4. Recoupments - Tax 399 summary PDF

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RecoupmentsIncluded in Gross Income1. Proceeds > Cost Price Profit on sale of asset1 Tax Consequences  Capital Gains Tax (Proceeds – Cost Price)  Recoupment (Cost Price – Tax Base)2. Proceeds < Cost Price Loss on sale of asset2 Tax Consequences  Recoupment (Cost Price – Tax Base)3. ...

Description

Recoupments Included in Gross Income Proceeds

Tax Base

Recoupment

(Limited to Cost Price) Cost Price less Capital Allowances

1. Proceeds > Cost Price Profit on sale of asset

1.1 Tax Consequences  Capital Gains Tax (Proceeds – Cost Price)  Recoupment (Cost Price – Tax Base)

2. Proceeds < Cost Price Loss on sale of asset 2.1 Tax Consequences  Recoupment

(Cost Price – Tax Base)

3. Requirements -s8(4)(a) - Applicable where TP - Recovered/Recouped amounts - Previously deducted - In s11 to s20, s24I and s24J Amount is included in GROSS INCOME Recoupment amount is limited to original cost Taken into account in YOA recoupment is quantifiable

4. Donations, Asset in specie, Distribution to connected persons -s8(4)(k) Applicable to: - Donation of asset - Asset in specie - Disposal to connected persons Limited to Cost Therefore, Proceeds deemed to be MV of asset on date of disposal

5. Deferred recoupment of allowances – s8(4)(e) Requirements: - A replacement asset AND - Par 65 (involuntary disposal) and par 66 (reinvestment in replacement assets) of 8th schedule Full proceeds must be reinvested in replacement assets -

Proceeds = Base Cost OR Proceeds > Base Cost

Depreciable Asset claim as W&T is claimed Deferred Recoupment Included in GI Non-depreciable Asset claim when asset is sold

5.1 More than one replacement asset Cost of Asset 1 -

Deferred recoupment =

Recoupment

Net Purchase Prices

Cost of Asset 2 = Recoupment

Net Purchase Prices

5.2 Disposal of Replacement asset / Cession of use of asset 5.2.1 Disposal of replacement asset 

Any deferred recoupment not included in GI before disposal is included at time of disposal s8(4)(eC)

5.2.2 Cession of use of asset 

Any deferred recoupment not included in GI is included at time ceasing use of replacement asset s8(4)(eD)

5.3 Failure to conclude contract / Bring asset into use 5.3.1 Failure to conclude contract 

Must be concluded within 12 months

Paragraph 65/66 of 8th schedule

5.3.2 Failure to bring asset into use 

Within 3 years after disposal

6. Alienation, Loss or Destruction Allowance – s11(o) Allowance

Proceeds 

Tax Value

Negative amount

Requirements: - Election of TP - For qualifying depreciable assets - Used in purpose of trade - Has been alienated, lost or destroyed - In YOA - Useful life < 10 years

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Provided that: -

Asset was never used Not sold to connected person Disposal not in YOA of claim

7. Limitation or Losses from Disposal of certain Assets s20B - If full consideration (TP has only received a partial amount) for disposal does not accrue in current YOA...