On 15 October 2014, National Treasury and SARS stated in a Response Document (‘Document’) presented to the Standing Committee on Finance (‘SCoF’) that the ‘excessive interest limitation rules’ are in line with international practice and measure up well in light of current discussions at the OECD. Sections 23M and 23N were introduced in the 2013 Taxation Laws Amendment Act as measures to limit the amount of interest that a company can deduct, which the Document describes as a more reasonable level since debt finance was used to create opportunities for base erosion in the past.
Author: Nyasha Musviba
INVITING TECHNICAL TAX PROPOSALS FOR ANNEXURE C OF THE 2015 BUDGET REVIEW
I. Background The National Treasury invites taxpayers, tax practitioners and members of the public to submit any technical proposals to improve or correct current tax legislation, including the closing of loopholes and addressing of unintended anomalies. Proposals received will be considered for possible inclusion in Annexure C of the 2015 Budget Review, released as part of the 2015 Budget Review.
SARS Interpretation Note 80 – Income Tax treatment of stolen money
1. Purpose This Note provides guidance on – • the deductibility of expenditure and losses incurred in a taxpayer’s trade when money is stolen through embezzlement, fraud or theft, including expenditure incurred on legal and forensic services to investigate such losses; • the inclusion in income of amounts recovered or recouped in respect of such expenditure and losses previously allowed as a deduction; and • the taxation of stolen money in the hands of the thief and the non-deductibility of such amounts when repaid.
Release of the 2014 Tax Statistics Bulletin
Joint Media Release by the National Treasury and the South African Revenue Service PRETORIA – The 2014 Tax Statistics bulletin was released today. This is the seventh edition of the publication. The objective of releasing the country’s Tax Statistics is to publicise available, comprehensive tax revenue data that can assist policy makers and provide insights on economic indicators to researchers, analysts, the media and the public in general. The 2014 Tax Statistics Bulletin provides an overview of tax revenue collection and tax return information for the 2009/10 to 2013/14 fiscal years, and the 2010 to 2013 tax years respectively.
Proposed modifications to the transfer pricing guidelines relating to low Value-adding intra-group services
The Organisation for Economic Co-operation and Development (OECD) released a public discussion draft (DD) pertaining to the Base Erosion and Profit Shifting (BEPS) Action Plan 10 on 3 November 2014. The DD intends to reduce the scope for erosion of the tax base by means of the charging of excessive management fees and head office expenses. In establishing an approach, reference is made to so-called low value-adding intra-group services where a simplified approach can be adopted. In such instance the mark-up selected by the taxpayer cannot be less than 2% of the cost nor should it be greater than 5% thereof.
Binding Private Ruling 181 – Ruling on withholding tax on interest and the application of a treaty
The South African Revenue Service (SARS) issued Binding Private Ruling No 181 (Ruling) on 4 November 2014, which deals with the application of a treaty for the avoidance of double taxation to withholding tax on interest. The applicants were three companies incorporated and tax resident in South Africa, who intend to construct wind farms in South Africa.
OECD publishes first seven reports in its Base Erosion Profit Shifting (BEPS) project
Authors: David Gubbay, Ben Roberts , Adam Craggs and Nigel Brook – RPC Global On 16 September 2014 the Organisation for Economic Co-operation and Development (OECD) published its first set of reports and recommendations on the BEPS project. Seven of the 15 areas of the BEPS action plan are covered, addressing: the digital economy hybrid mismatches treaty abuse transfer pricing documentation and country-by-country reporting transfer pricing and intangibles harmful tax practices a possible multilateral instrument to implement BEPS
The assumption of rehabilitation liabilities as consideration given on the acquisition of mining property and capital assets
Author: Andre Vermeulen – ENSafrica During December 2013, SARS released a draft discussion paper in which it set out its application of the relevant tax law, in relation to the tax treatment of the purchaser and seller, with regard to the assumption of contingent liabilities as part settlement of the purchase price of assets acquired as part of a going concern. SARS states that the document was prepared in light of recent judgments delivered by local and foreign courts as well as numerous requests for clarity regarding the income tax treatment, of both the seller and the purchaser, in respect of the assumption of contingent liabilities as part settlement of the purchase price of assets disposed of and acquired.
Retirement Reform – Why you should not be afraid
Author: Cindy Wilson and David Crossley, Wealth and Advisory, BDO South Africa Johannesburg, South Africa- November. 06, 2014 A great deal of controversy has surrounded the Government’s proposed legislative changes to current Retirement Funds in 2015. Already a number of employees have taken extreme measures and have resigned from their employment in order to cash in their Provident Fund savings. These actions were taken under the mistaken belief that the Government would not allow members access to their benefits, once the law was implemented.
SARS guide on the new dispute resolution rules
The rules, promulgated on 11 July 2014 (new Rules), replaced the rules promulgated under s107A of the Income Tax Act, No 58 of 1962 (old Rules). The new Rules prescribe the procedures to be followed in respect of objections and appeals in respect of assessments or certain administrative decisions by SARS. The new Rules also deal with procedures to be followed in respect of alternative dispute resolution and various other issues relating to the Tax Court. In our Tax Alert dated 18 July 2014, it was noted that some of the most noteworthy departures from the old Rules were the following: