By Duncan McAllister, Consultant at Webber Wentzel Although personal rights are clearly assets for CGT purposes, they add a layer of complexity which has not been clarified in recent court decisions Personal rights play an important role in the determination of capital gains and losses. They may comprise assets in their own right for CGT purposes and play a role in establishing proceeds and base cost. Unfortunately, they impose a layer of complexity on the Eighth Schedule which cannot be avoided. What is it? A personal right (jus in personam) is a right in or against a particular person or group of persons. Personal rights are of two types: jus in personam ad rem acquirendam, a right to claim delivery of a thing; and jus in personam ad faciendum, a right to claim performance or an act. Put differently, a personal right is a right against another person for performance Read More …
Author: Nyasha Musviba
SARS steams ahead with reforms to its VDP process
On 31 January 2022, SARS hosted a public workshop to discuss the draft Voluntary Disclosure Programme Guide and uncertainties about the Voluntary Disclosure Programme process. As part of its ongoing efforts to reform its Voluntary Disclosure Programme (VDP), the South African Revenue Service (SARS) hosted another workshop with interested stakeholders, primarily to discuss comments on its draft VDP Guide. The draft VDP Guide explains SARS’ understanding of the VDP process and provides general guidance to taxpayers wishing to make use of the VDP to voluntarily disclose and regularise tax defaults. Two of the main agenda items discussed at the workshop were: the impact of prescription on the VDP process; and the meaning of “audit” and “voluntary” for purposes of the VDP. Regarding the impact of prescription, and the associated document retention timeframes, as set out in the Tax Administration Act, 2011 (TAA), SARS was firm that taxpayers wishing to regularise Read More …
South Africas second transfer pricing case?
Author: Jerome Brink. It is no secret that revenue authorities the world over continue to place significant emphasis on Base Erosion and Profit Shifting (BEPS), with transfer pricing being one of the key focus areas. The South African Revenue Service (SARS) is no different. In fact, the Minister of Finance (Minister) in the recent 2021 National Budget Speech specifically requested an additional spending allocation of R3 billion to SARS which would, amongst others, be used to expand SARS specialised transfer pricing audit and investigative skills.
Budget 2021/22 – Treasury further tightens the noose on retirement assets of emigrants
Authors: Joon Chong & Wesley Grimm from Webber Wentzel. The Budget Review 2021 includes a proposal to impose a deemed retirement withdrawal tax on retirement assets of emigrants as an exit tax. The proposal is unclear and has numerous issues. Data from various sources suggests that around 23 000 South African (SA) tax residents emigrate each year in search of greener pastures. Individuals who cease to be tax residents currently pay an exit tax on their worldwide assets, with certain exclusions. At present, immovable properties and retirement funds that remain invested in South Africa are excluded from the exit tax net.
Budget 2021/22 – SECTION 18A TAX DEDUCTIBLE DONATIONS TO PBOs UNDER THE SPOTLIGHT
Non-profit organisations (NPOs) play a critical role in their communities and broader society by sharing in the responsibility of Government to pursue the social and developmental needs of South Africa. Certain NPOs can qualify as public benefit organisations (PBOs) which entitles them to a preferential tax regime. Most PBOs are dependent on donor funding and some of them are able to encourage such funding by being able to issue section 18A tax deductible receipts which entitles the donor to claim an income tax deduction. In broad terms, entities that can issue section 18A tax deductible receipts include, amongst others:
Budget 2021/12 – REVIEW OF VOLUNTARY DISCLOSURE PROGRAMME CHANGE AFOOT?
Since South Africa introduced the principle of worldwide taxation in 2001, a number of so-called tax amnesty programmes have seen the light of day. A number of these amnesty programmes were focused on encouraging South Africans to declare and regularise their offshore income and assets, including the 2003 tax amnesty and the special voluntary disclosure programme (SVDP), which was in place between 1 October 2016 and 31 October 2017. A more permanent fixture in this regard has been the voluntary disclosure programme (VDP), which came into effect on 1 October 2012 and is contained in Chapter 16, Part B of the Tax Administration Act 28 of 2011 (TAA).
Budget 2021/22 – Proposed changes to Value Added Tax
Owing to the detrimental effect of the COVID-19 pandemic on business and individuals alike, it has been decided that Government will not introduce measures to increase tax revenue in the Budget. In keeping with this approach, no significant VAT amendments have been announced. We nevertheless highlight some of the more technical and minor policy amendments in this article. Zero-rating of super fine maize meal Section 11(1)(j) of the VAT Act provides for the zero-rating of certain foodstuffs as set out in Part B of Schedule 2 of the VAT Act.
Budget 2021/22 – Trusts: More anti-avoidance rules
Trusts are versatile legal constructs or arrangements that are often used for tax planning purposes, inter alia with a view to avoid estate duty on appreciating assets. However, the line is sometimes very thin between legitimate tax planning and schemes that are, at least from a policy point of view, considered unacceptable avoidance arrangements. The list of specific anti-avoidance rules that have been introduced in relation to trusts over the years is long. These include, most notably, the introduction of section 7C of the Income Tax Act, which effectively disincentivises the transfer of an asset to a trust by a connected person on interest-free or low-interest loan account or simply granting interest-free or low-interest credit to a trust for purposes of acquiring an asset in that trust. The amount by which the interest is less than the official rate of interest will be treated as a donation in the hands Read More …
Budget 2021/22 – Tax thresholds and seven tax brackets for individuals
Bracket creep is the phenomenon where a state collects increased revenue without making increases to the tax rate. Instead the state relies on inflation to bring more individual taxpayers into higher tax brackets, resulting in an increased revenue collection. While South African individual taxpayers have been spared an increase in tax rates in the recent past, this was based on the intention that bracket creep would provide the additional revenue required by the state. The Minister has announced that the tax thresholds and seven tax brackets for individuals will be raised by 5%. The two tables below demonstrate the brackets for 2020/21 and 2021/22:
Budget 2021/22 – PROPOSED AMENDMENTS IN RELATION TO CONTROLLED FOREIGN COMPANIES
Controlled foreign companies (CFC) are companies where more than 50% of their participation rights or voting rights are held directly or indirectly by South African residents. The CFC regime is one of the measures put in place to tax South African residents that have majority held equity investments offshore. The provisions do this through (absent the qualification of an exemption), the imputation of the net income of the CFC (in essence, the taxable income of the CFC had it been South African resident) to the South African resident shareholders, in proportion to the interest held in the CFC. The Minister has proposed two amendments relating to CFCs as discussed below.