By David Warneke, BDO South Africa One of the tax proposals contained in the 2014 Budget review is the scrapping of the ‘deemed loan’ secondary transfer pricing adjustment contained in section 31(3) of the Income Tax Act, in favour of such an adjustment being treated as a dividend subject to the dividends tax or a ‘capital contribution depending on the facts and circumstances’. The scrapping of the deemed loan treatment is generally to be welcomed although scant detail regarding the proposal was provided in the Budget Review.
Author: Nyasha Musviba
Budget 2014 – Income Tax and VAT highlights of the 2014 Budget
The 2014 Budget produced few surprises. There were no changes to the corporate or personal income tax rates, capital gains tax inclusion rates or the VAT rate. The robustness of revenue collections, almost in line with the 2013 forecast, probably played a part in enabling the Minister to keep rates steady. The most significant changes are: The introduction of tax-preferred savings accounts. The initial contribution limits are very low, at R30 000 per annum, with a lifetime contribution limit of R500 000. This was announced at last year’s budget.
SARS shortens time between date of assessment and 'second date'
In order to avoid interest on the late payment of assessed income tax, taxpayers have to pay outstanding tax by the ‘second date’ indicated on the income tax assessment. We are finding that SARS has shortened the number of days between the date of assessment and the second date in many cases, to only a few days. If your income tax calculation indicated that you will have to make a payment to SARS, please be aware that you may have to make the payment within a few days of submission of your return, in order to avoid interest.
Ruling on definition of 'listed shares'
The South African Revenue Service (SARS) released Binding Class Ruling 42 on February 7 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 a wholly owned subsidiary of Company Y. Company X is to be listed on the JSE Limited. Company X’s 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. The preferred securities would:
SARS welcomes Gauteng North High Court judgment on Mr Mark Krok
PRETORIA, 31 JANUARY 2014 – Judgment was delivered earlier today in the Gauteng North High Court confirming a preservation order granted to the South African Revenue Service (SARS) over the South African assets of Mr Mark Krok (the respondent). The respondents were also ordered to pay the costs of two counsel for SARS. This action is the first mutual collection of taxes action between South Africa and Australia in terms of Article 25A of a Double Taxation Agreement between the two countries and an initial step to combating non-payment of taxes and strengthening the working relationship between South Africa and Australia. SARS welcomes the Gauteng North High Court judgment as it confirms an important legal principle of mutual assistance and cooperation amongst revenue authorities in different countries. SARS believes the judgment will advance the capability of revenue authorities to combat cross border tax evasion and attempts to conceal Read More …
Renewed focus on high net worth individuals: the Krok judgment
Alexa Muller – Associate at ENSafrica High net worth individuals and their associated trusts have in the past been identified by the South African Revenue Service (“SARS”) as posing a risk of non-compliance to tax legislation. The recent confirmation of a preservation order by the North Gauteng High Court in C:SARS v Krok and Jucool Enterprises Inc. (Case No. 1319/13) now renews the focus of SARS in this regard. The Krok judgment is significant for a number of reasons – including on the basis that it considers: section 185 of the Tax Administration Act No. 28 of 2011 (“the Tax Administration Act”) which empowers SARS to recover tax on behalf of foreign governments in certain circumstances; whether one can transfer beneficial ownership of “blocked” assets – i.e. assets placed under the physical control of an authorised dealer subsequent to the emigration of a South African resident; and the day-to-day actions Read More …
CSARS v Mobile Telephone Networks Holdings (Pty) Ltd (966/12) [2014] ZASCA 4 (7 March 2014)
Introduction The Supreme Court of Appeal delivered its judgement for the case between Commissioner for the South African Revenue Service v Mobile Telephone Networks Holdings (Pty) Ltd (966/12) [2014] ZASCA 4 on the 7th of March 2014. This case concerns itself with the apportionment of audit fees incurred for a dual or mixed purpose in terms of section 11(a) read with section 23(f) and (g). Facts The group structure were as follows: the respondent, Mobile Telephone Network Holdings (Pty) Ltd (Holdings), is a wholly owned subsidiary of the MTN Group Limited and is the holding company of five directly held and numerous indirectly held subsidiaries and joint ventures.
Tax allowances for tri-generation
Author: Ruaan van Eeden (Cliff Dekker Hofmeyer) The South African energy landscape has undergone significant changes over the last few years with the introduction of a number of private and public sector funded renewable energy projects, aimed at feeding power into the national grid and reducing reliance on coal-fired power stations for generating electricity. Further initiatives for energy efficiency (and not necessarily energy generation) have also been introduced to further assist taxpayers in reducing their energy footprint. The generation of electricity from renewable resources such as wind, solar, biomass or hydro is not only directed at feeding power into the national grid, but is also utilised by a wide array of corporate taxpayers for their own use.
Value shifting arrangements still applicable to companies and triggering adverse tax implications
Author: Andre Lewis (Cliff Dekker Hofmeyer) The Eighth Schedule to the Income Tax Act, No 58 of 1962 (Act) contains particular anti-avoidance provisions dealing with so called value-shifting arrangements. The South African Revenue Service (SARS) Comprehensive Guide to Capital Gains Tax (Issue 4) (CGT Guide) indicates that value shifting involves the effective transfer of value from one entity to another without constituting an ordinary disposal for capital gains tax purposes. Without these specific provisions, the concern is that entities could manipulate the value of assets in order to obtain a capital gains tax benefit. In the Taxation Laws Amendment Act, 2012 (TLA 2012) a new s24BA of the Act was introduced to ensure that asset-for-share transactions take place for equal value.
End of medical tax deductions won’t hurt all pensioners
By Laura du Preez Taxpayers over the age of 65 who earn less than R400 000 a year may pay less tax as a result of the introduction of the medical tax credits system. Some pensioners are angrily accusing government of not caring about the plight of the elderly after it was highlighted in the Budget last week that over-65s will lose the tax deduction for medical scheme contributions and medical expenses in the 2014/15 tax year. But, depending on their contributions, expenses and family size, the scrapping of the tax deduction is bad news only for over-65s who earn more than about R400 000 a year, National Treasury says. Those who earn less should be better off.