Tax application of income received in advance
Income received in advance is treated differently for accounting and tax purposes.
The tax application on the other hand requires the provision to be added back and taxed. The reason for this is that income is taxed the earlier of invoice or receipt for income tax purposes.
Frequently asked questions
Is income received in advance taxable in South Africa?
Sometimes, when people make advance payments, they don't have any expenses to deduct from them. This means that the full amount of the advance payments will be taxed. This is stated in Section 18(1) of the Income Tax Act No. 104 of 1980.
What is Section 24C of the Income Tax Act?
Section 24C allows taxpayers to deduct expenses incurred to comply with an agreement that resulted in receiving income in advance.
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