TAX3701 Assignment 2 Study Guide 2025/2026
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Part 1: Core Concepts & Principles (Questions 1-25)
1. Q: What is the primary goal of the South African residence-based tax system?
• A: To tax residents on their worldwide income and non-residents only on their income
from a South African source.
• Rationale: This principle is the cornerstone of the South African Income Tax Act. It
defines the scope of a taxpayer's liability, ensuring the South African Revenue Service
(SARS) has the right to tax all income of its residents, regardless of where it is earned.
2. Q: Differentiate between "Gross Income" (as defined in Section 1 of the Income Tax
Act) and "Taxable Income".
• A: Gross Income is the total amount received by or accrued to a taxpayer, excluding
receipts of a capital nature. Taxable Income is Gross Income minus all allowable
deductions and exemptions.
• Rationale: Understanding this distinction is fundamental. Gross Income is the starting
point for the tax calculation, while Taxable Income is the final base upon which the
normal tax is calculated.
, 3. Q: Which of the following is NOT a characteristic of a "resident" for individuals
under the physical presence test?
• a) 91 days in the current year of assessment.
• b) 915 days in total during the five preceding years of assessment.
• c) A permanent home in South Africa.
• d) 91 days in each of the five preceding years of assessment.
• A: d) 91 days in each of the five preceding years of assessment.
• Rationale: The physical presence test requires an aggregate of 915 days over the
previous five years, not a minimum of 91 days in each of those years. Option (c) relates
to the ordinarily resident test.
4. Q: Explain the "Source" concept in South African tax law.
• A: The source refers to the originating cause of the income. For income to be taxable in
South Africa for a non-resident, it must have its source within the country. The location of
the source is a matter of fact, determined by the operations from which the income
originates.
• Rationale: This concept is critical for determining the tax liability of non-residents and
for applying Double Taxation Agreements (DTAs).
5. Q: What is the purpose of a Double Taxation Agreement (DTA)?
Verified Questions & Detailed Solutions with Rationales || 100% Guaranteed
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Part 1: Core Concepts & Principles (Questions 1-25)
1. Q: What is the primary goal of the South African residence-based tax system?
• A: To tax residents on their worldwide income and non-residents only on their income
from a South African source.
• Rationale: This principle is the cornerstone of the South African Income Tax Act. It
defines the scope of a taxpayer's liability, ensuring the South African Revenue Service
(SARS) has the right to tax all income of its residents, regardless of where it is earned.
2. Q: Differentiate between "Gross Income" (as defined in Section 1 of the Income Tax
Act) and "Taxable Income".
• A: Gross Income is the total amount received by or accrued to a taxpayer, excluding
receipts of a capital nature. Taxable Income is Gross Income minus all allowable
deductions and exemptions.
• Rationale: Understanding this distinction is fundamental. Gross Income is the starting
point for the tax calculation, while Taxable Income is the final base upon which the
normal tax is calculated.
, 3. Q: Which of the following is NOT a characteristic of a "resident" for individuals
under the physical presence test?
• a) 91 days in the current year of assessment.
• b) 915 days in total during the five preceding years of assessment.
• c) A permanent home in South Africa.
• d) 91 days in each of the five preceding years of assessment.
• A: d) 91 days in each of the five preceding years of assessment.
• Rationale: The physical presence test requires an aggregate of 915 days over the
previous five years, not a minimum of 91 days in each of those years. Option (c) relates
to the ordinarily resident test.
4. Q: Explain the "Source" concept in South African tax law.
• A: The source refers to the originating cause of the income. For income to be taxable in
South Africa for a non-resident, it must have its source within the country. The location of
the source is a matter of fact, determined by the operations from which the income
originates.
• Rationale: This concept is critical for determining the tax liability of non-residents and
for applying Double Taxation Agreements (DTAs).
5. Q: What is the purpose of a Double Taxation Agreement (DTA)?
