The Davis Committee has made certain recommendations relating to transfer pricing and documentation in its report on the OECD’s Base Erosion and Profit Shifting (BEPS) Action Plan. We are aware that the current transfer pricing practical guidelines, as contained in SARS’ Practice Note 7 (PN7), are not that clear and are based on outdated publications. The Davis Committee confirms that PN7 should be updated and revised to reflect recent developments. At least one legally Binding General Ruling should be enacted on section 31 of the Income Tax Act.
Author: Nyasha Musviba
Retirement reform: seeing past the market myths to the benefits
By Cindy Wilson, Director: BDO Employee Benefits and David Crossley, Practice Manager BDO Wealth Advisers Johannesburg, South Africa- Government’s proposed legislative changes to current retirement funds have created a great deal of controversy and confusion in the market, with some individuals going so far as to resign from their jobs in order to cash-in and ‘protect’their provident fund savings. This is based on the mistaken belief that Government will not allow members to access their benefits once these changes are implemented. In fact, nothing could be further from the truth.
Interpretation of fiscal legislation
Introduction In Commissioner SARS v Bosch (394/2013) [2014] ZASCA 171 (November 19 2014), the Supreme Court of Appeal dealt with the fiscal consequences of a deferred delivery transaction. The judgment is important not only in the context of the meaning of simulation, but also with reference to the way in which legislation should be interpreted. In Bosch, the question arose as to the meaning of Section 8A of the Income Tax Act (58/1962), which read that a taxpayer’s income should include any gain made by the exercise, cession or release of any right to acquire a marketable security during the year of assessment.
Relationship between a VAT vendor and Sars
The Supreme Court of Appeal (SCA) recently handed down judgment in the matter of Director of Public Prosecutions, Western Cape v Parker (103/14) [2014] ZASCA 223 (12 December 2014). In this matter a close corporation, being a registered vendor for purposes of Value-added Tax (VAT), together with its sole representative, Mr Parker, were charged in the regional court on several counts.
Expiry of STC credits on 31 March 2015
Dividends tax was introduced into the South African tax regime on 1 April 2012 and effectively replaced secondary tax on companies (STC). STC was levied on dividends distributed by companies at the flat rate of 10%. In terms of the dividends tax regime, a 15% tax is levied on the amount of any dividend paid by a company. The company is liable to withhold the amount of the tax in respect of cash dividends and pay it over to the South African Revenue Service (SARS).
SARS Media Release: Response to recent media speculation pertaining to internal disciplinary processes faced by some employees
Pretoria, 13 January 2015 – The South African Revenue Service takes note of the article, ‘Pillay fights back’, published in one of the Sunday Newspapers of the 11 January 2015. SARS would like to place on record its serious concern with what appears to be the ‘fighting’ of internal SARS matters through the media without following the proper processes that SARS has in place. This approach is wrought with problems, the most apparent being that the suspension process in question is still underway and subject to internal proceedings. Very worryingly, the response seen by some media had not been provided to SARS by Mr Pillay at the time of the published article.
Two Noteworthy Tax Changes Effective from January 1st, 2015
Authors: Dawid van der Berg and Roxanna Nyiri, Tax, BDO South Africa Johannesburg, 17 December 2014 – Two noteworthy taxation amendments come into effect on the 1st of January 2015. The first tax amendment relates to the deductibility of interest paid to a person who is not liable to tax in South Africa, for example non-residents. The section in question, section 23M of the Income Tax Act, intends to protect the South African tax base by limiting such deduction. Views have been expressed that the limitation could deter foreign direct investment into South Africa. For example, local subsidiaries could suffer higher effective tax rates as a result.
Meaning of “due and payable” for purposes of the Interest Withholding Tax provisions
As of 1 March 2015, interest payable by South African residents to or for the benefit of foreign persons may be subject to Interest Withholding Tax (IWT) at a rate of 15%. Exempt from IWT will be interest payable by, amongst others, the government of South Africa (in the national, provincial and local sphere), any bank, the South African Reserve Bank, the Development Bank of South Africa and the Industrial Development Corporation. Interest payable on so-called ‘listed debt’ is also exempt from IWT regardless of the nature of the person paying the interest. In addition, the IWT provisions make allowance for a reduction in the rate of IWT where the provisions of a Double Taxation Agreement so provide. The IWT provisions will be applicable to interest that is paid or becomes due and payable on or after 1 March 2015.
Tax u-turns on cards after probe into SARS rogue unit
Authors: Mzilikazi Wa Afrika, Stephan Hofstatter, Piet Rampedi and Malcolm Rees (Times Live) Tax settlements worth billions of rands risk being reversed as an independent investigation into a rogue spy unit rocked the South African Revenue Service this week. Billionaire businessman Dave King is the most prominent among high-profile South Africans who could be slapped with far higher tax bills if their deals with the taxman are reviewed. The findings of the investigation, carried out by a panel headed by Johannesburg advocate Muzi Sikhakhane, largely confirm reports by the Sunday Times over the past few months – and vociferously denied by SARS at the time – that the rogue unit engaged in a wide array of illegal tactics.
SARS boss Ivan Pillay faces chop again
Author: Piet Rampedi, Stephan Hofstatter and Mzilikazi wa Afrika (Times Live) Tax official Ivan Pillay has been handed a suspension notice, a day after he won a court bid on Thursday to be reinstated. Pillay was handed the notice on Friday, giving him until January 12 to show why he should not be suspended pending the outcome of an investigation. The notice, seen by Sunday Times reporters, said Pillay had to be suspended because of the danger that he could tamper with evidence during the investigation, as he had allegedly done before. Pillay faces a string of allegations, including that he: Established, recommended or was instrumental in setting up a covert intelligence unit within SARS;