Author: Heinrich Louw (DLACliffeDekkerHofmeyr) The South African Revenue Service (SARS) released Binding Private Ruling 171 (Ruling) on 9 June 2014. The facts were as follows. Two individuals, A and B,were each the sole members of close corporations C and D, respectively. C and D each held half of the issued share capital of a company E. It appears that C and D also each had a loan claim against company E, while A and B each had a loan claim against C and D, respectively.
Author: Nyasha Musviba
VAT considerations between developers and owners of land
Author: Carmen Moss-Holdstock (DLACliffeDekkerHofmeyr) Where a registered vendor for Value-added Tax (VAT) purposes disposes of vacant subdivided land or developed properties in the course and furtherance of conducting an enterprise as a property developer, such disposal would ordinarily constitute a taxable supply subject to VAT at the standard rate of 14%. Such property developer would further be entitled to a deduction of input tax incurred on the acquisition of goods and services in the course of making the taxable supplies.
New tax dispute resolution rules brings about some welcome and unwelcome changes
Author: TaxTalk The wait is finally over! After three draft documents for public comment, numerous workshops and internal discussions, the new Dispute Resolution Rules (‘the new Rules’) issued in terms of section 103 of the Tax Administration Act (No. 28 of 2011) (‘the TAA’) has today been promulgated into law under Government Notice 550 published in Government Gazette No. 37819. It should be noted that the new Rules replace the Rules issued in terms of section 107A of the Income Tax Act (‘the old Rules’) with immediate effect. Although the new Rules are a lot more comprehensive than the old Rules, the South African Institute of Tax Professionals’ (‘the SAIT’) technical department warns the public of some common pitfalls and welcome changes.
Deductibility of costs in respect of plant used in the production of Renewable energy
Author: Nicole Paulsen In our Tax Alert of 7 March 2014, we discussed how the energy landscape has developed over the last few years with the introduction of a number of private and public sector funded renewable energy projects, aimed at reducing the energy footprint of corporate taxpayers.
Court sets ‘rules of the game’ for SARS audit
Author: Amanda Visser (BDlive) A judgment by the Supreme Court of Appeal sets out the “rules of the game” for an audit by the South African Revenue Service (SARS) on a taxpayer, in terms of the new Tax Administration Act that came into effect two years ago. In the judgment delivered last month the court found that raising additional assessments in the course of an audit should be based on “proper grounds” and that it was imperative for auditors to familiarise themselves with the business environment in which taxpayers operated.
Value Added Tax – Address on tax invoices
This ruling now clarifies that the address of the recipient and supplier to be reflected on a tax invoice, debit or credit note is either The physical address from where the enterprise is being conducted; The postal address of the enterprise; or Both the physical and postal addresses of the enterprise. With regard to branches or divisions that are separately registered for VAT in terms of section 50(1) of the VAT Act, the tax invoice, credit or debit note must reflect the address of the branch or division as listed above.
Tax Avoidance -Simulated transactions
In Roshcon (Pty) Ltd v Anchor Auto Body Builders CC [2014] ZASCA 40 (Roshcon) the Supreme Court of Appeal (SCA), in a unanimous judgment drafted by Wallis JA, has clarified the issues caused by its previous decision in SARS v NWK Limited [2011] SA 67 (NWK). Roshcon was not a tax case; it concerned supplier and floor plan agreements relating to the sale of trucks, with a reservation of ownership to a finance house as security until the trucks were fully paid for by the purchaser. On the assumption that NWK had transformed our law in regard to simulated transactions, counsel contended that the agreements in question were a disguise or simulation, amounting in fact to a pledge of the trucks without delivery or possession as required by law. In rejecting this argument, the SCA took great care to reaffirm the well-established principles relating to simulations, and to explain its Read More …
The ABC of Donations deductions
“Social responsibility is an ethical theory that an entity, be it an organisation or individual, has an obligation to act to benefit society at large.” When your moral compass and sense of social responsibility lead you to acts of benevolence, you could, in addition to the sense of wellbeing that comes from helping others, also qualify for a reduction in your tax bill. In recognition of the valuable role these donations from individuals and businesses play in these tougher economic times, government has legislated further concessions to allow greater tax relief in respect of such donations.
Deductions – Apportionment of holding company expenses
Mobile Telephone Networks Holdings (Pty) Ltd (the taxpayer) v Commissioner for the South African Revenue Service [2011]73 SATC 315, the taxpayer was the holding company of five directly held subsidiaries and a number of indirectly held subsidiaries and joint ventures, within a group of companies. The collective business of the operating companies within the group was the operation of mobile telecommunication networks.
Capital Gains Tax – Base cost of an interest-freenloan at a discount
Introduction The Eighth Schedule to the Income Tax Act No. 58 of 1962 (the Act) provides for a tax on capital gains colloquially known as capital gains tax. An interest free loan is regarded as an “asset” in terms of the definition in paragraph 1 of the Eighth Schedule as it is an incorporeal asset whereby the lender acquires a right to claim payment from the borrower. Where part of a loan is repaid it constitutes part of an asset disposed of and it will be necessary to allocate a part of the base cost of the loan to the part of the loan repaid in order to determine the capital gain or capital loss in respect of the disposal of that part. Where a loan is acquired for less than its face value, i.e. the base cost of the loan is less than the amount actually owed by the Read More …