NB notes
LA 2- Exempt income
* First include amounts in GI, and then deduct if they are exempt
Exempt because of status
Exemptions incentivising investments
Interest exemption (s 10(1)(i))
• Only for natural persons- not for companies
• Local interest (SA source) < 65: 2019 – R23 800
• Local interest (SA source) ≥ 65: 2019– R34 500
• No exemption for foreign interest
Amounts received from tax free investments (s 12 T and 64F)
• Only applicable from 1 March 2015- incentive to increase household savings
• When calculating total contributions, need to show that capitalisations from interest and dividends from the
investment is not included in investments
Definition
• A financial instrument or policy owned by a natural person, and administered by a person designated by Minister of
Finance
• May only be issued by a bank; long-term insurer; manager (i.t.o. Collective Investment Scheme Control); SA Government;
a Mutual bank; and a co-operative bank
Application
• Interest, dividends tax (64F) & CGT are totally exempt!
• Maximum contribution R36 000 per annum and R500 000 over lifetime per person
• May open multiple tax-free accounts, but the limit may not be exceeded
• Amounts received and re-invested in same account, and amounts transferred between tax-free accounts are not taken
into consideration when determining limits
• However, any amount transferred between persons will be deemed a contribution
• If exceed maximum contributions- 40% of excess deemed to be normal tax payable (but all proceeds will still be exempt)
• Death or insolvency- investments in estate remain tax-free
Purchased annuities (S10A)
Definitions
• Exemption applies to the capital portion of an annuity amount payable to a purchaser or his spouse, as per the definition
of an annuity contract
• Purchaser- natural person, his estate or a curator bonis or a trust created solely for the benefit of any natural person
• Annuity amount- amount payable under contract
• Annuity contract requirements
, NB notes
1. Insurer pays purchaser or spouse until the death of the annuitant or the expiry of the specified term
2. Purchaser pays a lump sum cash consideration- thus must be a purchased annuity
3. No amounts payable to purchaser or any other person other than the envisaged annuity
Application
• General rule- annuities are included in GI (Special inclusion); however capital portion of some annuities are exempt
• Exemption only applies to natural persons
• Pension/provident fund, RAF- not included for this exemption
• Annuities donated, in consideration for services, for the disposal of a business or rights- excluded
• Annuity split between income portion (taxable), and capital portion (exempt)
Exemptions relating to dividends (10(1)(k))
• Dividends from SA resident companies to natural persons or entities are normally exempt (already taxed in company’s
income and 20% dividends tax withheld by the company)
• The dividend exemption will not be applicable if the dividend is received in the form of an annuity; (Also: Real Estate
investment trust; employee based share schemes; received by a company in consequence of session; exercise of power
or in respect of shares borrowed; applied against deductible financial payments; as part of a dividend stripping
transaction)
Not exempt
• Dividends as part of an annuity
• Real estate investment trust (REIT) distributions- fully taxable in recipient’s hands (taxed under s 25BB)- exemption
will apply if REIT distributes dividend to non-resident, or the dividend is an amount as consideration for the
acquisition of shares in the REIT
• Dividends from employee-based share schemes- taxed as normal amount received for employment
• Dividends liquidating the underlying value of shares- e.g. dividends as consideration for redemption of shares or in
anticipation of winding up
S 10 B Foreign dividends exemptions
Participation exemption
• Shareholder (together with company in same group) receiving the dividend holds at least 10% in equity and voting
rights (2)(a)
• Dividends must be iro equity shares
• Does not apply if company declaring dividends may deduct from income tax (but can still get ratio exemption)
• Does not apply if it is in respect of an amount that is deductible for the person paying, and not included in income
of the receiver, or if the amount is consideration for the purchase of trading stock (proviso to (2))
Country to country exemption (BEL700)
Controlled foreign company (CFC) exemption (BEL700)
JSE-Listed shares (2)(d)
• Declaring company listed on JSE
• If distribution of assets in specie- only exempt if received by a resident company
Ratio exemption (3)
• Natural persons/estate/trusts- FD x 25/45
• Company: FD x 8/28
• Only used if not qualifying for any other exemption
***Participation and country to country does not apply to the extent that foreign dividends are deductible for
foreign company (but can still get ratio and JSE)- Proviso to (2)
Exemptions relating to employment
Foreign pension (s 10(1) (gC))
• Any foreign pension, government or not, will generally be included
LA 2- Exempt income
* First include amounts in GI, and then deduct if they are exempt
Exempt because of status
Exemptions incentivising investments
Interest exemption (s 10(1)(i))
• Only for natural persons- not for companies
• Local interest (SA source) < 65: 2019 – R23 800
• Local interest (SA source) ≥ 65: 2019– R34 500
• No exemption for foreign interest
Amounts received from tax free investments (s 12 T and 64F)
• Only applicable from 1 March 2015- incentive to increase household savings
• When calculating total contributions, need to show that capitalisations from interest and dividends from the
investment is not included in investments
Definition
• A financial instrument or policy owned by a natural person, and administered by a person designated by Minister of
Finance
• May only be issued by a bank; long-term insurer; manager (i.t.o. Collective Investment Scheme Control); SA Government;
a Mutual bank; and a co-operative bank
Application
• Interest, dividends tax (64F) & CGT are totally exempt!
