(15 Marks) cate whether the | ing reasons, rly resident. She ica for the 2024 follows’ tas defined, outh Attica for 1 South Africa: try 2024, of effective 2 Australia/ din South | uth Africa | sessment), 2023 ang | Statement: Ms Knot ceases to be a resident at the end of the 2024 year of Mr Split owns a home in England and also has a house in South Africa. Because rily resident both in England and he spends six months in each house, he is ordin in South Africa, 7. South African dividends received by a non-resident are included in gross income, Australian dividends received by a non-resident are included in gross income. 8. 9. A royalty paid to a Swiss resident in respect of a patent used in South Afri included in gross income. 10, When Prof Smart lived in South Africa, he invented and patented a product. In 2013, he emigrated and is now ordinarily resident in the United States of America (USA), He has not visited South Africa since 2013. Statement: A royalty received from the USA, for the use of his patent in the USA, is not included in his ‘gross income’. QUESTION 1.2 (18 Marks) PART A (6 Marks) Gris-Gris (Pty) Ltd is a company formed in Mauritius that carries on part of its business through a branch in South Africa. It has two shareholders ~ Mr and Mrs Couve, both of whom are ordinarily resident in Mauritius. There are four company directors ~ Mr and Mrs Couve and two residents of South Africa, both of whom reside in Cape Town, where the South African branch of the company is situated The annual general meeting of the company is always held in Curepipe, Mauritius In addition, two six-monthly directors’ meetings are held in Mauritius to decide on company strategy. Mr and Mrs Couve's only input into the running of the company takes place at these meetings in Mauritius. YOU ARE REQUIRED TO: Explain, giving full supporting reasons, whether or not Gris-Gris (Pty) Ltd is a ‘resident’ as defined in s1 of the Income Tax Act. (Ignore the effect of the double tax treaty.) PART B (12 Marks) 022, Iona Ticket had always Until the date of her emigration to the UK on 10 July 2022, regarded South Africa as her true home. From that date, however, she settled permanently in the UK. During the years of assessment prior to 2024, she had been physically present in the two countries as follows: Year of assessment ended Days in South Africa Days in UK 28 February 2023 132 233 28 February 2022 250 116 28 February 2021 205 160 29 February 2020 280 86 105 260 28 February 2019 Questions on SA Tax 3VP ise sent it h Africa from 1 March 2022 to the d hhysically present in Soutl dat of Si aad Anes belgrade nea South Attica for the first time ae 2023 and remained in South Africa until 5 March 2024, YOU ARE REQUIRED TO: Explain, giving full supporting reasons, whether Tona is a ‘esident” as defineg in s1 of the Income Tax Act for her years of assessment ending February 2023 4 eae = (6 Marks) Explain whether and why your answer would be different with respect to the Year 1. : of assessment ending 29 February 2024 if lona had instead emigrated on | Mar 2023 (6 Marks) QUESTION 1.3 (40 Marks) (9 Marks) PART A James Schoeman is employed as an engineer for AMCS Yachting Ltd, a South African company running yacht cruises to Mauritius, the Comoros and the Seychelles, James carns a fixed monthly cash salary of R15 000. James currently works on a month-on) month-off basis for one month he is out of South Africa on a cruise to one of the three possible destinations, and for one month he is at home with his wife and children in Durban, where he works at the docks where all the yachts of AMCS Yachting are repaired and prepared for the next cruise. James's son William is studying Income Tax as an elective to his BA degree and recently fold James about the ‘physical presence’ test. James is now considering discussing with his employer whether he can spend more time outside South Africa each year in the hope that this will exclude him from the definition of ‘resident’ and consequently reduce his taxable income, YOU ARE REQUIRED TO; Advise James, with reasons, as to whether his plan will exclude him from the definition of resident in the Income Tax Act and how else he ‘might reduce the South African income tax on his salary, iL ee his six years of studying, he always planned ie g0 back to Namibia when € was finished, as that is Where his family lives. He only left South Africa once during his six years of