Author: Karen Miller, Consultant at Webber Wentzel. Transfer pricing audits can be onerous, but taxpayers can achieve a more successful outcome by providing all information requested, anticipating areas of concern, and engaging openly with SARS The South African Revenue Services (SARS) recent issue of seemingly arbitrary questionnaires to multinationals on the provision or receipt of intra-group services has encountered much criticism and complaint. Although I agree that there appears to be a lack of coordination at SARS, with many taxpayers receiving these questionnaires while already under a transfer pricing audit, it demonstrates that SARS is serious about tackling the perceived use of transfer pricing to shift profits and contribute to base erosion in South Africa.
Author: Nyasha Musviba
SARS, stand in line: How tax debts rank in business rescue
Author: Joon Chong, Tax Partner at Webber Wentzel. A company in financial distress may have a variety of outstanding tax debts at the commencement of business rescue. Besides capital amounts of tax due, there could also be tax returns for VAT, PAYE and income tax which are due and have not been submitted resulting in tax liabilities which are due and payable, but do not yet appear on the relevant statements of account. The late submission of returns will also result in 10% late payment penalties for VAT, PAYE and provisional taxes, and potentially 20% underestimation penalties for income tax, plus interest. There could also be administrative penalties imposed for non-submission of income tax returns.
Emigrating? National Treasury confirms 3 years wait to access preservation and RA lump sums
Author: Joon Chong, Partner & Wesley Grimm, Associate at Webber Wentzel. National Treasury proposes to introduce a 3-year rule to replace the financial emigration trigger which allows individuals to withdraw all amounts in their preservation funds and retirement annuity funds before retirement. The proposed amendment in the draft Taxation Laws Amendment Bill 2020 provides that pre-retirement individuals will only be able to access their preservation funds and retirement annuity funds after ceasing to be tax resident in South Africa for three years, as opposed to completion of the financial emigration process. Please refer to our article which discusses some of the issues of the proposed amendment.
Five points to consider when SARS owes you a refund
Authors: Andries Myburgh AND Simon WeberIts been a tough year. For taxpayers expecting long-outstanding refunds from the South African Revenue Service (SARS), even moreso. Earlier this year, SARS relished the fact that it had paid ZAR2.4 billion in refunds to taxpayers. It acknowledged that these refunds were a major cash injection into the economy at a very critical period. But SARS has generally been slow to refund amounts of excess payments due to taxpayers. The Tax Ombud, for instance, reported that in the 2018/2019 financial year, 24.43% of all complaints received by its office had related to delayed refunds the second highest number of complaints.
SARS decision to audit: Can it be taken on review?
Author: Louise Kotze. Administrative action (being the exercise of public powers and the performance of public functions by organs of state) may be taken on review by members of the public that have been adversely affected by a decision that is taken by any public authority. In the recent judgment of Cart Blanche Marketing CC and others v CSARS (26244/15) [2020] ZAGPJHC (31 August 2020), the High Court of South Africa had to determine whether the decision taken by the South African Revenue Service (SARS) to audit a taxpayer constituted administrative action and whether the said decision was capable of being reviewed under South African administrative law.
Voluntary disclosure programme: The High Court interprets the provisions of the Tax Administration Act
Author: Louis Botha. The Voluntary Disclosure Programme (VDP), contained in Part B of Chapter 16 of the Tax Administration Act 28 of 2011 (TAA), was introduced to encourage non-compliant taxpayers to come forward, and provide an account of their non-compliance with a view to regularizing their tax affairs. A valid disclosure and conclusion of a voluntary disclosure agreement with SARS shields the taxpayer from criminal prosecution and provides relief from the non-compliance and understatement penalties which would ordinarily have been imposed. Section 226(1) of the TAA provides that voluntary disclosure relief may be applied for by a person acting in their personal, representative, withholding or other capacity. Section 227 prescribes the requirements for a valid disclosure, and it must:
TLAB 2020: Section 45 Proposed rollover relief amendments tabled
Author: Louis Botha. The rollover relief provisions contained in Part III of the Income Tax Act 58 of 1962 (the Act) provide valuable commercial flexibility to corporate groups. This is achieved by enabling corporate groups to undertake certain transactions in a tax neutral manner and defer the tax costs, where such transactions would otherwise give rise to immediate income tax and/or capital gains tax costs. The intra-group transactions covered by the rollover relief provisions include the introduction of assets into a group company, transfer of assets between group companies, and the unbundling of indirectly held subsidiaries to a group holding company.
The failure by a taxpayer to object to the imposition of interest may prove fatal
Author: Louise Kotze. In the judgment of CSARS v The Executor of the Estate Late Lot Maduke Ndlovu (A395/2016) [2020] ZAGPPHC (12 October 2020), the High Court of South Africa had to determine whether the Tax Court had erred in its findings that, amongst others, the taxpayer should be entitled to raise a new ground of objection during the appeal when such ground had not been raised by the taxpayer in his objection. Facts The late taxpayer, the executor of whose estate was the respondent in this matter, was granted options to acquire shares in his employer, which options were exercised by him during his tenure of employment.
BEPS ACTION 1: Tax challenges of the digital economy a brief history and forecast
Author: Keshen Govindsam. The internet and allied technologies have blossomed from a mere communication revolution into an increasingly indispensable part of everyday life. The growing range of what we can achieve online has allowed new ways of doing commerce and creating economic value, whether through cell phone based payments in underbanked countries, reimagined global retail offerings, or free to use digital services which indirectly generate advertising revenue. Appropriately and fairly taxing the value earned online is the next major challenge for international tax policy.
Planning ahead: SARS issues binding private ruling regarding pension payments from a foreign pension fund
Author: Louis Botha. In our Tax & Exchange Control Alert of 23 October 2020, we discussed the amendments that would be made to the provisions of the Income Tax Act 58 of 1962 (Act) dealing with withdrawal of retirement funds upon emigration. These amendments will come into effect once the Taxation Laws Amendment Bill (B27-2020) has been passed by both houses of Parliament, signed into law by the President and promulgated in the Government Gazette. In a related matter, it is interesting to note that on 22 November 2020, SARS issued Binding Private Ruling 355 (Ruling), regarding the taxation of amounts that accrue to a South African resident from a foreign pension fund. We discuss this Ruling below.