Multinational organisations operating in Africa face significant tax exposure and risks in the form of withholding taxes. “Multinationals considering doing business on the continent need to consider the potential tax treatment of their transactions upfront,” says Elandre Brandt, an International Tax Partner at PwC and Head of the Africa Tax Desk based in Johannesburg. “Contractual terms may have a significant impact on the applicable withholding tax, and may range from anything between five percent to as much as 30% of the gross amount of the transaction,” warns Brandt. “Planning for a withholding tax liability allows for certainty regarding the tax liability associated with any commercial transaction.”
Author: Nyasha Musviba
Legal professional privilege and invoices from attorneys
Author: Heinrich Louw (DLA Cliff Dekker Hofmeyer) On 17 March 2014 judgment was handed down in the Western Cape High Court in the case of A Company v Commissioner of the South African Revenue Service (case no 16360/2013 – as yet unreported). The facts were briefly as follows. The applicants were three companies in a group of companies. In the course of conducting an audit in the applicants’ tax affairs, the South African Revenue Service (SARS) directed a request for relevant material at the applicants in terms of s46 of the Tax Administration Act, No 28 of 2011.
Withdrawal of assessments under the Tax Administration Act
Author: Danielle Botha (DLA CLiff Dekker Hofmeyer) Section 98 of the Tax Administration Act, No 28 of 2011 (TAA) makes provision for the withdrawal of an assessment by the South African Revenue Service (SARS) in certain circumstances. Prior to its amendment, s98 allowed for the withdrawal of an assessment (despite no appeal having been noted or objection lodged), that was: a) issued to the incorrect taxpayer; b) issued in respect of the incorrect tax period; or c) issued as a result of an incorrect payment allocation.
Does South Africa currently have a withholding tax on interest?
That, one might imagine, should be an easy question to answer –after all, what does the Income Tax Act 58 of 1962 say in regard tothe date on which statutory provisions for the imposition of a withholding tax on interest come into effect? However, anyone who actually triesto find the answer to that question for himself, rather than relying on someone else’s conclusions in thisregard, will find himself following a tortuous path of legislation, made more complicated by the enactment of amending legislation that was repealed before it took effect.
The Supreme Court of Appeal speaks on the apportionment of expenditure
It is trite that the deductibility or otherwise of expenditure incurred by a taxpayer is determined in terms of section 11(a) of the Income Tax Act 58 of 1962, read with section 23. Section 11(a) determines what expenditure qualifies for deduction, whilst section 23 prescribes what may not be deducted. Subsections (f) and (g) of section 23 have been described as the negative counterpart to section 11(a). (See Commissioner for Inland Revenue v Nemojim (Pty) Ltd 1983 (4) SA 935 (A) at 946H 947C.)
Challenging a refusal by SARS to grant or renew a tax clearance certificate
Taxpayers who wish to tender for State contracts do not qualify unless they can produce a current tax clearance certificate. The refusal, withdrawal or non-renewal of such a certificate would consequently be the death knell of any business whose lifeblood is the securing of state tenders. A taxpayer’s unsuccessful attempt to compel SARS to grant a tax clearance certificate The decision in Chittenden NO v CSARS [2014] ZAGPPHC 51, handed down by the Pretoria High Court on 18 February 2014, concerned a taxpayer company that was under supervision in terms of the business rescue provisions of the Companies Act 71 of 2008 and its attempt to secure the renewal of a tax clearance certificate.
On the money: Let tax-free savers profit from stocks
Author: Stuart Theobald (BDlive) The Treasury is busy missing an ideal opportunity to encourage individuals to invest directly in shares listed on the stock market. It apparently thinks that this would be a bad thing. It is wrong. South Africans are useless at saving. Only 42% of adults have any savings at all, the rest preferring to spend as they get it or borrow to consume. We have become addicted to consumption. Over 60% of our gross domestic product is made up of final consumption expenditure.
New page on the institution of legal proceedings
Author: SARS Legal and Policy What is it? The institution of legal proceedings is a process whereby a taxpayer delivers court papers to SARS requiring the Commissioner for SARS to appear and defend a matter in the High Court. Prior notice before the institution of the proceedings is required in some instances, particular in matters involving the State. What does the tax and customs laws say? There are two different Acts in terms of which the institution of legal proceedings against the Commissioner for SARS is governed and although they have a similar purpose, the requirements are not identical.
Buy-back of shares at a purchase price in excess of their market value
Author: Andrew Lewis (DLA Cliff Dekker Hofmeyer) 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. The facts of the proposed transaction are relatively simple. As part of a Broad-Based Black Economic Empowerment (B-BBEE) transaction, a company (BEECo) acquired 40% of the ordinary shares (shares) in a South African incorporated and resident company (applicant). The acquisition of the shares was financed by the BEECo through the issue of cumulative redeemable preference shares to various investors, the majority of which were financial institutions.
Re-financing and buy-back of shares
Author: Heinrich Louw (DLA Cliff Dekker Hofmeyer) The South African Revenue Service (SARS) released Binding Private Ruling 163 (Ruling) on 12 March 2014. The Ruling deals with the tax consequences of a transaction involving the re-financing of various loans and the application of the proceeds for purposes of a share buy-back. The facts are briefly as follows. Company X owns 49.3% of the issued shares of company Y. The balance of the issued shares of company Y are held by various individuals, companies, trustees of trusts and executors of deceased estates (other shareholders).