studying for a to Mauritius with his friends during 2022, which lasted two weeks,© REQUIRED TO: Discuss which of the above amounts Brian ( ARE REQUIRED TO: Discuss w! must ie South Atrican gross income in the 2024 year of assessment. Suppor dis cussion with appropriate references to the Income Tax Act and case law, Qu OM Lucky Matola, a South African resident, was born and raised in Cape Town, Hes, always been a keen boxer and now, atthe age of 25, he is @ world-ranked boxer trip to London, he met a boxing promoter who offered him a world title fight, "8 Lucky signed a contract for the fight in France, The title bout was staged in America and Lucky excelled, knocking out his opponey, in the third round. Lucky was paid an amount of $5 million, which was deposited ing a bank account in Switzerland. YOU ARE REQUIRED TO: Advise Lucky on the source of the $5 million, QUESTION 1.5 (35 Marks) PART A (7 Marks) Manley Blaine, a South African resident, owns a block of flats situated in Wynberg, Cape Town, He inherited the block of flats in terms of his father’s (Mr Blaine Senior) will, executed in the United Kingdom. Mr Blaine Senior was, at date of death and throughout his adult life, ordinarily resident in the UK. Manley received rentals of R700 000 for the year of assessment ended 29 February 2024. YOU ARE REQUIRED TO: 1. State what is the source of these (the R700 000) rentals, State whether the sourceiis determined in terms of s9 or in terms of common law principles, with appropria explanations and reference to case law. 2. Explain, if the block of flats that Manley inherited was situated in the UK. how your answer would differ from that in (1), PARTB (5 Marks) Adrie Spans, ordinarily resident in the Netherlands, designed a model pattern that Has used to teach the art of tailoring. She developed this pattern in the Netherlands. Because of its popularity in the Netherland: isited South Africa and marketed her product here, In the 2024 year of assessment, Adrie received payments amounting to R 120 000 from various design schools in South Africa that used the pattern as a teaching a © Questions on SA Tax you in So Incot PAR A le: of S of and ber equ yo PA cr wi su tc aee include ct your YOU ARE UIRED T¢ s whether the R120 000 received would be ta in South Africa or not, indicating the source of the income with reference (e 89 of the Income Tax Act or common law principles as appropriate. Iarks) t 12 Marks) has PART C ( : Ona ‘A leading lung specialist (a South A rican resident) in private practice in the Republic | of South Africa was flown to a Central African state to perform an operation oF Of of their top ministers. The president (of the African state) sent his private jet to fetch ord return the specialist. All his expenses were paid and, although he did not wish 'o | be paid for his services, the government of the African state insisted on paying him the rent equivalent of R100 000. nto YOU ARE REQUIRED T 1. Explain where the source of the income would be. 2. Explain with reasons whether the lung specialist will be taxed on the amount in the Republic of South Afri s) PART D (11 Marks) 9 Chancer, aSouth African resident, occupied a position that required him to be entrusted he appropriated with funds to be used for secret operations. Over a number of years, | funds for himsclf and, in total, tool was ultimately caught, charged and ordered to repay the whole amount, whi subsequently did. Chancer we therefore not gross income k about R450 000 from the trust fund. Chancer ‘es then assessed to pay tax on the amount he had stolen. Chancer objected to this assessment on the grounds that the amount was not ‘received by’ him and was | YOU ARE REQUIRED TO: Discuss whether the R450 000 was or was not ‘received by’ Chancer. Refer to case law where appropriate. (19 Marks) QUESTION 1.6 YOU ARE REQUIRED TO: In each of the following cases, explain whether the amounts fall into the gross income of the respective taxpayers. Your answei state whether or not the amount is to be included and the bas s on which the source of the income is determined. Provide references to the relevant sections of the Income Tax Act or to relevant case law in support of your answers. (Ignore double taxation agreements.) 