By Basil Mashabane Impact on private companies This is a follow-up to the article ‘Mergers and takeovers under the new Companies Act’ (2011 (Sept) DR 30) where I discussed the fact that South African mergers and acquisitions are experiencing a paradigm shift following the enactment and implementation of the new Companies Act 71 of 2008 (the Act) on 1 May 2011, replacing the old order.
Author: Nyasha Musviba
Concerns raised on interest deduction limitation rules
Interest deduction limitation provisions have been enacted in terms of s23N of the Income Tax Act, No 58 of 1962 (Act), which apply to so called ‘reorganisation and acquisition transactions’. These provisions have been in effect since 1 April 2014. The purpose of these provisions (as the heading suggests) is to limit interest deductions in respect of certain debt arrangements that National Treasury consider as being susceptible to excessive gearing.
Salary Sacrifices – tax case IT 12984
In the recent case of ABC Limited v The Commissioner for the South African Revenue Service (case number 12984, as yet unreported), the Tax Court had to determine whether the Appellant had entered into an effective salary sacrifice scheme with its employees in respect of motor vehicle benefits. If there truly was a salary sacrifice, only the taxable value of such benefit in accordance with the provisions of the Seventh Schedule to the Income Tax Act, No 58 of 1962 (Act) will have accrued to the employee, otherwise the amount expended by the Appellant to provide the benefit will have accrued.
Disposal of foreign equity shares – proceed with caution
In advising on international corporate transactions we often advise taxpayers that directly, or indirectly through a foreign subsidiary, dispose of their equity shares in foreign subsidiaries or equity investments resulting in a taxable capital gain. What looks like a simple transaction, capable of being executed in a tax neutral manner, could very easily result in adverse tax implications for the disposing shareholder.
New tax dispute resolutions promulgated
The new rules governing objections and appeals were promulgated under section 103 of the Tax Administration Act No. 28 of 2011 (‘TAA’) in Government Gazette 37819 on 11 July 2014. These rules replace the rules which were promulgated under section 107A of the Income Tax Act and for all practical purposes the new rules took effect on 11 July 2014 and will therefore regulate the resolution of tax disputes going forward.
Uncertainty to greet tax on multinationals’ profits
Author: Amanda Visser (BDlive) Businesses globally are facing a period of great uncertainty following the publication of seven action plans that countries will be implementing in the next year to address the shifting of profits by multinationals in efforts to reduce their tax liabilities and depriving countries of much needed revenue. Jeffrey Owens, former head of the Organisation of Economic Co-operation and Development (OECD) Centre for Tax Policy and Administration, anticipated a “tsunami” of tax disputes between multinationals and tax authorities because there was certainly going to be inconsistencies in the application of the steps announced this week.
OECD releases 2014 BEPS deliverables
Author: Osler Hoskin & Harcourt LLP , Canada, Global On September 16, 2014, the Organisation for Economic Co-operation and Development (OECD) released its first seven of 15 deliverables under the OECD/G20 base erosion and profit shifting (BEPS) project (the 2014 BEPS Package). The 2014 BEPS Package arises from the Action Plan on Base Erosion and Profit Shifting (the BEPS Action Plan), which contains 15 specific recommendations for international tax reform (see our Update on the BEPS Action Plan, “OECD/G20 International Tax Reform: Potential Impact on Canadian Companies,” July 19, 2013). A summary overview of the 15 recommendations is included at the end of this Update.
Complaints procedure for the Office of the Tax Ombud
The Minister of Finance, Pravin Gordhan, officially launched the Office of the Tax Ombud (‘OTO’) on 7 April 2014. Judge Bernard Ngoepe was announced as the Tax Ombud in October 2013. The OTO has recently released an informal guide in print form, which summarises the complaints procedure to be followed by taxpayers. The guide can be obtained from their offices and other government offices.
Recent Developments Regarding Section 23M of the Income Tax Act
Section 23M is set to become effective from 1 January 2015. Its intention is to limit the deduction of interest where such interest is paid to a connected person, which is not subject to tax in South Africa on the interest received. In the majority of cases, non-residents are not subject to normal tax in South Africa on interest received from a South African source due to the exemption provided in section 10(1)(h) of the Act. However, the withholding tax on interest paid to non-residents is to become effective from 1 January 2015. The intention would appear to be that if the interest received is not taxed in South Africa at all i.e. neither subject to normal tax in South Africa nor the withholding tax on interest (for example because a double taxation agreement reduces the withholding rate to zero per cent), then the section 23M limitation needs to be Read More …
Recent Developments Regarding Tax Free Savings Accounts
Author: BDO In order to encourage savings, in the 2012 Budget speech the Minister of Finance proposed the introduction of tax free savings accounts. The idea was that individuals could invest up to R30 000 per annum into such accounts, with an overall lifetime ceiling of R500 000. Returns generated in the account would be tax free, whether by way of income or capital gains. The individual could withdraw the amount invested at any stage on a tax free basis.