ch5 exempt income (for A1S1)
Saturday, 30 March 2024 14:31
outcomes of this chapter:
- identify amounts, that were incl. in gross income, that are exempt from normal tax
- apply the qualifying criteria to determine whether certain amounts are exempt from normal tax
- explain why certain amounts exempt from normal tax
overview (structure) of exempt income in SILKE
SILKE included page #
5.1. introduction p.80
5.2. exemptions incentivising investments p.81
5.3. exemptions relating to dividends p.90
5.4. exemptions relating to employment p.101
5.5. exemptions that incentivise education p.108
5.10. exemptions aimed at amounts that are subject to withholding tax p.123
5.11. other exemptions p.124
5.1. fundamentals (introduction) of exemptions [SILKE p.80]
the income of a tp is the amount of his gross income remaining after excl. of any amounts exempt from normal tax for yoa. inc ome
is therefore calc. as follows:
gross income xxx
less: exempt income - s10; s12 (xxx)
subtotal 1 - income xxx
exempt income refers to amounts received/accrued and that have been incl. in gross income, that are not subject to normal tax :
▪ you must incl. an amount in gross income, even if the full amount/portion thereof will qualify for an exemption
▪ you must incl. the gross amount in gross income & then exempt the amount (if applicable) BUT do not incl. net gross income
▪ majority of exemptions are contained in s10 of the act
5.2. exemptions incentivising investments [SILKE p.81]
the following types of investment income are exempt from normal tax:
(1) interest received by natural persons
(2) interest received by non-residents
(3) amounts received from tax free investments
(4) purchased annuities
(5) exemption of non-deductible element of qualifying annuities
(6) collective investment schemes
(7) proceeds from insurance policies
(8) approved funds and associations
5.2.1. interest received by natural persons [SILKE p.81]
▪ where a natural person receives interest from a source in south africa, the following amounts qualify for an exemption:
▫ where the person is <65 yrs the first R23 800 interest that the person received during the year; or
▫ where the person is ≥65 yrs the first R34 500 interest that the person received during the year
▪ this exemption does not apply to interest received from a tax-free investment & is also not applicable to non-natural persons
(companies, or trusts)
5.2.2. interest received by non-residents [SILKE p.81]
▪ only interest that is received from a south african source will be incl. in a non-resident's gross income
▫ the source of interest is in south africa if the interest is paid by a resident, or is received/accrued i.r.o. any funds
used/applied by any person in south africa
▫ interest received by a non-resident is exempt from normal tax, subject to the exceptions mentioned in s10(1)(h)
▫ interest received by a non-resident is, however, not tax-free since it may be subject to the 15% withholding tax on
interest
▫ the rate of the withholding tax on interest may be reduced by a double tax agreement (south africa & other country)
▪ exceptions, where the normal tax exemption does not apply, are
▫ in the case of a natural person
- who was physically present in south africa for a period exceeding 183 days in total during the 12 -month period
preceding the date on which the interest is received by/accrues to that person
- if the debt from which the interest arises is effectively connected to a permanent establishment of that person in
south africa
▫ in the case of any other person (incl. companies/trusts)
- if the debt from which the interest arises is effectively connected to a permanent establishment of that person in
south africa
ch5 Page 1
Saturday, 30 March 2024 14:31
outcomes of this chapter:
- identify amounts, that were incl. in gross income, that are exempt from normal tax
- apply the qualifying criteria to determine whether certain amounts are exempt from normal tax
- explain why certain amounts exempt from normal tax
overview (structure) of exempt income in SILKE
SILKE included page #
5.1. introduction p.80
5.2. exemptions incentivising investments p.81
5.3. exemptions relating to dividends p.90
5.4. exemptions relating to employment p.101
5.5. exemptions that incentivise education p.108
5.10. exemptions aimed at amounts that are subject to withholding tax p.123
5.11. other exemptions p.124
5.1. fundamentals (introduction) of exemptions [SILKE p.80]
the income of a tp is the amount of his gross income remaining after excl. of any amounts exempt from normal tax for yoa. inc ome
is therefore calc. as follows:
gross income xxx
less: exempt income - s10; s12 (xxx)
subtotal 1 - income xxx
exempt income refers to amounts received/accrued and that have been incl. in gross income, that are not subject to normal tax :
▪ you must incl. an amount in gross income, even if the full amount/portion thereof will qualify for an exemption
▪ you must incl. the gross amount in gross income & then exempt the amount (if applicable) BUT do not incl. net gross income
▪ majority of exemptions are contained in s10 of the act
5.2. exemptions incentivising investments [SILKE p.81]
the following types of investment income are exempt from normal tax:
(1) interest received by natural persons
(2) interest received by non-residents
(3) amounts received from tax free investments
(4) purchased annuities
(5) exemption of non-deductible element of qualifying annuities
(6) collective investment schemes
(7) proceeds from insurance policies
(8) approved funds and associations
5.2.1. interest received by natural persons [SILKE p.81]
▪ where a natural person receives interest from a source in south africa, the following amounts qualify for an exemption:
▫ where the person is <65 yrs the first R23 800 interest that the person received during the year; or
▫ where the person is ≥65 yrs the first R34 500 interest that the person received during the year
▪ this exemption does not apply to interest received from a tax-free investment & is also not applicable to non-natural persons
(companies, or trusts)
5.2.2. interest received by non-residents [SILKE p.81]
▪ only interest that is received from a south african source will be incl. in a non-resident's gross income
▫ the source of interest is in south africa if the interest is paid by a resident, or is received/accrued i.r.o. any funds
used/applied by any person in south africa
▫ interest received by a non-resident is exempt from normal tax, subject to the exceptions mentioned in s10(1)(h)
▫ interest received by a non-resident is, however, not tax-free since it may be subject to the 15% withholding tax on
interest
▫ the rate of the withholding tax on interest may be reduced by a double tax agreement (south africa & other country)
▪ exceptions, where the normal tax exemption does not apply, are
▫ in the case of a natural person
- who was physically present in south africa for a period exceeding 183 days in total during the 12 -month period
preceding the date on which the interest is received by/accrues to that person
- if the debt from which the interest arises is effectively connected to a permanent establishment of that person in
south africa
▫ in the case of any other person (incl. companies/trusts)
- if the debt from which the interest arises is effectively connected to a permanent establishment of that person in
south africa
ch5 Page 1
