Author: Nyasha Musviba

In the last few weeks, many South Africans have been affected by the extreme weather and flooding around the country, particularly in KwaZulu-Natal. While government intervention is required to alleviate the harm and impact on affected South Africans, effective alleviation of their plight will require collaboration between Government and civil society, such as charitable organisations. For civil society organisations, including charities, to assist most efficiently, it is crucial that our tax laws relieve them of the tax burden that they would otherwise incur, which in South Africa is done by way of the tax dispensation applicable to public benefit organisations (PBOs). In XY Mining v The Commissioner for the South African Revenue Service (Case No IT25390) (as yet unreported), the Tax Court summarised this as follows: “a PBO by designation exists to relieve the state of certain burdens. Accordingly, only those organisations that qualify as PBOs should be released from Read More …

In the case of L’Avenir Wine Estate (Pty) Ltd v Commissioner for the South African Revenue Service (16112/2021) [2022] ZAWCHC 28 the High Court had to consider this question and more. The vintage return L’Avenir (Taxpayer) is a South African wine producer. In 2006 the Taxpayer applied to the Registrar of Companies to make March the end of its current financial year. Again, in 2010, the Taxpayer applied to change the end of its current financial year, this time to December. Both were approved at the relevant times. The Taxpayer believed that the 2010 change had a retrospective effect for its 2009 tax year, meaning that the period of 1 April 2009 to 31 December 2009 (the disputed period) would be included in the 2009 tax year. SARS, on the other hand, maintained that the approval applied to the Taxpayer’s 2010 tax year (rather than 2009) and that the disputed Read More …

Tax deductible donations to philanthropic and other socially beneficial organisations are a familiar feature of many countries’ tax systems – to the extent that such deductible donations can be said to have gained the tinge of infamy in mainstream media. However, the goal of this type of regulation is to incentivise companies and individuals to donate to organisations dedicated to the provision of social goods and insulated from the personal financial benefits which are associated with for-profit enterprises. On 9 May 2022, the South African Revenue Service (SARS) issued Binding Private Ruling 371 (BPR 371), dealing with the proposed operating model of a trust that is an approved public benefit organisation (PBO). Specifically, whether the operating model was within the provisions of section 30(1)(c)(i). BPRs are issued by SARS under Chapter 7 of the Tax Administration Act 28 of 2011. BPRs are published with the consent of the applicant(s) and Read More …

Following the High Court’s decision regarding the disclosure of former President Jacob Zuma’s tax returns (see our Tax & Exchange Control Alert of 18 November 2021), the confidentiality (or possible lack thereof) of taxpayer information has entered the public mind. Recently, a second case dealing with this confidentiality came before the Eastern Cape Division of the High Court (Grahamstown) in Structured Mezzanine Investments (Pty) Ltd and Another v Commissioner, South African Revenue Services (Case No 1824/2021) (as yet unreported) (SMI v SARS). Although appearing to further erode the confidentiality of taxpayer information under section 69 of the Tax Administration Act 28 of 2011 (TAA), on careful reading this case is not cause for taxpayer concern. Facts The South African Revenue Service (SARS) requested information from Structured Mezzanine Investments (SMI) in terms of section 46 of the TAA, specifically certain loan agreements that SMI had concluded. SMI failed to comply with Read More …

When a purchaser acquires a business, they often also assume some or all of the seller’s liabilities in relation to the business. In negotiating the purchase price, the purchaser may contractually agree to assume the seller’s obligation to pay existing or future liabilities. The question is whether the assumption of such liabilities forms part of the consideration for the supply of the business, on which value-added tax (VAT) is payable. The term “consideration” is widely defined in section 1(1) of the Value-Added Tax Act 89 of 1991 (VAT Act) to mean any payment made or to be made, whether in money or otherwise, or any act or forbearance, in respect of, in response to, or for the inducement of, the supply of any goods or services, whether by that person or any other person. Where a business is transferred as a going concern which qualifies for the zero rate in Read More …