• Maximum contribution R36 000 per annum and R500 000 over lifetime per person
• May open multiple tax-free accounts, but the limit may not be exceeded
• Amounts received and re-invested in same account, and amounts transferred between tax-free accounts are not taken
into consideration when determining limits
• However, any amount transferred between persons will be deemed a contribution
• If exceed maximum contributions- 40% of excess deemed to be normal tax payable (but all proceeds will still be exempt)
• Death or insolvency- investments in estate remain tax-free
Purchased annuities (S10A)
Definitions
• Exemption applies to the capital portion of an annuity amount payable to a purchaser or his spouse, as per the definition
of an annuity contract
• Purchaser- natural person, his estate or a curator bonis or a trust created solely for the benefit of any natural person
• Annuity amount- amount payable under contract
• Annuity contract requirements
, NB notes
1. Insurer pays purchaser or spouse until the death of the annuitant or the expiry of the specified term
2. Purchaser pays a lump sum cash consideration- thus must be a purchased annuity
3. No amounts payable to purchaser or any other person other than the envisaged annuity
Application
• General rule- annuities are included in GI (Special inclusion); however capital portion of some annuities are exempt
• Exemption only applies to natural persons
• Pension/provident fund, RAF- not included for this exemption
• Annuities donated, in consideration for services, for the disposal of a business or rights- excluded
• Annuity split between income portion (taxable), and capital portion (exempt)
Exemptions relating to dividends (10(1)(k))
• Dividends from SA resident companies to natural persons or entities are normally exempt (already taxed in company’s
income and 20% dividends tax withheld by the company)
• The dividend exemption will not be applicable if the dividend is received in the form of an annuity; (Also: Real Estate
investment trust; employee based share schemes; received by a company in consequence of session; exercise of power
or in respect of shares borrowed; applied against deductible financial payments; as part of a dividend stripping
transaction)
Not exempt
• Dividends as part of an annuity
• Real estate investment trust (REIT) distributions- fully taxable in recipient’s hands (taxed under s 25BB)- exemption
will apply if REIT distributes dividend to non-resident, or the dividend is an amount as consideration for the
acquisition of shares in the REIT
• Dividends from employee-based share schemes- taxed as normal amount received for employment
• Dividends liquidating the underlying value of shares- e.g. dividends as consideration for redemption of shares or in
anticipation of winding up
S 10 B Foreign dividends exemptions
Participation exemption
• Shareholder (together with company in same group) receiving the dividend holds at least 10% in equity and voting
rights (2)(a)
• Dividends must be iro equity shares
• Does not apply if company declaring dividends may deduct from income tax (but can still get ratio exemption)
• Does not apply if it is in respect of an amount that is deductible for the person paying, and not included in income
of the receiver, or if the amount is consideration for the purchase of trading stock (proviso to (2))
Country to country exemption (BEL700)
Controlled foreign company (CFC) exemption (BEL700)
JSE-Listed shares (2)(d)
• Declaring company listed on JSE
• If distribution of assets in specie- only exempt if received by a resident company
Ratio exemption (3)
• Natural persons/estate/trusts- FD x 25/45
• Company: FD x 8/28
• Only used if not qualifying for any other exemption
***Participation and country to country does not apply to the extent that foreign dividends are deductible for
foreign company (but can still get ratio and JSE)- Proviso to (2)
Exemptions relating to employment
Foreign pension (s 10(1) (gC))
• Any foreign pension, government or not, will generally be included
