Page 26 - PowerPoint Presentation
P. 26
INCOME TAXES
Capital Allowances - example
On 1 January 20.12, A Ltd was incorporated and acquired a manufacturing
building at a cost of R2 000 000, an administration building at cost of R500 000
and land at a cost of R300 000 for its own use. Land is not depreciated and no
tax allowance is claimable.
The manufacturing building is depreciated at 4% per year using the straight-
line method and the SA Revenue Service allows a 5% annual allowance on the
manufacturing building.
The administration building is depreciated over 20 years, but no tax allowance
is claimable.
The company's year-end is 31 December 20.12. Assume that the profit before
tax is R200 000 for the year ended 31 December 20.12 and the tax rate is 28%.
Deferred tax is provided on all temporary differences according to the
statement of financial position approach.
Required: Calculate the deferred tax expense for the year ended 31 December 20.12.
