Author: Victoria Williams – SAVCA South African venture capitalists have welcomed the recent Taxation Laws Amendment Bill which introduces two changes to Section 12J of the Income Tax Act. The changes, effective January 2015, should boost investment into entrepreneurial businesses and increase the appeal of venture capital for investors.
Author: Nyasha Musviba
Western Cape High Court rules on purpose of preservation orders
Author: Dr Beric Croome – ENSafrica Section 163 of the Tax Administration Act 28 of 2011 (“TAA”) provides that a senior SARS official may authorise an ex parte application to the High Court for an order for the preservation of any assets of a taxpayer, or other person prohibiting any person, subject to the conditions and exceptions as specified in the preservation order, from dealing in any manner with the assets to which the order relates.
Base erosion and profit shifting – a South African perspective
Author: Peter Dachs – ENSafrica The concept of base erosion and profit shifting (BEPS) has been debated at various international forums following discussions at the G20 Finance Ministers and Central Bank Governors meeting and the G20 Heads of State summit in Russia last year. The Organisation for Economic Co-operation and Development’s (OECD) BEPS Action Plan provides for 15 actions to be completed in three phases by December 2015.
Structural tax reform needed to promote economic growth: PwC Tax Services
A reform of South Africa’s tax system is high on the agenda. This comes in the wake of Finance Minister Nhlanhla Nene’s recent Medium Term Budget Policy statement that changes are set to be made to tax policy in the 2015 Budget. The government is proposing a fiscal package that reduces the expenditure ceiling and raises tax revenues by at least R44 billion over the next three years.
The treatment of foreign pensions
In terms of s10(1)(gC)(ii) of the Income Tax Act, No 58 of 1962 (Act) a pension received by or accrued to a resident from a source outside South Africa as consideration for past employment outside South Africa is exempt from the payment of tax. In terms of s9(1)(i) of the Act it is indicated that an amount is deemed to be sourced within South Africa if the amount constitutes a pension or annuity and the services in respect of which the amount is received or accrued were rendered within South Africa.
What is simulation really
Author: Emil Brincker – DLA Cliffe Dekker Hofmeyr Since the judgment of the Supreme Court of Appeal (SCA) in CSARS v NWK 73 SATC 55 there has been a bone of contention as to the real meaning of a simulated arrangement. In the NWK case it was indicated that “[i]f the purpose of the transaction is only to achieve an object that allows the evasion of tax, or of a peremptory law, then it will be regarded as simulated. And the mere fact that the parties do perform in terms of the contract does not show that it is not simulated: the charade of performance is generally meant to give credence to their simulation.”
Base Erosion and Profit Shifting (“BEPS”) – are you BEPS proof?
Author: Okkie Kellerman – ENSafrica BEPS is a term used by the Organisation for Economic Co-operation and Development (“OECD”) to describe tax planning strategies exploiting gaps and mismatches in tax rules so that profits disappear for tax purposes or profits are shifted to locations with little or no real activity and where profits are subject to little or no taxes. Although BEPS is not illegal it distorts competition between those companies operating cross border and those operating domestically and it leads to inefficient allocation of resources and it seems unfair that some companies can legally avoid paying tax.
OECD proposes curtailing use of commissionaire and other arrangements that aim to avoid PE Status
The OECD Focus Group on the Artificial Avoidance of Permanent Establishment (PE) Status recently issued its Proposed Discussion Draft that proposes 14 possible changes to the definition of a PE under Article 5 of the OECD Model Tax Convention. The proposals were a response to the OECD Action Plan on Base Erosion and Profit Sharing (BEPS) published in July 2013. The primary focus is on the perceived abuses associated with: (i) using a “commissionaire arrangement” instead of a local distributor arrangement in order to shift profits out of the country where sales take place; (ii) using certain specific activity exemptions to prevent the application of the PE rules; and (iii) certain uses of construction and insurance contract provisions.
Landmark judgement in Supreme Court of Appeal upholds deferred delivery share scheme
In its first and much anticipated judgement in relation to the interpretation of section 8A of the Income Tax Act, and to Deferred Delivery Share Schemes, a full bench of the Supreme Court of Appeal unanimously upheld the taxpayers’ contentions as to the tax effects of a so-called Deferred Delivery Share Scheme. In this test case, the Court rejected the main contentions by the South African Revenue Service (“SARS”), that the share scheme was subject to various conditions, or alternatively that it was a simulation. The taxpayers’ argument that the exercise of an option agreement constituted the sole point at which tax could be levied in terms of the then applicable tax law, was upheld. This confirms the interpretation which had been accorded to section 8A of the Income Tax Act by many tax practitioners over the years as well as (until recently) SARS itself.
BEPS tail shouldn’t wag global investment dog
Author: Claire M.C. Kennedy of Bennett Jones LLP I spoke recently on a panel in Tokyo on the future of international tax planning after BEPS (the OECD’s & G20’s Action Plan to counter Base Erosion & Profit Shifting). The panel also featured a senior official at the OECD and practitioners from the US, Japan, Germany, France, Ireland and the Netherlands It was refreshing to hear the OECD official acknowledge that the international corporate tax planning targeted by BEPS constitutes legal arrangements and transactions and not illegal tax evasion.