Whether the entity below will be allowed to switch over from claiming section 11(e) wear and tear allowance to section 12e allowance for SBC's. And if so, how this new section 12e allowance will be calculated, as wear and tear in terms of section 11(e) wi
Important:
This answer is based on tax law year ending 28 February 2019.
Answer:
Section 12E(1A)(b) does not require the taxpayer to be small business corporation in the succeeding years of assessment. The deduction, in respect of assets subject to the election, is then made in the years based on the qualifying year – the year the asset was brought into use.
SARS agrees with this in their practice generally prevailing – we copy from that:
“As a result, even if the taxpayer no longer qualifies as an SBC in the second or third years of assessment, it will still qualify for the 30% and 20% deductions provided it complies with the trade usage requirement of section 11(e).”
We agree with your view - once an election was made, the taxpayer can't change it in a future year of assessment (with regard to the assets acquired earlier and in respect of which an election was made).