IIE Learn Module Outline TAXA6212 Taxation 2A TAXA6212 MODULE OUTLINE 2021 (First Edition: 2018) 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 2021 Page 1 of 30 IIE Learn Module Outline TAXA6212 Table of Contents Introduction.................................................................................................................................. 3 Using this Module Outline ........................................................................................................... 4 This Module on Learn................................................................................................................... 5 Icons Used in this Document and on Learn ................................................................................. 6 Module Resources........................................................................................................................ 7 Module Purpose ........................................................................................................................... 8 Module Outcomes........................................................................................................................ 8 Assessments ................................................................................................................................. 9 Module Pacer ............................................................................................................................. 12 © The Independent Institute of Education (Pty) Ltd 2021 Page 2 of 30 IIE Learn Module Outline TAXA6212 Introduction Welcome to Taxation 2A. The purpose of this module is to provide you with a basic introduction to the South African tax system as it relates to corporate entities. You will be introduced to new and exciting principles that will benefit you greatly in your future career. 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. Taxation 2A will make you aware of various taxes, however, you will only be focusing on two, namely Income Tax (as it relates to a corporate entity) and Value-Added Tax (VAT). It is essential to understand that VAT and Income tax are two separate taxes governed under two separate Acts, but they can be easily integrated and it is imperative that you understand how this is done. Other taxes such as Dividends tax, Donations Tax and Estate Duty will be learnt as you progress through your studies. The concepts and principles included in this module are difficult, but with enough practice, they can be mastered. What you learn this year serves as a fundamental basis to what you will learn in future and Taxation 2A is quite a substantial portion of what you will learn in Taxation 3A. Obtaining a solid understanding now will only make it easier as you progress. © The Independent Institute of Education (Pty) Ltd 2021 Page 3 of 30 IIE Learn Module Outline TAXA6212 Using this Module Outline This module outline has been developed to support your learning. Please note that 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. • • This document does not reflect all the content on Learn, the links to different resources, nor the specific instructions for the group and individual activities. 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 within Learn in this regard. © The Independent Institute of Education (Pty) Ltd 2021 Page 4 of 30 IIE Learn Module Outline TAXA6212 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 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. • TAXA6212 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. © The Independent Institute of Education (Pty) Ltd 2021 Page 5 of 30 IIE Learn Module Outline TAXA6212 Icons Used in this Document and 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. © The Independent Institute of Education (Pty) Ltd 2021 Page 6 of 30 IIE Learn Module Outline TAXA6212 Module Resources Prescribed Material (PM) for this Module Recommended Readings, Digital, and Web Resources Module Overview Assessments Bruwer, L. 2021. A Student’s Approach to Income Tax: Business Activities. Durban: Lexis Nexis (PM1). ISBN: 9780639009391 Please note that a number of additional resources and links 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. You will find an overview of this module on Learn under the Module Information link in the Course Menu. Find more information on this module’s assessments in this document and on the Student Portal. © The Independent Institute of Education (Pty) Ltd 2021 Page 7 of 30 IIE Learn Module Outline TAXA6212 Module Purpose The purpose of this module is to introduce students to the basic principles of the South African tax system in order for them to be able to calculate taxable income in a corporate environment. Module Outcomes MO1 MO2 MO3 MO4 Demonstrate a basic understanding of VAT and be able to calculate the VAT implications