The concept of reportable arrangements was introduced in 2005 to require early disclosure to the South African Revenue Service (SARS) of certain types of transaction that may give rise to tax avoidance concerns so as to enable SARS to investigate them timeously. Fewer than 150 transactions were reported by 2008, causing significant amendments to the reportable arrangement legislation to ensure a greater response. The draft Taxation Laws Amendment Bill of 2014, published in July for public comment, contains several proposed changes to the reportable arrangement legislation. Some of the main proposals are:
Author: Nyasha Musviba
Refundable compliance rebate – revision of small business corporation tax relief
One of the important proposals relates to the revision of the Small Business Corporation (SBC) tax regime. An SBC is defined in s12E(4)(a) of the Income Tax Act, No 58 of 1962 as any close corporation or cooperative or any private company as defined in the Companies Act, No 71 of 2008 (thus excluding trusts, sole proprietors and partnerships), all shareholders of which are at all times during the year of assessment natural persons, where the gross income for the year of assessment does not exceed R20 million per annum. A number of other limitations with regard to shareholding and professional service businesses are included in the definition.
South Africa: transfer pricing legislation to be amended again
The draft Taxation Laws Amendment Bill (“DTLAB”), released for public comment on 17 July 2014, proposes certain changes to the transfer pricing secondary adjustment mechanism in terms of which the amount of the secondary adjustment will now be deemed to be a dividend in specie paid by the South African taxpayer to the non-resident connected person.
The implications of FATCA in South Africa
Background The Foreign Account Tax Compliance Act (FATCA) was enacted in 2010 by the US to target non-compliance by US taxpayers using foreign accounts. FATCA essentially requires foreign financial institutions to report information about financial accounts held by US taxpayers, or by foreign entities in which such taxpayers hold a substantial ownership interest, to the IRS. Until now, FATCA has largely impacted US taxpayers with specified foreign financial assets.
Donating to Public Benefit Organisations
Public benefit organisations (‘PBOs’) provide invaluable healthcare, education, poverty alleviation, housing, conservation, environmental, cultural and religious services in South Africa. The important role that these organisations play in our society is recognised by the legislature which has provided PBOs with a number of tax advantages.
Are Gains From the Sale of Share Scheme Shares Being Correctly Taxed?
This article, which examines the taxation treatment that results from the sale of share scheme shares, concludes that it is advisable to hold any shares for a period of at least three years before disposing of them – including shares acquired in terms of an employer’s share incentive scheme. Section 8C of the Income Tax Act (‘the Act’) taxes gains and allows for the deduction of losses arising on the vesting of ‘equity instruments’ that are acquired by virtue of employment, or office of director of any company, or from any person by arrangement with the taxpayer’s employer. The most common type of ‘equity instrument’ encountered is an equity share acquired by the taxpayer in his or her employer company – for example, in terms of a share incentive scheme.
STC Credits to Expire on 31 March 2015
Companies should take note of the fact that Secondary Tax on Companies (STC) credits that they have accumulated up to 31 March 2015 will expire on that date. The implication is that companies with STC credits should take advantage of the credits by paying dividends on or before 31 March 2015. The benefit of STC credits is only enjoyed at the point where dividends are distributed to shareholders who are not exempt from the Dividends Tax – for example where dividends are paid to shareholders who are natural persons. Therefore multi-tier groups of companies will have to pay dividends all of the way up and out of the group on or before 31 March 2015 for the non-exempt shareholders to experience a benefit. The benefit derived by a non-exempt shareholder from an STC credit is that the effective rate of Dividends Tax payable is reduced.
Important Notice: 60 Day Time Limit Placed on Section 6quin Rebate
It has come to our attention that there are still taxpayers who are unaware of the fact that they have to notify SARS within 60 days (from the date the foreign tax was withheld) if they intend to use the section 6quin rebate for foreign withholding taxes paid. The Taxation Laws Amendment Act No. 24 of 2011 (TLAA) introduced subsection (3A) to section 6quin of the Income Tax Act in January 2012.
Challenges for corporate taxpayers and the role of advisors
Author: Pieter van der Zwan (North-West University) Being a corporate taxpayer in an environment with constant developments in legislation and regulations coupled with complex tax issues that arise on a regular basis is not an easy task. One need not look further than a number of cases that appeared before the courts over the past year to see evidence of this. It is submitted that the nature of the challenges faced highlights the fact that the role of a corporate tax advisor’s involvement in the tax affairs of a client has evolved to be much more than merely assisting to complete an income tax or provisional tax return just before the submission deadline arrives. This article deals with four of the challenges that a corporate taxpayer in South Africa may face as well as the role that a corporate tax advisor could, and arguably should, be fulfilling in addressing these Read More …
The case of GB Mining v Commissioner: SARS
Author: Erich Bell (SAIT Technical) This case stems from disallowed and partially disallowed objections raised against revised assessments for the 2003-2006 tax years of the appellant, GB Mining, where the matter went on appeal through the Pretoria Tax Court which dismissed the appeal except for certain management fees which do not form part of the appeal to the SCA. This case clearly highlights the importance of supporting information submitted with a return and the burden of proof on the taxpayer when disputing an assessment.