In the case of Bechan and Another v SARS Customs Investigations Unit and Others (19626/2022) [2022] ZAGPPHC 259 (28 April 2022) the High Court was tasked with deciding whether the South African Revenue Service (SARS) acted unlawfully in searching motor vehicles parked outside of designated premises and whether the affected persons could demand the return of the seized items through the mandament van spolie. On 28 March 2022, a warrant was issued in terms of sections 59 and 60 of the Tax Administration Act 28 of 2011 (TAA). The warrant authorised SARS to seize information and documentation at the premises of, and related to, a particular taxpayer (Taxpayer). The day after obtaining the warrant, SARS arrived at the Taxpayer’s premises in order to execute it. The premises were located within an office park, which was shared with a number of other companies. Access to the office park was controlled, and Read More …

On 22 February 2022, the South African Revenue Service (SARS) issued a draft interpretation note (Draft IN) for public comment, which appears to have been published to provide clarity on the interplay between the recoupment provisions under section 8(4)(a) of the Income Tax Act 58 of 1962 (ITA) and the newly introduced deemed-disposal rule under section 8(4)(k)(iv) of the ITA. Background Section 8(4)(a) of the ITA contains recoupment provisions that aim to include in a taxpayer’s income all amounts claimed as a deduction or allowance under certain sections of the ITA whether in the previous or current years of assessment, which have been recovered or recouped in the current year of assessment. Therefore, the effect of section 8(4)(a) is, subject to certain exemptions and exclusions under the ITA, to include in income, amounts which have either been recovered or recouped by the taxpayer on the disposal of an asset or Read More …

Digital business models create value in ways that are not neatly captured by our tax systems which are designed to tax “bricks and mortar” economic activity. The source and residence rules on which today’s tax systems are based were not designed to tax the types of economic interactions that take place online. Free-to-use digital services provide a good example of the disruption caused by digital business models to existing tax rules. With free-to-use digital services there is no transaction between the service provider and consumer. The payment for the service provided is not how the service provider generates its income. Advertising revenue is often a significant part of how such businesses earn income. However, it is indisputable that the provision and consumption of the free service is at the core of its trading activities. This, along with the international mobility of the digital service provider’s intellectual property (including branding, collected Read More …

The Employment Tax Incentive Act 26 of 2013 (ETIA) creates a motivation, known as the employment tax incentive (ETI), whereby employees’ tax may be reduced in terms of the formulae provided in the ETIA for the benefit of the employer. In its preamble, the ETIA explains that this measure aims to support employment growth in the face of South Africa’s concerning rate of unemployment and for Government to share the costs of expanding job opportunities with the private sector. In the case of Taxpayer M v CSARS (Case no: IT 45585) (as yet unreported), the appellant, Taxpayer M (Employer), was eligible to receive the ETI in respect of its qualifying employees. As required by the ETIA, the Employer timeously submitted its monthly employer declaration returns (known as an EMP201). During this time, an ETI in the amount of R3,757,633 was available to the Employer. However, in the employer reconciliation declaration Read More …

Authors: Joon Chong, Partner from Webber Wentzel SARS has announced the deadline dates for filing income tax returns for the 2022 year of assessment as well as the details of those exempt from filing returns On 3 June 2022, SARS will publish a notice in the Government Gazette specifying the taxpayers that do not need to file income tax returns for the 2022 year of assessment, and the deadlines for taxpayers that have to file an income tax return. Taxpayers who are exempt from filing are individuals who receive total income of less than ZAR 500 000 for the year from only one source and receive no other allowances or benefits, and from whom PAYE has been deducted according to the prescribed tax deduction tables. Individuals who only receive (i) interest below the interest exemption thresholds; (ii) amounts from Tax Free Savings Accounts; or (iii) dividends and are non-residents throughout the year, Read More …