in a specific scenario. Understand the different types of entities and the tax implications for each of them. Apply basic principles to calculate normal income tax (including capital gains tax) for a corporate entity. Calculate the tax payable or refundable by the taxpayer for the year of assessment. © The Independent Institute of Education (Pty) Ltd 2021 Page 8 of 30 IIE Learn Module Outline TAXA6212 Assessments Integrated Curriculum Engagement (ICE) Minimum number of ICE activities to complete Weighting towards the final module mark Formatives Weighting Duration Learning Units covered Resources required Test 1 20% 1 hour LU 1 – 3 None Summative Weighting Duration Total marks Open/Closed book Resources required Learning Units covered Examination 50% 3 hours 180 Closed book None All © The Independent Institute of Education (Pty) Ltd 2021 4 10% Test 2 20% 1 hour LU 1 – 5 None Page 9 of 30 IIE Learn Module Outline TAXA6212 Assessment Preparation Guidelines Format of the Assessment Test 1 The test for this module will assess your understanding of Learning Units 1 – 3 of this module, and will include a series of short and medium-length questions, as well as one longer question. You will be expected to apply, as well as recall information as per your objectives for these learning units. Test 2 The test for this module will assess your understanding of Learning Units 1 to 5 of this module, and will include a series of short and medium-length questions, as well as one longer question. You will be expected to apply, as well as recall information as per your objectives for these learning units. Preparation Hints • • • • • • • • Examination The examination will assess • all learning units in this module, and will include both theory and applicationtype questions. • You will be expected to respond to short, theory- Ensure that you work through all the relevant activities, exercises and revision questions on Learn and in your textbook. Brainstorm possible questions based on the learning outcomes and objectives provided. Then complete these as practice-tests. During both your preparation for the test and during the test itself, pay attention to the instruction words (like list, apply, describe etc.) and to the mark allocations of each question to ensure that you are able to provide the correct depth and detail in your answers. Make sure that you have mastered the objectives in Learning Units 1 – 3. Ensure that you work through all the relevant activities, exercises and revision questions on Learn and in your textbook. Brainstorm possible questions based on the learning outcomes and objectives provided. Then complete these as practise-tests. During both your preparation for the test and during the test itself, pay attention to the instruction words (like list, apply, describe etc.) and to the mark allocations of each question to ensure that you are able to provide the correct depth and detail in your answers. Make sure that you have mastered the objectives in Learning Units 1 – 5. Consult your examination brief for this module, which will be made available prior to your examination. Make sure that you practise answering the sample questions in the brief so that you become familiar with the kinds of questions likely to appear in the examination itself. 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 © The Independent Institute of Education (Pty) Ltd 2021 Page 10 of 30 IIE Learn Module Outline TAXA6212 based, but mainly to calculation based questions. • • • your prescribed material to ensure that you have prepared adequately for your examination for this module. Pay close attention to the instruction words (like list, apply, describe, analyse etc.) and to the mark allocations of each question to ensure that you provide the correct depth and detail in your answers. 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. © The Independent Institute of Education (Pty) Ltd 2021 Page 11 of 30 IIE Learn Module Outline Module Pacer Code TAXA6212 Learning Unit 1 TAXA6212 Programme BAC312 Introduction to taxation Contact Sessions 44 Credits 12 Overview: This learning unit introduces you to the South African tax system, the different types of taxes as well as the different tax bases. You will also learn about how legislation is interpreted and the impact of interpretation notes and practice notes where the legislation is not clearly worded. If you are a contact student, you will likely spend four sessions on this learning unit. Please work through Themes 1 and 2 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 also ensure that you complete the activities on Learn. This is fairly basic learning unit and generally easy to understand. Students do not usually struggle with this learning unit. © The Independent Institute of Education (Pty) Ltd 2021 Page 12 of 30 IIE Learn Module Outline