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s2A: Apportionment of "general expenses"
- This specifies the basis for apportionment of general expenses.
- An apportionment shall be made on such basis as is most reasonable and appropriate to the activities of the trade, profession or business concerned.
s2B: Apportionment of "interest expenses"
- It provides for the basis for apportionment of interest on money borrowed for share investment and share dealing.
- If interest expense was paid on money borrowed and used partly to acquire shares which only earn non-taxable dividends/profits and partly for other business purposes, apportionment is required to disallow part of the interest cost.
s2C: Apportionment of "admin. expenses" attributable to investment portfolio
- It provides for adjustment to expenses of supervision and management attributable to substantial investment portfolio.
- If a taxpayer's investment portfolio is sufficiently substantial, a portion of the portfolio value has to be calculated and deemed as "management, clerical and other general expenses" incurred in the supervision and management of the investment portfolio which generate no or limited taxable profits. This portion is to be disallowed, calculated on the following basis:
- - if investment involve share dealing: 1/8% of the cost of the investment portfolio to be disallowed; and
- - in any other cases: 1/2% to be disallowed.
s5(1): Definition of "permanent establishment"
- Permanent Establishment in IRR 5(1) means:
- (a) a branch, management or other place of business; and
- (b) an agent who has,
- - and habitually exercises, a general authority to negotiate and conclude contracts on behalf of his principal, or
- - has a stock of merchandise from which he regularly fills orders on his behalf.