Advanced Taxation: Taxation of Companies

<p>Initial repairs after purchasing an asset (B)</p> Signup and view all the answers

<p>To ascertain profit or loss (D)</p> Signup and view all the answers

<p>Trading income is derived from regular operations while capital receipts are one-time financial gains (C)</p> Signup and view all the answers

<p>Disallowed expenses (D)</p> Signup and view all the answers

<p>Interest for capital employed is allowable (B)</p> Signup and view all the answers

<p>Contributions to a retirement fund (B)</p> Signup and view all the answers

<p>Forgiving them is treated as income. (B)</p> Signup and view all the answers

<p>If they are incurred for business purposes. (B)</p> Signup and view all the answers

<p>Payments for technical education related to business (B)</p> Signup and view all the answers

<p>They are allowable deductions. (D)</p> Signup and view all the answers

<p>Expenses associated with setting up a business (B)</p> Signup and view all the answers

<p>Donations to approved charitable institutions (A)</p> Signup and view all the answers

<p>They are allowable if related transactions are of a revenue nature. (B)</p> Signup and view all the answers

<p>Domestics or private expenses (A)</p> Signup and view all the answers

<p>30% (D)</p> Signup and view all the answers

<p>ETC must be claimed on both trading and non-trading incomes. (C)</p> Signup and view all the answers

<p>It may be treated as an interest payment. (A)</p> Signup and view all the answers

<p>Deductions were not declared on time. (D)</p> Signup and view all the answers

<p>Income that is taxed at source (D)</p> Signup and view all the answers

<p>Fixed rate preference dividend paid (D)</p> Signup and view all the answers

<p>Capital employed in improvements (C)</p> Signup and view all the answers

<p>15% (A)</p> Signup and view all the answers

<p>Payment to a major shareholder with 25% holdings (C)</p> Signup and view all the answers

<p>50% (A)</p> Signup and view all the answers

<p>Companies can set off losses against future taxable profits indefinitely. (B)</p> Signup and view all the answers

<p>Tax liability divided by accounting income before tax. (C)</p> Signup and view all the answers

<p>In four quarterly instalments up to December 15. (A)</p> Signup and view all the answers

<p>Good management minimizing tax liabilities. (D)</p> Signup and view all the answers

<p>33 1/3% (D)</p> Signup and view all the answers

Expenses that can be deducted from income to reduce the taxable amount, like interest on business loans.

Expenses that cannot be deducted from income to reduce the taxable amount, such as personal expenses.

Profit calculated according to accounting rules and principles..

Profit after adjustments to accounting profit, determining the income subject to tax.

Detailed records of business transactions, required to accurately determine profit or loss.

Twelve-month period used to calculate taxable income for a given tax year.

Accounting method recognizing income and expenses when they are earned or incurred, regardless of cash flow.

Accounting method that recognizes income when cash is received and expenses when cash is paid.

Severance pay is deductible if it's directly linked to acquiring income.

Contributions up to 20% of employee remuneration are deductible for approved superannuation schemes.

Debts owed to the taxpayer, incurred in generating income, are deductible.

Entertainment expenses for clients are deductible if directly related to acquiring income.

Business-related training expenses are often deductible.

Insurance for business is deductible.

Revenue-related legal fees are deductible, but capital-acquiring expenses are not.

Donations to approved charities/educational institutions, up to 5% of statutory income, are allowed as deductions.

A resident company making a distribution to a major shareholder (holding over 25%) does not face any withholding tax. The recipient is responsible for accounting for the tax at nil.

A resident company distributing dividends to a shareholder holding less than 25% faces a 15% withholding tax.

A resident company making a dividend distribution to an overseas shareholder is subject to a 25% or 33 1/3% withholding tax, or the applicable treaty rate.

When a resident company distributes dividends to a resident shareholder within the same group, holding 25% or more voting rights, the income tax rate is nil.

If a company has a tax loss approved by the tax department, they can carry it forward indefinitely and deduct it from future taxable profits.

The deduction allowed for prior year losses is limited to 50% of the net income for the respective year.

The ratio of tax liability to accounting income before tax, expressed as a percentage.

Factors such as capital allowances, interest charges, currency gains, and operating income can influence the effective tax rate.

Expenses that cannot be deducted from income to reduce the taxable amount under the Income Tax Act. These include personal expenses, withdrawals of capital, capital improvements, losses not related to business, and rent or repairs for premises not used for income generation.

An incentive for employers who promptly pay statutory deductions from employees' salaries. It's a tax credit calculated as 30% of the income tax payable, but only applicable to payroll deductions and contributions paid on time.

To be eligible for the Employment Tax Credit (ETC), employers must ensure: 1. The claimed ETC matches total payroll deductions, 2. Deductions are paid on time and in full, 3. The credit is limited to 30% of the income tax due, and 4. ETC is not available for non-business income such as interest and dividends.

Shares representing ownership in a company's profits and losses. Ordinary dividends paid to shareholders are currently taxed at a rate of 15%.

Shares that guarantee a fixed dividend payment before ordinary shareholders receive their dividends. For companies listed on the stock exchange, preference dividends are an allowable deduction, but companies not listed may treat them as interest payments under certain conditions.

To treat preference dividends as interest payments, companies not listed on the stock exchange must: a) Ensure the paid-up preference shares don't exceed half the ordinary share capital, b) Have a dividend rate that is reasonable in the opinion of the tax commissioner, and c) Have issued shares after June 16, 1970, for value equal to the share price.

Income distributed by a corporation to another corporation subject to tax and with tax deducted at source. This income is labeled as 'franked income,' indicating that tax has been deducted at the source.

Interest paid to holders of preference shares, which are a type of share that offers a fixed dividend payment, guaranteeing a specific return to the shareholder.