If your business meets these nine requirements, you qualify for a deduction of expenditure and losses
43984, 29 Sep. 2014
A deduction is an amount SARS lets you deduct from your taxable income. This is usually the actual expense you’ve incurred.
This is great because it means you can use the full amount of the deduction to reduce your taxable income in the year you incur it, or over the period it applies to.
Are you thinking, “wow, this sounds too good to be true, what’s the catch?”
The catch is, you must first meet the following nine requirements to qualify for a deduction of expenditure and losses…
Nine requirements that qualify your company for a deduction of expenditure and losses
You have to meet these requirements to qualify for a deduction of expenditure and losses:
Requirement #1: You must carry on a trade.
Requirement #2: You must derive income, or show a probability that you’ll derive income in the near future when you carry out that trade.
Requirement #3: The amount you claim must constitute an expense or a loss.
Requirement #4: You must incur the expense or loss during the year of assessment.
Requirement #5: You must incur the expense or loss in the production of the income.
Requirement #6: You must lay out the expense or loss for the purpose of trade.
Requirement #7: The expenditure or loss mustn’t be of a capital nature.
Requirement #8: The expenditure or loss mustn’t be prohibited in terms of Section 23 of the Income Tax Act (ITA) or any other section.
Requirement #9: You can only claim expenses specifically provided for under other sections of the ITA under those other sections (i.e. you can only claim them as deductions once).
If you meet these nine requirements, congratulations! You qualify for a deduction of expenditure and losses.
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