Learning unit 4_handout.pdf - Study unit 2 unit 4 Learning...

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2016/09/06 1 Study unit 2: Administration, returns and assessments Learning unit 4: Income of a business entity 2 Background What should you be able to do for this learning unit: 1) State the criteria of the gross income definition, and apply them in a practical situation. 2) Apply the special inclusions in a taxable income calculation. 3) Apply exempted income in a taxable income calculation. 3 The definition for gross income relating to a resident and non resident is different. Distinguish between residents and non residents. For a company a resident is: - incorporated, established or formed in the republic or - Place of effective management is in the Republic. 4 A resident company: Subject to Income Tax on worldwide income income inside and outside the Republic. Non-residents: taxed on a source basis will not be dealt with in TAX2601. Refer to learning unit 1 for difference between source basis and world wide basis. 5 Gross income definition In the case of a resident: - the total amount - in cash or otherwise - received by or accrued to, or in favour of a person - during the year of assessment - excluding amounts of a capital nature. The definition goes further to include items specifically listed (these are specific inclusions and will be dealt with later in this learning unit. 6
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