Author: Stephen Zaaiman (Renmere) It is difficult to define the term ‘Mergers and Acquisitions’ or ‘M&A’ as an abstract concept. Whereas most commercially-minded practitioners ‘know it when they see it’, it often seems that no single definition quite succeeds in capturing the concept within four corners. This is particularly true in the field of tax where it is not uncommon for the resident M&A practitioner to declare jurisdictional authority over anything ranging from a residential lease agreement to a capital allowance review.
Author: Nyasha Musviba
Relief from transfer pricing for controlled foreign companies
Author: Arnaaz Camay (ENSafrica) The current transfer pricing provisions contained in section 31 of the Income Tax Act, 58 of 1962 came into effect on 1 April 2012 and are applicable for years of assessment commencing on or after that date. In terms of section 31(2), where:
Government improves customs efficiency but holds off on tax increases
Author: Kayn Woolmer (Deloitte) The draft Customs Duty Bill and Customs Control Bill have been under development for almost six years now. As such it was expected that the Minister of Finance would make some mention as to when these bills would be promulgated into legislation thereby paving the way for enhanced customs controls and potentially improved customs management techniques and opportunities for both SARS and businesses in his Budget Speech earlier this year.
The Supreme Court of Appeal admonishes the South African Revenue Service
Author: Beric Croome Under the provisions of the Tax Administration Act, the Commissioner: South African Revenue Service (‘SARS’) is entitled to request that a taxpayer submits relevant material that SARS requires in terms of section 46 of the Tax Administration Act No. 28 of 2011 (‘TAA’). Section 1 of the TAA in turn defines ‘relevant material’ as meaning:
Branch vs. Subsidiary: Key tax considerations
Author: Wendy Lumsden Foreign investors frequently face the decision of whether to conduct operations in South Africa as a branch or whether to setup a subsidiary for undertaking South African activities. This article highlights the key South African tax consequences of a Branch as opposed to those of a Subsidiary and considers some of the other key considerations, such as legal liability.
Capital gains tax, savings and inflation
Author: Ben Strauss of DLA Cliffe Dekker Hofmeyr Consider the following example: A taxpayer bought shares for R100 000 on 1 June 2004, and sold them on 1 June 2014. Assume that: the in?ation rate during the period the shares were held was 6% per year compounded; the value of the shares grew at a (generous) rate of 10% per year compounded; the taxpayer has no other capital gains during the tax year ending 28 February 2015 and has no assessed capital loss; and the taxpayer pays income tax at the highest marginal rate of 40%.
Allowances in respect of public private partnerships
Authors: Nicole Paulsen and Gigi Nyanin of DLA Cliffe Dekker Hofmeyr On 17 July 2014, the National Treasury released the draft Taxation Laws Amendment Bill (TLAB) which aims to give effect to the various tax proposals announced in the 2014 Budget.
Remedy for declined tax clearance certificate
On 18 February 2014 the North Gauteng High Court delivered a judgment on the remedies available when a tax clearance certificate (‘TCC’) is declined by SARS. What is clear from the judgment is that when a taxpayer is dependent on a TCC for financial or business purposes and it gets declined by SARS, the potential impending economic harm that may come to a taxpayer from such refusal does not entitle the taxpayer to a court order compelling SARS to issue such a TCC sought.
Discussion paper on the assumption of contingent liabilities in a going concern acquisition
SARS released the above discussion paper in December 2013 and it was open for comment to 31 March 2014. It deals with the treatment of so-called ‘free-standing’ contingent liabilities from the points of view of the seller as well as the purchaser, where the contingent liabilities are assumed by the purchaser as part settlement of the purchase price for the acquisition of the assets of a going concern. It distinguishes between valuation provisions, ‘embedded’ obligations and free-standing contingent liabilities. A valuation provision, for example a provision for doubtful debts and an embedded obligation, for example the statutory duty to reforest timber plantations after harvesting, have an impact on the market value of the asset to which they are attached.
Binding Ruling on leasehold improvements
The South African Revenue Service (SARS) released binding private ruling 177 (Ruling) on 31 July 2014. The Ruling concerned a lease and a sublease and SARS was asked to rule on the income tax consequences for, inter alia, the landlord in circumstances where there is an obligation on the sub-lessee to make improvements to the land.