Tax Law Assignment
According to the Act Gross Income is defined as , in relation to any year or period of assessment, means, in the case of any person, the total amount, in cash or otherwise, received by or accrued to or in favour of such person during such year or period of assessment from a source within or deemed to be within Namibia, excluding receipts or accruals of a capital nature, but including, without in any way limiting the scope of this definition, such amounts (whether of a capital nature or not) so received or accrued as are described further in the section. Gross Income is made up of all amounts received by or accrued to a person from a source within Namibia but excluding amounts of a capital nature (except if specially included by another provision). In Namibia it liability is based on the source of the income concerned and not on the residence of the tax payer, as is the position in the majority of tax jurisdictions. This means that non-residents temporarily employed in Namibia will be liable to tax here and conversely that non-Namibian source income will generally be exempt in the hands of a Namibian resident. Any income received is taxable even if it is for future services rendered or goods to be delivered. In the case of Geldenhuys v CIR it was concluded that the words received by mean received by the tax payer on his own behalf for his own benefit. Accrual envisages the existence of an absolute entitlement to the income concerned even though the due date for payment may be some time in the future and even after the year end concerned. In the case of Lategan v CIR accrued was held to mean to which he has become entitled. An amount may be in cash or in kind and may be a physical thing or an incorporeal such as a right (for example an option to acquire something at a low value). So long as the thing which accrues can be converted into cash, that notional cash value is the amount of the gross income concerned. Allowable deductions must constitute expenditure or losses actually incurred during the year of assessment concerned, in the production of income and to the extent that it is laid out for the purposes of trade but not of a capital nature.
The elements of Gross Income are;
1. Total Amount
2. In cash or otherwise
3. Received by or accrued to or in favour of
4. Year of Assessment
5. From a Namibian source or deemed Namibian source
6. Not of Capital nature/ Excluding receipts or accruals of a capital nature All these elements should be present (all the requirements set out in the act, namely in the definition of gross income should be present) for an amount to be considered or regarded as gross income and for the amount to be taxed. In the present scenario the transactions took place between the 20th of May 2011 to the 28th of February 2012 and their tax year starts from the 1st of March 2011 to the 28th of February 2012, hence the activities took place within that year of assessment and the amount of N$810 000.00 is the total amount received within that year. However of that amount N$510 000.00 was in cash received as proceeds of livestock sales in the DRC. The contracts for the sale were concluded in Namibia. Therefore DRC may also want to tax on the basis of source and hence a conflict may arise with Namibia. This will be discussed later in the paper. The amount of N$150 000.00 was received in the value of small stock that the company received in exchange for the cattle owing this took place in Namibia, hence it should now be determined whether this amount can be included and constitutes gross income. Does it qualify as otherwise according to the definition of gross income? Finally whether the amount of N$1.5 million which they got from selling the property can be considered as gross income, is this amount of a capital nature or revenue and hence should it be taxed or not. If the amount is of a capital nature than it cannot be taxed but if it is an income than it can be...
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