Learning Unit 1: Theme Breakdown Sessions: Theme 1: Introduction to Taxation 1-4 LO1: Describe the South African tax Academic Week: system; 1 LO2: Describe the budget process; Related LO3: Describe the role of SARS; Outcomes: LO4: Explain how Income Tax law is MO1 interpreted; LO5: Identify the impact of Regulations, Practice Notes and Interpretation notes. Theme 2: Classification of taxes LO6: Explain the implications for resident and non-resident taxpayers (basis of taxation); LO7: Distinguish between direct and indirect taxes; LO8: Distinguish between progressive, regressive and proportional tax. © The Independent Institute of Education (Pty) Ltd 2021 TAXA6212 Prescribed Material (PM) No prescribed text No prescribed text Page 13 of 30 IIE Learn Module Outline Learning Unit 2 TAXA6212 Value-Added tax (VAT) Overview: In Learning Unit 1, you established the different taxes that are levied in South Africa. VAT (an indirect tax) was one of them. In this learning unit, we will now be looking at VAT in more detail. The work that will be covered in this learning unit is merely an introduction to VAT and does not encompass all the rules and/or exceptions. You will learn 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 will also learn how to determine the VAT treatment of a particular transaction i.e. when is output tax levied and when can input tax 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. If you are a contact student, you will likely spend eight sessions on this learning unit. Please work through Themes 1 to 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 activities on Learn. 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. © The Independent Institute of Education (Pty) Ltd 2021 Page 14 of 30 IIE Learn Module Outline Learning Unit 2: Theme Breakdown Sessions: Theme 1: The calculation of VAT 3-10 Academic Week: LO1: Calculate output or input tax on an –1-3 amount that is inclusive of VAT; LO2: Calculate output or input tax on an 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. Related Theme 2: The accounting basis and Outcomes: administration MO1 LO5: Explain how the VAT system works; LO6: State when a taxpayer needs to 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: The basics of output tax LO10: Determine when output vat must be levied; LO11: Determine when a supply is a zero rated supply; LO12: Determine when a supply is an exempt supply; LO13: Apply the value and timing rules of a supply. Theme 4: The basics of input tax LO14: List the requirements of a valid VAT invoice that enable input tax to be claimed; © The Independent Institute of Education (Pty) Ltd 2021 TAXA6212 Prescribed Material (PM) PM: Chapter 2 PM: Chapter 2 PM: Chapter 2 PM: Chapter 2 Page 15 of 30 IIE Learn Module Outline TAXA6212 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. © The Independent Institute of Education (Pty) Ltd 2021 Page 16 of 30 IIE Learn Module Outline Learning Unit 3 TAXA6212 Income tax Overview: In Learning Unit 1, you established the different taxes that are levied in South Africa. Income Tax (a direct tax) was one of them. 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 learn how to describe the income tax process from registration all the way to resolving a dispute with SARS. There are many rules and processes when it comes to disputes and you will need to know how to discuss and apply the rules for objections, appeals and dispute resolution. 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. If you are a contact student, you will likely spend two sessions on this learning unit. Please work through Themes 1 to 3 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 activities on Learn. 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. © The Independent Institute of Education (Pty) Ltd 2021 Page 17 of 30 IIE Learn Module Outline Learning Unit 3: Theme Breakdown Sessions: Theme 1: The taxation process 11 – 12 Academic Week: LO1: Explain the various elements of the 3 taxation process and the related requirements as per the Tax Administration Act; LO2: Discuss the rules for objections, appeals and dispute resolution; LO3: Apply the rules for objections, appeals and dispute resolution. Related Theme 2: Different taxpayers Outcomes: LO4: Identify different taxpayers; MO3 LO4: Determine the manner each MO4 respective taxpayer should be taxed; LO6: Apply the requirements for a taxpayer to register as a “microbusiness”; LO7: Apply the requirements for a taxpayer to register as a “small business corporation”; LO8: Calculate a taxpayer’s taxable income per the framework; LO9: Calculate a taxpayer’s tax liability or refund per the framework; LO10: Calculate the following of a microbusiness: • “qualifying turnover”; • “taxable turnover”; and • the tax liability or refund. Theme 3: Interaction between Income Tax and VAT LO12: Determine the impact of VAT on transactions included in the income tax calculation. © The Independent Institute of Education (Pty) Ltd 2021 TAXA6212 Prescribed Material (PM) PM: Chapter 12 PM: Chapter 1, 8 and 9 PM: Chapter 2 Page 18 of 30 IIE Learn Module Outline Learning Unit 4 TAXA6212 Income Overview: In learning unit 3, you learnt the framework of how to calculate taxable income. Learning units 4 to 7 will breakdown 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. If you are a contact student, you will likely spend three sessions on this learning unit. Please work through Themes 1 to 3 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 activities on Learn: 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. © The Independent Institute of Education (Pty) Ltd 2021 Page 19 of 30 IIE Learn Module Outline Learning Unit 4: Theme Breakdown Sessions: Theme 1: The “Gross income” definition 13 – 15 Academic Week: LO1: State the criteria contained in the 4 definition of gross income (together with the applicable case law); LO2: Apply the principles of relevant case law to illustrate the meaning of the terms used in the gross income definition. Related Theme 2: Gross income – Special Outcomes: inclusions MO2 LO3: Identify the special inclusions of MO3 gross income specifically for a MO4 business entity, namely: (c) Services rendered or voluntary awards; (g) Lease premiums; (gA) “Know-how” payments; (h) Lease Improvements; (jA) Sale of assets similar to trading stock; (k) Dividends; (lC) Government grant; (m) Key-man insurance policies; (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 LO5: Identify entities which are exempt from tax; LO6: Identify income that is exempt from tax for a business entity, namely: • S10(1)(k) Local dividends; • S10B Foreign dividends; and • S12P Government grants. © The Independent Institute of Education (Pty) Ltd 2021 TAXA6212 Prescribed Material (PM) PM: Chapter 3 PM: Chapter 3 PM: Chapter 3 Page 20 of 30 IIE Learn Module Outline Learning Unit 5 TAXA6212 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). If you are a contact student, you will likely spend eight sessions on this learning unit. Please work through Themes 1 to 3 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 activities on Learn: 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 rule. However, if you practice consistently, you will find that applying these rules become much easier. © The Independent Institute of Education (Pty) Ltd 2021 Page 21 of 30 IIE Learn Module Outline TAXA6212 Learning Unit 5: Theme Breakdown Sessions: Theme 1: General deduction formula Prescribed Material (PM) 16 – 23 (Positive test S11(a) and negative test S23(g)) Academic Week: LO1: State the criteria contained in S11(a) PM: Chapter 3 6–8 (together with the applicable case law); LO2: Apply the principles of relevant case law to illustrate the meaning of the terms used in the general deduction formula (S11(a)). Related Theme 2: Specific deductions PM: Chapter 4 Outcomes: LO3: Calculate the various specific MO2 deductions (including trading stock) MO3 that are available to the taxpayer in MO4 accordance with the Income Tax Act. These include: • S11(c) – Legal fees; • S11(cA) – Restraint of trade; • S11(d) – Repairs; • S11(gB) – Renewal of patents, designs, copyrights and trademarks; • S11(gC) – Acquisition of patents, designs and copyrights; • S11(i) – Bad debts; • S11(j) – Allowance for doubtful debts; • S11(l) – Contributions to pension funds, provident funds and medical aids; • S11(m) – Annuities paid to employees and dependants; • S11D – Research and development; • S18A – Donations to Public Benefit Organisations; • S23H – Prepayments; • S22 – Trading stock (including recoupments). © The Independent Institute of Education (Pty) Ltd 2021 Page 22 of 30 IIE Learn Module Outline TAXA6212 Theme 3: Prohibited deductions PM: Chapter 3 LO4: Identify costs which are prohibited from being deducted. These include: • S23(c) – insured losses; • S23(d) – Tax, penalties, interest and levies; • S23(e) – Provisions; • S23(f) – Expenses incurred to produce exempt income; • S23(g) – Non-trade expenditure; • S23(l) – Expenditure relating to restraint of trade payments; • S23(o) – Fines and corrupt activities; • S23(q) – expenses relating to foreign dividends. © The Independent Institute of Education (Pty) Ltd 2021 Page 23 of 30 IIE Learn Module Outline Learning Unit 6 TAXA6212 Capital allowances Overview: In Learning Unit 5, 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. This learning unit covers the capital allowances that can be claimed on certain assets and you will learn how to calculate these allowances in accordance with the specific sections of the Act for moveable and immoveable assets. We will also look at calculating the tax effect of disposing of an asset. If you are a contact student, you will likely spend eight sessions on this learning unit. Please work through Themes 1 to 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 activities on Learn. 