ࡱ> fheq` ;0bjbjqPqP 4J::;(||||$<X2XXXXXXX"Zh\jX777XX7JX7X2WSX 9ӳ|RT.XX0XU\(\\X\X|0":VXXX7777|| STUDY UNIT 4 EXEMPT INCOME EXEMPTIONS BASED ON THE NATURE OF THE INCOME (SECTION 10) (3.3) Pension payable to State President, Deputy State President or his/her widow Any pension payable to the above is exempt from tax War Pensions and awards for diseases Any amount received as a war pension or compensation iro diseases contracted in mining operations Disability pensions and workmens compensation Following is exempt from tax: Any disability pension paid ito section 2 of Social Assistance Act 59 of 1992 Any compensation paid ito Workmens Compensation Act 30 of 1941 or the Compensation for Occupational Injuries and Diseases Act 130 of 1993 Compensation paid by an employer iro death of an employee in corse of their employment. Limited to R300,000 less any amount that has ever been exempted ito section 10(1)(x) Foreign Pensions Exempts amounts received by or accrued to any resident Under the social security system of any other country Pensions form a source outside the Republic which arent deemed to b from a source in the Republic Funeral Benefits Exempts amounts received to any resident who receives a funeral benefit ito the Special Pensions Act 69 of 1996 Interest Received by Non-Residents Interest received by any person who is not a resident is exempt from taxation if the following requirements are met: If person isnt present in RSA for more than 183 days during the year of assessment If person doesnt carry on buss through a permanent establishment in RSA These amounts must b reflected in taxpayers return irrespective of the fact that its exempt. Exemption doesnt apply to an annuity Interest Exemption Under age 65 is entitled to an exemption of R19,000 Over age 65 is entitled to an exemption of R27,500 Maximum exemption for qualifying foreign dividends and interest for individuals of any age is R3200 First use the R3200 towards for divs and then towards for interest Dividends (other than foreign divs) Dividends received by a taxpayer are exempt form normal tax. Some divs are not exempt though, according to this section: Divs declared by a property collective investment scheme. This div will remain exempt if it represents a distribution of capital profits or if its received by a non-res Divs received form a collective investment scheme that are declared by the portfolio out of income received by collective investment scheme which is exempt ito section 10(1)(iA), or amounts received by means of divs from a property collective investment scheme Foreign Dividends Following foreign divs are exempt from taxation: Foreign divs received to extent that profits have been taxed in RSA Divs declared by listed company, as defined, and more than 10% of the equity share capital is held by residents Divs declared by a controlled foreign company where the divs are pai out of income that has already been taxed in the RSA Divs received to a person who holds at least 20% of total equity share capital or voting rights of the company declaring the div, except if the foreign div are paid by a collective investment in securities Any div exempt, should b included in the taxpayers income tax return Royalties paid to non-residents Exempts any amount received as a royalty or similar payment that has been subject to withholding tax ito section 35 Foreign Entertainers and Sportspersons Those who are non-res will b exempt form normal tax if the amount that they receive is subject to tax on foreign entertainers and sportpersons Copyright Exempts any amount received to an author of a work ito assignment of or grant of an interest in a copyright of that work, if the amount is chargeable with income tax in a foreign country Exemption doesnt apply to a comp or any person who is not the first owner of the copyright Unemployment Insurance benefit funds Any benefit or allowance payable ito Unemployment Insurance Act 63 of 2001 is exempt Uniforms and Uniform Allowances Where an employee, as a condition of his employment: Is required to wear a special uniform while on duty Which is clearly distinguishable form ordinary clothing The value of the uniform provided by employer will be exempt from taxation Any allowance made by the employer to the employee in lieu of the uniform will also be exempt Relocation Benefits Any benefit/advantage accruing to any employee by reason of the fact that his employer has, in consequence of the transfer or appointment of the employee, borne the expense of: Transporting the employee, his household and personal possessions from his previous place of residence to his new place of residence Costs incurred by employee iro sale of his previous residence and in settling in permanenet residential accommodation at his new place of residence, or Hiring residential accommodation in a hotel or elsewhere for the employee or members of his household for a period ending 183 days after his transfer took effect or after he took up appointment Is exempt from taxation ito the provisions of section Fringe Benefits This is dealt with in chapter 6 Employment outside the Republic Officer or crew Exempts any remuneration derived