGT (Issue 5) (31/5/2015)
Interpretation Notes
Interpretation Note 20 (Issue 5) — Additional deduction for learnership agreements
Category F vendors
What’s new @ SARS?
Tax compliance status
cient and effective collection
of revenue).
A senior SARS official may
only issue such confirmation if
the taxpayer is registered for
tax and does not have any
Outstanding tax debt
(excluding certain catego-
ries, e.g. debt suspended
under section 164);
Outstanding return, unless
an acceptable arrangement
was made with SARS.
The confirmation must be in
the prescribed form an include
at least:
The original date confirma-
tion is issued to the taxpay-
er;
Name, tax reference num-
ber and identity number or
company registration num-
ber of the taxpayer;
Confirmation of tax com-
pliance status of the tax-
payer.
Taxpayers may, under section
256 of the Tax Administration
Act, for a confirmation of the
taxpayer’s tax compliance
status.
SARS must issue or decline to
issue the confirmation of the
taxpayer’s tax compliance
status within 21 business
days from the date the appli-cation is submitted (or such
longer period reasonable re-
quired if a senior SARS official
is satisfied that the confirma-
tion may prejudice the effi-
The best way
to predict the
future is
to create it.
Abraham Lincoln
Page 11 Volume 6, Issue 1
The IASB met in public from
20-22 January 2015 at the
IASB offices in London, UK.
The following topics were
discussed during the meeting:
Leases
Conceptual Framework
I F R S f o r S M E s
(Comprehensive Review
2012–2014)
Disclosure Initiative
IAS 19 Employee Bene-
fits and IFRIC 14 IAS19—
The Limit on a Defined
Benefit Asset, Minimum
Funding Requirements and
their Interaction
Measuring investees at fair
value through profit or loss:
a n i n v e s t m e n t - b y -
investment choice or a con-
sistent policy choice
Sale or Contribution of
Assets between an Investor
and its Associate or Joint
Venture: Narrow-scope
Amendment to IFRS 10 and
IAS 28, issued September
2014—Interaction with
paragraph 32 of IAS 28
Insurance Contracts
Emissions Trading Schemes
The IASB meets at least once
a month for up to 5 days. The
next IASB meetings are sched-
uled for:
16-20 February
16-20 March
27-30 April.
size and nature of the omis-
sion or misstatement judged in
the surrounding circumstanc-
es. Users are however as-
sumed to have a reasonable
knowledge of business and
economic activities and ac-
counting and a willingness to
study the information with
reasonable diligence.
If the IFRS does not specifical-
ly address a transaction, event
or condition, the entity’s man-
agement has use its judgment
in developing and applying an
accounting policy that results
in information that is:
relevant to the economic
decision-making needs of
users, and
Accounting policies are the
specific principles, bases, con-
ventions, rules and practices
applied by an entity in prepar-
ing and presenting financial
statements. If IFRS specifically
addresses a transaction, other
event or condition, an entity
has to apply IFRS, unless the
effect of applying another method would not be materi-
al.
Omissions or misstatements
of items are material if they
could, individually or collec-
tively, influence the economic
decisions of users made on
the basis of the financial state-
ments.
Materiality depends on the
reliable in that the financial
statements:
Faithfully represent
the financial position,
financial performance
and cash flows of the
entity
reflect the economic
substance of transac-
tions, other events and
conditions, and not
merely the legal form;
are neutral, i.e. free
from bias;
are prudent; and
are complete.
IASB update
SMEs—Accounting policies
IFRS for SMEs
The IASB met on 21 January 2015 to discuss an issue that had arisen during the balloting process
of the amendments to the IFRS for SMEs. Those amendments resulted from the initial comprehen-
sive review of the IFRS for SMEs. The issue related to the transition requirements for the option
to use the revaluation model for property, plant and equipment. The IASB decided to require pro-
spective application of the option to use the revaluation model from the beginning of the period in
which the entity first adopts the amendments. All IASB members agreed.
Next steps
The amendments are expected to be issued in the first half of 2015. The IASB will discuss the pro-
cedures surrounding future reviews of the IFRS for SMEs at its February 2015 meeting .
You must take
personal
responsibility.
You cannot
change the
circumstances,
the seasons, or
the wind, but
you can change
yourself.
Jim Rohn
Page 12 The Professional
Section 13 sets out the princi-
ples for recognizing and meas-
uring inventories which are
current assets –
Held for sale in the ordinary
course of business
In the process of produc-
tion for such sale or
In the form of materials or
supplies to be consumed in
production process or in
the rendering of services.
Measurement
Inventories must be measured
at the lower of cost and esti-
mated selling price less cost to
sell. Entities may use tech-
niques like standard costing,
the retail method or most
recent purchase price for
measuring the cost of invento-
ries is the result approximates
cost.
Cost
Cost includes all costs of pur-
chase, cost of conversion and
other costs incurred in bring-
ing the inventories to its pre-
sent condition and location.
The cost of inventories of
items that are not ordinarily
interchangeable and goods or
services produced and segre-
gated for specific projects has
to be measured by using spe-
cific identification of their
individual costs. In other in-
stances, the cost has to be
measured using the first-in,
first-out (FIFO) or weighted
average cost formula. The last-
in, first-out (LIFO) method is
not permitted. The same cost
formula has to be used for all
inventories that are similar in
nature and use for the entity.
