SARS has ruled that maintenance contracts qualify for the Section 24C allowance, with a caveat …
MANY NEW vehicles sold in South Africa come with some sort of maintenance or service contract, the cost of which is included in the purchase price. With such vehicles, the purchaser is effectively paying for the cost of their services up front, for a specified distance and/or period of time.
However, many purchasers are not aware that from the manufacturer’s point of view, the sale of such vehicle gives rise to two streams of income: The portion that applies to the sale of the vehicle, and the portion that applies to the advance payment for future maintenance and servicing.
The gross income definition contained in Section 1 of the Income Tax Act provides that any amount “received by” a taxpayer is included in gross income, and would therefore be subjected to tax. Both amounts thus received …
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