Tax planning structures normally involve multiple parties. Sometimes the individuals and/or legal entities involved are inter-connected. The tax benefits generated through such structures, almost without exception, annoy revenue authorities.
Author: Nyasha Musviba
Dividends withholding tax implications where a resident company is a beneficiary of a share scheme trust
Dividends withholding tax (“DWT”) was introduced into the Income Tax Act 58 of 1962 (“the Act”) with effect from 1 April 2012. Section 64F of the Act exempts the withholding of DWT in respect of the receipt of dividends, to the extent that it does not consist of dividends in specie by “beneficial owners” which are listed in the section. A resident company is included in the exemption in terms of the list in section 64F(a) .
Changes to the taxation of dividend cessions and manufactured dividends
In the 2013 Budget Review, which was released on 27 February 2013, specific mention was made that a research project is underway in which consideration is being given to a unified treatment of dividend cessions and manufactured dividends. As part of this project it noted that consideration will be given to anti-avoidance rules to eliminate the shift in the income from taxable parties to exempt parties. The Budget Review states that the tax impact of a dividend transfer depends on wh
What’s in a name: 'primary residence' examined
By Danielle le Roux and Johan van der Walt The term ‘primary residence’ is defined in paragraph 44 of the Eighth Schedule to the Income Tax Act, No 58 of 1961 (ITA) (read with paragraph 1). The reason this definition has captured the minds of many is due to the exclusion on the gain or loss made on disposal of one’s primary residence, provided the gain does not exceed R2 million or the proceeds from the sale of the property do not exceed R2 million. To qualify as a primary residence, and receive the benefit of the exemption, a residence must be one in which a natural person or a special trust holds an interest. But, in addition, the natural person or a beneficiary of the special trust or spouse of the person or beneficiary must: ordinarily reside or have resided in the residence as his or her main residence; Read More …
Reforming the taxation of trusts: a long time coming
By Johan van der Walt High Net Worth Individuals (HNWI’s) and their use of trusts for tax and estate planning purposes go hand in hand. A trust is often praised for its “flexibility”. Open any financial planning periodical and there’s bound to be an article on the virtue of trusts.
Maintenance contracts: making commercial sense of section 24C
The Commissioner of the South African Revenue Service (“the Commissioner”) has recently published a Draft Interpretation Note (“the Draft”) on the allowance of future expenditure on contracts in terms of section 24C of the Income Tax Act 58 of 1962 (“the Act”). In the Draft the Commissioner has taken a firm view on what he regards as “a high degree of probability and inevitability” that expenditure will be incurred, especially with regards to maintenance contracts.
Interpretation Note 49 (Issue 2) – Documentary proof required to substantiate a vendor’s entitlement to input tax or a deduction
This Note provides guidelines on the documentary proof that must be obtained and retained under section 16(2) of the VAT Act to substantiate a vendor’s entitlement to “input tax” as defined in section 1(1), or a deduction as contemplated in section 16(3)(c) to (n). Click here to download full guide.
SARS Guides: VAT412 Guide for share block schemes
Today Sars published VAT guide for share block schemes. The guide deals with the VAT implications of share block schemes in South Africa and the various types of supplies related to these schemes. The intention of the guide is to attend to basic principles and their effect from a VAT point of view.
Changes in tax interest announced
As part of his 2013 Budget proposals, Minister Gordhan announced various changes to the tax treatment of interest. Firstly, as announced last year, the tax treatment of so-called ‘hybrid debt’ will be amended so as to re-characterise such debt as dividends. The main concerns in this area appear to be debt instruments that do not have a realistic possibility of being repaid in 30 years, or debt that is convertible into shares at the option of the issuer. Banks and insurers will be excluded from this re-characterisation treatment.
The continued attack on the trust structure
It is not news that the fiscus has been bearing down on the use of Trusts by taxpayers in recent years. Finance Minister, Pravin Gordhan, has made this abundantly clear on numerous occasions and his sentiment seems to be echoed by Oupa Magashule, the Commissioner for the South African Revenue Service.