by any person as an officer/crew member of a ship engaged in intl transportation of passengers or goods for reward, where such person was outside the RSA for a period exceeding 183 days in aggregate during year of assessment Foreign Services Provides for the exemption of following: Salary, leave pay, wage, overtime pay, bonus, gratuity, commission, fee, emolument or allowance Incl any fringe benefit as per the seventh schedule Indl any subsistence allowance, travel allowance, holder of public office allowance Incl any taxable amounts derived form broad-based employee share plan and any taxable amount arising on the vesting of equity instruments Derived by any employee iro services rendered outside RSA for or on behalf of any employer, if employee was outside RSA: For period/s exceeding 183 full days in aggregate during 12 month period commencing or ending during a year of assessment, and For a continuous period exceeding 60 full days during such period of 12 months Exemption doesnt apply to remuneration derived iro holding of office/services rendered for or on behalf State or any semi-state organisation Provision to this section provides that for the purposes of this section, where remuneration is received by an employee during a year of assessment for services that were rendered by him in more than 1 year of assessment, then the remuneration is deemed to have accrued evenly over the period that those services were rendered A person in transit between 2 places outside RSA and who hasnt entered through a port of entry as defined in immigrations act, deemed to be outside the RSA Employment of non-residents Any amount received by following persons will b exempt from taxation, provided the amount is subject to income tax in his country of residence. Exemption wont apply if income tax is payable on his behalf by the Gov or the other institutions referred to: Any person who is not a resident For services rendered or work or labour done by him outside RSA For or on behalf or any employer in the national or provincial sphere of Gov or any Municipality in the RSA or any national/provincial public entity, and If not less than 80% of expenditure of entity is defrayed directly or indirectly form funds voted by Parliament Bursaries and Scholarships Any bona fide scholarship or bursary granted to enable or assist any person in studying at a recognised educational or research institution is exempt form normal tax. Exemption will not apply to a bursary/scholarship granted by: An employer to an employee Employee doesnt agree to reimburse the employer for any scholarship or bursary if he fails to complete his studies for reasons other than death, illhealth or injury Where the bursary is lined to any such condition of repayment, it will b exempt Thus, it has to b an open bursary which is available to anyone and is awarded on merit Bursaries/scholarships granted to: Relatives of an employee wont be exempt If remuneration derived by employee during year or assessment exceeds R100,000 Bursary granted to relative of an employee will only b exempt up to an amount of R10,000 p/yr Thus, as long as employee doesnt earn more than R100k pa ea one of his relatives may b awarded exempt bursaries of up to R10k during that same year Gratuity received form public funds Exempts gratuity received by any person form public funds on his retirement form any office or Gov employment, Railway Administration, provincial admin or from the funds of Land and Agricultural Bank of RSA upon retirement as a member of the board of that bank, which the Treasury declares to b free of tax Alimony Received Any amount received by person form his spouse or former spouse by way of alimony, allowance, or maintenance for himself ito an order of judicial separation or divorce, is exempt form taxation if the proceedings were instituted after 1962 or ito any agreement of separation entered into after that date Any amount received ito any maintenance order for the maintenance of a child is also exempt from tax Also applies to exempt amounts paid by the estate of a deceased former spouse in pursuance of an obligation to pay maintenance Retirement Awards An exemption of R30,000 is granted iro awards received by the taxpayer ito a loss, termination, cancellation, etc of an office or employment This exemption is not applicable to retirement fund lump sum benefits Taxpayer may only make use of R30,000 cumulatively in their lifetime Government Grants Is exempt from normal tax if its received to a person ito any programme or scheme that has been approved ito the national annual budget process Any amount received iro goods or services provided to beneficiaries ito an official development assistance agreement will b exempt form normal tax Subsidy received by a farmer Any subsidy received by farmer form the state on interest payable by him on any amount owing on any loan or advance utilised for farming activities is exempt form taxation Rebate or assistance received for exports Any rebate or assistance received by any person under any approved scheme for the promotion or financing of exports will b exempt.   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