Cost of purchase
The cost of purchase includes
the purchase price, import
duties and other taxes (other
than those subsequently re-
coverable, e.g. input tax in the
case of a vendor), transport,
handling and other costs di-
rectly attributable to the ac-
quisition of finished goods,
materials and services. The
entity must however also
remember to deduct trade
discounts, rebates and other
similar items from the costs of
purchase.
If the entity purchase invento-
ry on deferred settlement
terms (i.e. on credit where interest is charged), the cost
of purchase should exclude
the interest component of the
price which should be recog-
nised separately over the peri-
od of the financing.
Cost of conversion
Cost of conversion include
costs directly related to the
units of production, (e.g. di-
rect labour) as well as the
systematic allocation of fixed
and variable production over-
heads that are incurred to
convert raw material into
finished goods.
Fixed overheads (e.g. rental of
the production area) has to be
allocated on the basis of the
normal capacity of the pro-
duction facilities. Normal ca-
pacity means the production
expected to be achieved in
average over a number of
periods or seasons under
normal circumstances. The
actual level of production may
be used if it approximates the
normal production. The
amount of fixed overhead
allocated to each unit of pro-
duction should not be in-
creased as a consequence of
low production or idle plant.
Unallocated overheads should
be recognised as an expense
in the period it is incurred.
Variable overheads are allo-
cated on the basis of the actu-
al use of the production facili-
ties.
Exclusions
The following costs must be
excluded from the cost of
inventories:
Abnormal amounts of wast-
ed materials, labour and
other production costs;
Storage costs, unless these
costs are necessary during
the production process
before a further production
stage;
Administrative overheads
that do not contribute to
bringing the inventory to its
present location and condi-
tion; and
Selling costs.
Impairment
SMEs has to assess at the end
of each reporting period
whether any inventories are
impaired, i.e. if the carrying
amount is not fully recovera-
ble as a result of damage, ob-
solescence etc. If impairment
occurs, these inventories have
to be measure at selling price
less cost to sell (net realizable value) and an impairment loss
has to be recognised for the
difference between the carry-
ing amount and the net realiz-
able value.
Allocation to other asset
accounts
There may be instances where
inventory is allocated to other
asset accounts, e.g. if invento-
ry is used as a component of
self constructed property,
plant and equipment. In these
instances the inventory will
form part of the cost of the
other asset and is depreciated
(if appropriate) in accordance
with the section of IFRS rele-
vant to that type of asset.
Disclosure
The SME must disclose the
following:
Accounting policy, includ-
ing cost formula used;
Total carrying amount of
inventories (and classifica-
tions) as well as pledged
inventories; and
Impairment losses.
Inventory—Section 13 of IFRS for SMEs
A successful
man is one who
can lay a firm
foundation
with the bricks
others have
thrown at him.
David Brinkley
Page 13 Volume 6, Issue 1
Primary Business Address
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Phone: (021) 761 6211 Fax: 086 637 6989
Report misconduct to:
QUERIES
General: Abeeda Busch [email protected]
Membership Soraya Busch [email protected]
Wendy van der Heyde [email protected]
Finance Duncan Stark [email protected]
Valencia Williams [email protected]
Marketing Magsoedah Fakier [email protected] [email protected]
CEO & Technical
Ehsaan Nagia: [email protected]
The Institute of Accounting and Commerce (IAC) is a professional accounting insti-
tute. Established in 1927, it is registered in South Africa as a section 21 company. It is
fully self-funded and conducts its business from its Head Office in Cape Town.
MISSION STATEMENT
It is the aim of the Institute of Accounting and Commerce to promote actively the
effective utilisation and development of qualified manpower through the achievement
of the highest standards of professional competence and ethical conduct amongst its
members.
INSTITUTE OF
ACCOUNTING AND
COMMERCE
A dynamic world-class professional accounting institute
www.iacsa.co.za
CPD
The Institute, being affiliated with SAQA and registered with CIPRO and SARS, requires all
its members to comply with our Continued Professional Development (CPD) requirements.
CPD refers to ongoing post-qualification development aimed at refreshing, updating and
developing knowledge and skills of professionals. Our members are required to be compe-
tent to carry out their duties and responsibilities and therefore have a duty to maintain a
high level of professional knowledge and skills required to carry out their work in accord-
ance with all relevant laws, regulations, technical and professional standards applicable to
that work. All members should complete 40 hours of CPD per calendar year (1 January - 31 Decem-
ber) of which 50% must be structured CPD and 50% must be unstructured. Tax practition-
ers must log a minimum of 15 tax related CPD hours per calendar year, of which 60% must
be structured and 40% unstructured. Structured CPD hours can be obtained by attending
courses, seminars and lectures and by performing research and/or writing technical articles.
Attending the monthly IAC discussion group also counts towards structured CPD hours.
Unstructured CPD hours can be obtained by reading technical and business literature, in-
cluding the IAC’s newsletter.
The Board further recommended that CPD hours need to be broken down into the follow-
ing categories:
Accounting (i.e. IFRS)
Taxation
Company Law
Auditing & Review Engagements
Other (which is appropriate to the type of work undertaken by the member).
Members must log their CPD hours on the IAC’s website.
Please note that the following penalties will be levied if a member fails to meet the CPD
requirements:
First time offenders – R 2 000 and catching up on outstanding CPD hours;
Second time offenders R 5 000 and catching up on outstanding CPD hours;
Third time offenders – R 10 000 and catching up on outstanding CPD hours and
More than 3 offences – IAC membership is cancelled.