An interesting advance tax ruling was released by the South African Revenue Service (SARS) on 12 March 2014. Binding Private Ruling 164 (Ruling) deals with the buy-back of ordinary shares by a company at an amount in excess of the market value of the shares.
Author: Nyasha Musviba
Collective investment schemes
Section 25BA prior to 1 January 2014 Prior to the amendments contained in the Taxation Laws Amendment Act No. 31 of 2013 (the TLAA), a Collective Investment Scheme (CIS) was taxed on a semi-flow through regime in terms of section 25BA of the Income Tax Act No. 58 of 1962 (the Act).
Changes to payroll tax forms submission to SARS
Manually completed payroll tax forms dropped-off at a SARS branch or posted, will no longer be accepted from 25 August 2014. The forms impacted include: Monthly Employer Declaration (EMP201) Employer Reconciliation Declaration (EMP501) Employee Tax Certificates [IRP5/IT3(a)] Tax Certificate Cancellation Declaration (EMP601) Reconciliation Declaration Adjustment (EMP701). Top Tip: An exception will be made for employers with a maximum of five IRP5/IT3(a)s. In such cases the employer can still go into a SARS branch where an agent will help them capture these IRP5/IT3(a)s and the EMP501.
Tax confidentiality versus exchange of tax information
Introduction The number of exchange of information agreements has increased dramatically in recent years. It is commonly accepted that the need of the governments to have effective tax administrations (i.e., that their taxpayers pay the right amount of tax in their respective jurisdictions) must be balanced with the right of taxpayers to privacy and confidentiality. Otherwise, it is presumed that taxpayers will lose their confidence towards their tax systems and thus the agreements will be less effective.
Proposal to amend Section 23N to better reflect market norms
By Webber Wentzel – South Africa Section 23N, which replaced section 23K with effect from 1 April 2014, prescribes rules to cap the deduction of interest incurred in respect of debt incurred by the acquirer of a business pursuant to a section 45 intra-group transfer, a section 47 liquidation distribution or a section 24O acquisition of shares. Section 23N applies to the refinancing of debt that was subject to section 23K and/or section 23N.
Proposed amendments to the Public Benefit Organisation provisions
Currently, conduit Public Benefit Organisations (PBOs) (PBOs which do not carry on a Public Benefit Activity listed in Part II of the 9th Schedule, but which provide funds or assets to other approved PBOs) are obliged to distribute or incur an obligation to distribute, to other approved PBOs, at least 75% of the donations received for which a section 18A deductible receipt was issued, within 12 months of the end of the year of assessment in which the donation is received.
Limited available to PPP receiving exempt income from government
The DTLAB introduces section 12NA, which aims to regulate the tax treatment of allowances available to public private partnerships (PPP) receiving exempt contributions from the government in terms of section 10(1)(zI). The proposed section will limit the allowable deduction to the amount of expenditure actually incurred in effecting improvements to land or buildings owned by government, reduced by the aggregate exempt contributions received from government. This limit is intended to address an ostensible “double dipping” in the context of PPPs.
Long term loan exemptions from transfer pricing provisions
New requirement for long term loan exemptions from transfer pricing provisions The current transfer pricing rules contained in section 31 of the Income Tax Act require the taxable income of a resident, which is party to an ‘affected transaction’, to be calculated as if the relevant transaction had been entered into on terms and conditions that would have existed between independent persons dealing at arm’s length (to the extent that a party to the ‘affected transaction’ derives a tax benefit).
What is your compliance status?
Currently, section 256 of the Tax Administration Act, No 28 of 2011 (TAA) houses the provisions governing the application for and granting of Tax Clearance Certificates (TCC). It is commonplace for taxpayers to require a TCC for a number of reasons including tenders, good standing, foreign investment allowance and emigration. The amendments to section 256 propose to remove the granting of a TCC and instead provide the taxpayer with a “confirmation of the taxpayer’s tax compliance status”.
New relief for small enterprises
In a review released by the Davis Tax Committee during July 2014, it was concluded that the lower tax rates applicable to small business corporations (SBCs) were not as effective as intended and resulted in tax relief only applicable to about 50 000 small entities, not all of which were in the professions intended to benefit. In order to promote the intention of SBC growth and provide relief for their tax compliance costs, it is proposed that all entities (including those with an annual turnover between ZAR1 million and ZAR20 million) would be subject to the normal corporate rate of 28%, but a refundable annual rebate of ZAR15,000 would be granted to SBCs.