Author: Nyasha Musviba

A fundamental reason for the existence of the rules of “prescription” in South African tax law is to provide a taxpayer with certainty as regards its tax position. Under certain circumstances, SARS is barred from changing a favourable to an unfavourable assessment. In disputes, prescription is a powerful defence available to compliant taxpayers, allowing them to bring finality to their tax assessments. Whether the defence of prescription is available to a taxpayer is, inter alia, dependent upon disclosure in its annual tax return. The importance of tax return disclosure was dealt with in quite some detail in the recent Supreme Court of Appeal decision in the matter of CSARS v Spur Group (Pty) Ltd. The court found against the Taxpayer both on the merits of the case, which related to the deductibility, in terms of section 11(a) read with section 23H of the Income Tax Act, 1962, of a contribution made to a share Read More …

The Finance Minister was able to avoid tax rate increases, and even make a positive contribution to reducing the deficit, as a result of better than expected tax revenues. These were largely contributed by the mining sector due to the increase in commodity prices, strong consumer demand after the COVID-19 lockdowns contributing to VAT and corporate taxes, and better personal tax collections due to improved earnings. The Finance Minister referred to reducing the corporate tax rate in future, and the disbenefits of further rate increases generally. He also cautioned that unless GDP and tax revenue increased, there was no capacity for increased permanent state expenditure. He warned about risks to the fiscal outlook both in the global and the domestic environment, including increased borrowing costs, state wage bill, and the poor state of certain SOEs. In the circumstances, taxpayers may be relieved about a neutral or even slightly positive budget Read More …

On 25 February 2022, Webber Wentzel hosted a client webinar, “Post Budget Speech Panel Discussion | What does the 2022 South Africa budget mean for you and your company?” Panellists at the webinar were Dr Azar Jammine – Director & Chief Economist of Econometrix, Brad Webber, Samantha Pokroy, Brian Dennehy and Julian Jones. Here’s some of the insights from the panel of experts. The Minister of Finance, Enoch Godongwana, delivered several positive messages in the 2022 National Budget. But it will take a long time, and significant progress on implementation, for government to reverse the long-term downward trajectory in South African economic growth, panellists at the Webber Wentzel Post-Budget Seminar agreed. The Budget showed that revenue collections exceeded original predictions by ZAR181.9 billion, mainly because of taxes paid by mining companies that had benefited from the commodities upturn. The Minister of Finance showed commendable prudence in that he did not assume this windfall will Read More …

By Joon Chong, Tax Partner at Webber Wentzel. The latest move by SARS to require the withholding of PAYE from annuity payments at an “Effective Tax Rate” as required in directives issued to payers of annuities may help some annuitants to plan their finances but may disadvantage others SARS issued IRP3e tax directives in terms of paragraph 2(2B) of the Fourth Schedule to the Income Tax Act to all payers of annuities in early February 2022 (i.e., to licensed insurers and retirement funds, collectively “administrators”). The directives required the administrators to withhold PAYE on the annuities paid at the “Effective Tax Rate” or “Fixed PAYE Rate” prescribed by SARS on the annuitants. Starting from 1 March or 1 April 2022, annuitants will find that PAYE will be withheld on the annuities they receive at the Fixed PAYE Rate – unless they opt out. How SARS calculates the Fixed PAYE Rate Read More …

By Duncan McAllister, Consultant at Webber Wentzel. Valuing a usufruct for estate duty purposes may incur a greater tax liability than disposing of it while the usufructuary is alive and paying donations tax, transfer duty and CGT When a usufruct ceases, it can have serious estate duty consequences for a deceased usufructuary. For this reason, amongst others, most planners nowadays shun the usufruct and use an inter vivos trust for estate planning. This article explores one of the options open to an aged usufructuary staring down the barrel of the estate duty gun. At the heart of the problem is s 5(1)(b) of the Estate Duty Act 45 of 1955. It states that a usufruct ceasing on a person’s death should be valued by capitalizing the right of enjoyment at 12% a year over the life of the person who becomes entitled to the right of enjoyment, or if the right is Read More …

