TAX TRAINING FOR TRADERS

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					    TRAINING DOCUMENT




TAX TRAINING FOR
    TRADERS
   Iquote Trading
                                   Contents




               •      Welcome and introductions
               •      Tax principles
               •      Foreign currency transactions
               •      Tax compliance
               •      Exchange control
               •      Examples




                                           2          12 April 2011
Tax Training for Traders
                               Tax Principles




               Tax concept of “trade”
               • Any activity conducted and any trade or
                 profession, eg salary, renting property, trading
                 in CFD’s




                                        3                       12 April 2011
Tax Training for Traders
                              Tax Principles Cont…




               Per Trade
               • Gross income
                 Amounts received not of a capital nature
                 Shares vs CFD’s and Futures
                 Disposal of shares deemed to be capital
                 Schemes of profit-making
                 Brokerage income


                                     4                       12 April 2011
Tax Training for Traders
                              Tax Principles Cont…




               Per Trade
               • Gross income
               • Less: Exempt income
                  Local interest (R22,300/R32,000 – foreign
                   exemption utilised) from all sources
                  Foreign interest/dividends (R3,700)
                  Local dividends
               • Equals: Income

                                      5                        12 April 2011
Tax Training for Traders
                              Tax Principles Cont…




               Per Trade
               • Income
               • Less: Expenses/Losses
                  In the production of income
                  Not of a capital nature
               • Less: Deductions/Allowances
               • Equals: Taxable income/loss


                                      6              12 April 2011
Tax Training for Traders
                                  Tax Principles Cont...




            •       Taxable income/loss per trade
            •       Add back: Taxable loss from foreign trade
            •       Add back: Taxable loss from “suspect trade”
            •       Add: Taxable capital gains
            •       Equals: Taxable income/loss




                                          7                       12 April 2011
Tax Training for Traders
                                    Taxable Income




               •      Taxable income
               •      Determine tax liability
               •      Less: Rebates
               •      Less: Foreign tax credits
               •      Equals: Tax payable




                                            8        12 April 2011
Tax Training for Traders
                            Expense Examples




               • Direct expenses
                 Monthly update fees
                 Telephone/Internet
                 Commissions paid
                 Entertainment/Refreshments
               • Motor vehicle expenses
                 Business vs private


                                   9           12 April 2011
Tax Training for Traders
                             Expense Examples Cont…




               • Home office expenses
                 Interest & insurance
                 Electricity & water
                 Rates
                 Cleaning




                                     10               12 April 2011
Tax Training for Traders
                             Deductions/ Allowances




               • Repairs
               • Wear and tear
                 Computer
                 Office equipment
                 Software
               • Pension/RA/Medical




                                      11              12 April 2011
Tax Training for Traders
                             Disallowed Expenses




               • Personal expenses
               • Suspect trades
               • Re-imbursable expenses




                                    12             12 April 2011
Tax Training for Traders
                               Capital Gains Tax




               Per asset
               • Proceeds
               • Less: Base cost
                  Pre-valuation date asset
                  Post-valuation date asset
               • Equals: Capital gain or loss




                                       13          12 April 2011
Tax Training for Traders
                              Capital Gains Tax Cont…




               • Capital gain or loss per asset
               • Less: Annual/Special exclusions
                  Annual exclusion (R17,500)
                  Primary residence exclusion (R1,500,000
                   or SP<R2,000,000)
               • Equals: Net capital gain or loss




                                     14                      12 April 2011
Tax Training for Traders
                               Capital Gains Tax Cont…




               • Net capital gain (capital loss carried forward)
               • Taxable capital gain
                  Natural person: 25%
                  Juristic person: 50%
               • Included in taxable income




                                       15                          12 April 2011
Tax Training for Traders
                              Foreign currency transactions




               • Currency of transaction
               • Exchange rates
               • Foreign currency pools




                                      16                      12 April 2011
Tax Training for Traders
                              Tax Compliance




               • Provisional tax returns
               • Annual income tax return




                                     17        12 April 2011
Tax Training for Traders
                              Exchange Control




               • Foreign investment allowance
               • Tax clearance application
               • Earning income offshore




                                     18          12 April 2011
Tax Training for Traders
                                               Example (salary earner)



                     Income
                           Salary                                             R300,000
                           Travel allowance                         R60,000
                           Travel deduction                        -R40,000
                           Net travel allowance                                R20,000
                           Local interest                            R6,000
                           Less: exempt interest                    -R6,000
                           Taxable interest                                         R0
                           Income                                             R320,000
                     Deductions
                           Pension/Retirement annuity                          R22,000
                           Medical                                             R18,000
                     Taxable income                                           R280,000




                                                        19                          12 April 2011
Tax Training for Traders
                                               Example (trader)




                     EXAMPLE 1
                     Gross income
                           Profit from trading                    R300,000
                           Brokerage/Commission income             R50,000
                           Local interest received                 R10,000
                           Foreign interest/dividends received      R4,000
                           Local dividends received                 R3,000
                           Gross income                           R367,000

                     Less: Exempt income
                           Foreign interest and dividends           R3,200
                           Local interest                          R10,000
                           Local dividends                          R3,000
                           Income                                 R350,800




                                                             20         12 April 2011
Tax Training for Traders
                                               Example (trader) Cont…




                     EXAMPLE 1 CONT…
                     Income                                             R350,800
                     Less: Expenses
                           Commissions                                   R40,000
                           Monthly download fees                          R2,400
                           Telephone/Internet fees                        R6,000
                     Less: Allowances
                           Wear and tear: Computers                       R3,000

                     Taxable income                                     R299,400




                                                      21                      12 April 2011
Tax Training for Traders
                                              Example (trader) Cont…




                     EXAMPLE 2
                     Closing balance on account @ 28/29 February                    R147,000
                     Less: Opening balance on account @ 1 March                     -R30,000
                     Less: Funds transferred into account                           -R50,000
                     Plus: Funds transferred out of account                         R300,000
                     Net profit/loss from trading activities                        R367,000
                     Less: Foreign interest and dividends (up to exemption limit)    -R3,200
                     Less: Local interest received (up to exemption limit)          -R10,000
                     Less: Local dividends received                                  -R3,000
                     Income from trading activities                                 R350,800
                     Less: Expenses/Allowances                                      -R51,400
                     Taxable income                                                 R299,400




                                                           22                             12 April 2011
Tax Training for Traders
                                        Disclaimer




                              This training is intended to give you an
                            understanding of the tax principles affecting
                           taxpayers and help you understand some tax
                              terminology. Accordingly, the information
                            supplied by the presentation and presenter
                             does not constitute any form of tax opinion
                             that can be relied upon by taxpayers in the
                                   preparation of their tax returns.



                                                23                          12 April 2011
Tax Training for Traders
                                   Contact details




               •      Web-site: www.kellyandkinder.co.za
               •      E-mail: robin@kellyandkinder.co.za
               •      E-mail: phil@kellyandkinder.co.za
               •      Cell: Robin – 083 651 3374
               •      Cell: Phil – 083 635 9029
               •      Office: 031 765 3468




                                           24              12 April 2011
Tax Training for Traders

				
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