The Tax Court is a specialist court specifically equipped to adjudicate on tax-related matters pertaining to the lawfulness and correctness of disputed assessments. Sections 104 to 107 of the Tax Administration Act, No 28 of 2011 (previously s81 to 88 of the Income Tax Act, No 58 of 1962 (Act)) together with the rules of the Tax Court, prescribe the procedures to be followed where a tax assessment is disputed and essentially entrusts the Tax Court with the power to determine the merits of a tax assessment.
Author: Nyasha Musviba
Tax Prescription – when does it apply?
Authors: Peter Dachs and Bernard Du Plessis of ENSafrica Many taxpayers are generally aware that there is a prescription provision contained in our tax law. However it is not always understood that the prescription provisions apply only if certain statutory requirements are met. In this regard it is not uncommon for SARS to assess taxpayers beyond the prescription period of three years. It is therefore necessary for taxpayers to understand the circumstances in which prescription will apply and also the relevant statutory provisions dealing with prescription.
VAT – Non supplies and charges
For a transaction in South Africa to attract value-added tax (VAT), there should be a supply of goods or services by a vendor in the course or furtherance of an enterprise. Consider the following scenario: A and B, both vendors for VAT purposes, have a business arrangement whereby, for example, B provides consulting and management services to A. It transpires, in the course of their business arrangement, that A requires the use of a rented vehicle. B agrees to arrange for the vehicle. B enters into a rental agreement with C, also a VAT vendor, and the vehicle is made available for the benefit of A. C subsequently invoices B for R100 plus VAT of R14 and B pays C the R114. Naturally, B seeks to recover the cost from A. B does not wish to recover anything in excess of the cost from A because A is a good Read More …
Tax Adminstration – Grounds on which an assessment can be withdrawn
If a taxpayer is unable to pay a tax debt, Chapter 14 of the Tax Administration Act No. 28 of 2011 (the TAA) makes provision for the taxpayer to apply to the South African Revenue Service (SARS) for the debt to be written off or compromised, that is to say, partially written off. However, SARS is in the business of collecting tax, not of waiving the payment of tax. It will only write off a tax debt if it is in its own interests to do so, for example because it would be impossible or uneconomic to collect the debt. The fact that the taxpayer would suffer hardship if he had to pay the tax debt is irrelevant in this regard, and is not a factor that SARS takes into consideration.
International Tax – US Foreign Account Tax Compliance Act (FATCA)
This article discusses how the US Foreign Account Tax Compliance Act (FATCA) is likely to affect all of us and contends that FATCA is not only of concern for United States (US) taxpayers; it is already affecting United Kingdom (UK) residents and its reach will soon extend to other taxpayers. Non-compliant taxpayers are watching a short fuse burning and that the records of the world’s financial industry will be opened to unprecedented data mining. FATCA has made waves in the upper reaches of the funds industry and caused concern to banks, custodians, insurance companies and trustees, but little news regarding its impact has yet spread to the wider world. Few ultimate clients of the international finance industry have yet heard of it.
VAT – Non supplies and charges
For a transaction in South Africa to attract value-added tax (VAT), there should be a supply of goods or services by a vendor in the course or furtherance of an enterprise. Consider the following scenario: A and B, both vendors for VAT purposes, have a business arrangement whereby, for example, B provides consulting and management services to A. It transpires, in the course of their business arrangement, that A requires the use of a rented vehicle. B agrees to arrange for the vehicle.
Interpreting court judgments
The South Gauteng Tax Court has had to make a determination of the effect of a direction given in a judgment handed down by the Supreme Court of Appeal in referring an assessment back to the Commissioner for the South African Revenue Service (SARS) for correction. The matter that was heard by the SCA (C:SARS v South African Custodial Services (Pty) Ltd [2012]74 SATC 61) had principally been concerned with whether improvements made to State property in terms of a public-private partnership constituted trading stock of the taxpayer. The costs incurred by the taxpayer had been claimed as a deduction on the basis that they were part of the cost of construction. Included in these costs were costs in respect of certain financial arrangements. In particular, the following were disputed by SARS: introduction fee, guarantee fees, consultation fees, financial advisory fee, margin fee and bid guarantee fee.
Exemptions – Listed shares and the foreign dividend exemption
The South African Revenue Service (SARS) released Binding Class Ruling No. 42 (BCR 42) on 7 February 2014. The factual circumstances in respect of which the ruling was made are as follows: Company Y is a company incorporated and resident in foreign country Y. Company X is a company incorporated and resident in country X. Company X is also a wholly-owned subsidiary of Company Y. Company X is to be listed on the JSE Limited. Its business is investment in foreign debt instruments, on which it will receive interest returns. Company X intends to raise funds for its business by issuing certain preferred securities. The preferred securities will be issued through its branch in country Y.
Subordination of loans and section 8F
Section 8F of the Income Tax Act No. 58 of 1962 (the Act), dealing with hybrid debt instruments was substituted by the Taxation Laws Amendment Act No. 31 of 2013 (the TLAA). In its substituted form the provision is considerably broader in scope than its predecessor. In particular it appears that certain subordination agreements may render the subordinated debt subject to reclassification as hybrid debt with potentially costly consequences. The new treatment applies to amounts of interest incurred on or after 1 April 2014.
How Sars could single you out for an audit
Author: Ingé Lamprecht (Moneyweb) Sars mum on selection process, but there may be ‘red flags’. JOHANNESBURG – There has been considerable speculation as to exactly how the South African Revenue Service (Sars) chooses individual taxpayers for audit. While some taxpayers have assumed that refunds would trigger an audit, or that a different pool of surnames is chosen each year, the revenue authority does not disclose “red flags” for an audit.