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 of this information, but remember an easy way to combat this is to make sure you keep up to date and practice lots of questions. © The Independent Institute of Education (Pty) Ltd 2021 Page 24 of 30 IIE Learn Module Outline Learning Unit 6: Theme Breakdown Sessions: Theme 1: Terminology 24 – 30 Academic Week: LO1: Define the different terms used; 6–7 • Discuss how such items are treated in the income tax calculation. LO2: Distinguish between a repair and improvement and determine the difference in tax treatment of each one. Related Theme 2: Capital allowances for moveable Outcomes: assets MO2 LO3: Calculate the capital allowances that MO3 are available to the taxpayer in MO4 respect of moveable assets in accordance with the Income Tax Act. Allowances covered include: • S12C – Allowances on moveable assets used by manufacturers; • S12E – Deductions in respect of a Small Business Corporation; • S11(e) – Wear and tear allowance on other assets (nonmanufacturing assets). Theme 3: Capital allowances for immoveable assets LO4: Calculate the capital allowances that are available to the taxpayer in respect of immoveable in accordance with the Income Tax Act. Allowances covered include: • S13 – Deductions in respect of buildings used in the process of manufacture; • S13quat – Deductions in respect of erection or improvements of buildings in an urban development zone; © The Independent Institute of Education (Pty) Ltd 2021 TAXA6212 Prescribed Material (PM) PM: Chapter 5 PM: Chapter 5 PM: Chapter 5 Page 25 of 30 IIE Learn Module Outline TAXA6212 • S13quin – Deductions in respect of commercial buildings; • S13sex – Deductions in respect of certain residential units. Theme 4: Disposal of assets PM: Chapter 5 LO5: Calculate the effects that the disposal of an asset has on taxable income, namely: • Recoupments (S8(4)(a), S8(4)(k)); • Deductible scrapping losses/allowances (S11(o)). • Determine when a recoupment can be deferred in terms of section 13(3). © The Independent Institute of Education (Pty) Ltd 2021 Page 26 of 30 IIE Learn Module Outline Learning Unit 7 TAXA6212 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 6. 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. Although the CGT calculation is quite complex, it is merely an additional step that is added on the calculations you learnt in Learning Unit 6. If you are a contact student, you will likely spend eight sessions on this learning unit. Please work through Themes 1 and 2 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 activities on Learn. 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. © The Independent Institute of Education (Pty) Ltd 2021 Page 27 of 30 IIE Learn Module Outline TAXA6212 Learning Unit 7: Theme Breakdown Sessions: Theme 1: Framework for calculating CGT Prescribed Material (PM) 31 – 38 Academic Week: LO1: Determine the difference between PM: Chapter 6 12 – 14 how residents and non-residents are subject to CGT; LO2: Determine when CGT is applicable. Related Theme 2: Calculating the taxable capital PM: Chapter 6 Outcomes: gain or assessed capital loss MO2 LO3: Calculate proceeds; MO3 LO4: Calculate base cost of a preMO4 valuation date asset; LO5: Calculate base cost of a postvaluation date asset; LO6: Calculate the aggregate and net capital gain; LO7: Determine the inclusion rate applicable for a particular taxpayer. © The Independent Institute of Education (Pty) Ltd 2021 Page 28 of 30 IIE Learn Module Outline Learning Unit 8 TAXA6212 Provisional tax Overview: In learning unit 3, you were introduced to the taxation process. You also learned 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.. If you are a contact student, you will likely spend three sessions on this learning unit. Please work through Themes 1 and 2 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 activities on Learn. This is a relatively easy learning unit, however, students tend to confuse payment dates. The second provisional payments proves 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. © The Independent Institute of Education (Pty) Ltd 2021 Page 29 of 30 IIE Learn Module Outline Learning Unit 8: Theme Breakdown Sessions: Theme 1: Provisional taxpayers 39 – 41 Academic Week: LO1: List the type of taxpayers who are 15 required to pay provisional tax. Related Theme 2: Calculation of provisional tax Outcomes: payments MO4 LO2: Calculate the first, second and third provisional payments in accordance with the Fourth Schedule of the Income Tax Act. © The Independent Institute of Education (Pty) Ltd 2021 TAXA6212 Prescribed Material (PM) PM: Chapter 8 PM: Chapter 8 Page 30 of 30