1. DrLanan Sprogg, who is resident in South America, received royalties amounting to R900 000 from the use, in South Africa developed in South America. of a patented process that he had—_ Oma PARTD ‘ed from a South African et «a South African resident who ret ‘MPloyera| chem, Atthe end of every month wil. ae Ste iad aso worked for an American firm (AmerCo) for 30 | say minimum prices met), Aslong as 28 February 2023, think I can make quite abit of mon Jane ade te, South MTS, Seta rom Amero on 31 Decent ante ent Jane wasinformed that AmerCo would Pay herapension o aot of her 30 years’ service to the company. Jane had become orn ean i ithe Republic from 1 January 2019. In addition to her pension, Jane recgiy, eae on a deposit in an American bank. This amounted to R200 000 for the ay year of assessment. YOU ARE REQUIRED TO: Determine the amount (if any) to be included in fn, Murray's gross income for the 2024 year of assessment. QUESTION 1.23 (22 Marky You have recently applied for a vacation work position in the Tax Department of a major accounting firm. For your second-round interview, you have been asked to prepare responses to the following queries that have recently been received from cliens of the firm. Your responses will be presented orally to the interviewer, so they do not need to bein the format of a letter or memo, but the content, tone and style should be appropriate toa discussion with a senior member of the Tax Department, who will be conducting the interview. In each case, your answer should be supported by appropriate reference to the Income Tax Act and case law. Query 1 — received from Adrian Ferreira (aged 54) (9 Marks) My mother-in-law recently sold a number of her possessions because she was moving into a retirement village, Included in what she sold were several paintings that had han in the family for years and that turned out to be quite valuable. ‘They were sold on er behalf ata local art auction and raised a considerable sum. As an added bonus, i turned out that there was no tax payable on the proceeds, Based on this experience, I decide 1a mace is ern 1 ced that I would start buying and selling paintings reasonably priced and is caren 2 Ment which artists’ work is caren branch of AmerCo (in Johannesburg) | significantly improve my financial po sion of R400q99,°| YOU ARE REQUIRED TO: Explai ‘mother-in-law’ paintings and whet the same way. Query 2 ~ received from Erica Myb T have two homes, one in Norfol T spend nine months of every ye However, in most years, I come | summer. Each time Tam here, lw novels. The copyright of these n ‘some in England and some in Sou ‘based on book sales. 1 am unsure whether my situ royalties I have received on my intend to come to South Afri YOU ARE REQUIRED TOs] con the book she intends to w income in terms of either the the royalties from any of bet COMMUNICATION MAR Clarity of communication. | in the above discussions arethem. Atthe end of evel tay minimum price i en will sell each painting to the highest bidder (assumin Febink Tean make quite atte aes ie Ican keep finding paintings at reasonable ae \e" i : aan improve my Hnaacil ane and, if hr io tx on what I make, I could YOU ARE RE! UIRED TO: E: ee a es Explain why there was no tax on the sale of Mr Ferreira’s gs and whether the sale of his own paintings will be treated in the same way. Query 2— received from Erica Myburgh (aged 45) (11 Marks) I have two homes, one in Norfolk, England, and one in Fish Hoek, South Africa. {spend nine months of every year in England vind my children go to schoo! there. However, in most years, I come to my home in Fish Hoek for three months in the summer. Bach time I am here, T rite another book in my successful series of romantie Rovels. The copyright of these novels is Tigensed to a number of different publishers come in England and some in South Africa, and I receive royalties from these publishers based on book sales. 1 requires that I include all, some oF none of the shether my situatior ks in my South African gross income. Tam unsure yy boo royalties I have received on™ {intend to come to South Africa in November 2023 to write my next book. ties Erica Myburgh will receive 1 of her 2024 gross al with hpether the royall mber 2023 will form par YOU ARE REQUIRED TO: Explain w! Jes, You do not need to des on the book she intends to write m Nove! income in terms of either the residence or source 1 the royalties from any of her previous books. (2 Marks) COMMUNICATION MARKS the audience Clarity of communication, logical in the above discussions are required. | thought and appropriateness of tone to