In the recent judgment of Purveyors South Africa Mine Services (Pty) Ltd vs Commissioner for the South African Revenue Services (135/2021) [2021] ZASCA 170 (7 December 2021), the Supreme Court of Appeal (SCA) considered an appeal brought by the taxpayer (the appellant) in respect of the findings of the High Court in a judgment which upheld the rejection by the South African Revenue Service (SARS) of the voluntary disclosure programme application submitted by the appellant. Share Facts On 12 January 2015, the appellant entered into a dry lease agreement with its holding company (a company incorporated and tax resident in the United States of America (US)) in respect of an aircraft that was registered in the US. The aircraft was subsequently imported into South Africa and was used to transport goods and personnel from South Africa to other countries situated in Africa. As a consequence of the importation of the Read More …

In October 2021, the CDH Tax & Exchange Control team discussed the landmark judgment handed down by the Supreme Court of Appeal (SCA) on 15 October 2021, in Commissioner for the South African Revenue Service v Spur Group (Pty) Ltd (Case no 320/20) [2021] ZASCA 145 (15 October 2021). In that case, the SCA held that a capital contribution made by an employer taxpayer to a trust established for purposes of an employee share incentive scheme, was not deductible for income tax purposes. Share The judgment raised the question whether such capital contributions would henceforth always be considered non-deductible or rather whether it was a case of considering the merits and specific facts and circumstances of each case. Many taxpayers would thus have been relieved when reading SARS Binding Class Ruling 78 issued on 24 January 2022 (BCR 78) which, amongst others, determined the income tax consequences of an employee Read More …

In October 2021, the CDH Tax & Exchange Control team discussed the landmark judgment handed down by the Supreme Court of Appeal (SCA) on 15 October 2021, in Commissioner for the South African Revenue Service v Spur Group (Pty) Ltd (Case no 320/20) [2021] ZASCA 145 (15 October 2021). In that case, the SCA held that a capital contribution made by an employer taxpayer to a trust established for purposes of an employee share incentive scheme, was not deductible for income tax purposes. Share The judgment raised the question whether such capital contributions would henceforth always be considered non-deductible or rather whether it was a case of considering the merits and specific facts and circumstances of each case. Many taxpayers would thus have been relieved when reading SARS Binding Class Ruling 78 issued on 24 January 2022 (BCR 78) which, amongst others, determined the income tax consequences of an employee Read More …

By Duncan McAllister (Consultant) from Webber Wentzel. Parties wishing to cancel a contract should try to do so within the same year of assessment as it was entered into, to avoid adverse cash-flow consequences The Taxation Laws Amendment Act 25 of 2015 introduced a number of amendments to address the cancellation of contracts, which came into effect on 1 January 2016. The principle underlying these amendments is that prior year assessments cannot be reopened to take account of subsequent events. In Caltex Oil (SA) Ltd v SIR, Botha JA stated the following:[1] ‘What is clear, I think, is that events which may have an effect upon a taxpayer’s liability to normal tax are relevant only in determining his tax liability in respect of the fiscal year in which they occur and cannot be relied upon to redetermine such liability in respect of a fiscal year in the past.’ The taxpayer in New Adventure Read More …

By Wesley Grimm, Senior Associate & Rudi Katzke, Partner at Webber Wentzel. National Treasury is asking for public comment by 7 February 2022 on its proposals to impose a specific excise tax on both the non-nicotine and nicotine solutions in e-cigarettes National Treasury published a draft discussion paper in December 2021 on the proposed taxation of electronic nicotine delivery systems (ENDS) and electronic non-nicotine delivery systems (ENNDS), commonly known as e-cigarettes. According to National Treasury, e-cigarettes are battery powered devices that do not burn or use tobacco leaves but vaporise e-liquid solutions which a user inhale. In its discussion paper, National Treasury acknowledges that there is uncertainty about the actual health-related risks of e-cigarettes. Consequently, it wishes to engage with stakeholders on its fiscal policy recommendations for the taxation of e-cigarettes, as countries like the Philippines, Kenya and Russia are doing. National Treasury proposes to introduce a specific excise tax Read More …