By Gerhard Badenhorst (ENS Tax Ensight) Executive summaryFor VAT to be levied there must be a supply of goods or services. This article examines the VAT consequences of taking deposits and deposits forfeited by looking at judgments by the ECJ and Australian courts.
Author: Nyasha Musviba
Budget 2013 – Share Schemes
By Andrew Lewis (DLA Cliffe Dekker Hofmeyr) Executive summary Share incentive schemes were again mentioned in this year’s tax budget proposals. It thus appears that the broad-based employee share plan contemplated in s8B of the Income Tax Act will be reviewed and possibly merged with s8C of the Income Tax Act into a single employee share scheme regime.
Maintenance contracts: making commercial sense of section 24C
ENSafrica Ehrhard Furstenburg 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. The view taken by the Commissioner may very well lead to many taxpayers, particularly vehicle manufacturers, having to reconsider the fine print of their maintenance plans and contracts ultimately resulting in an additional cost burden spilling over to consumers.
Retirement fund benefits for employees who worked abroad: the apportionment rules
The application of the apportionment rules to South African retirement fund benefits due to South African residents who contributed to these funds while they worked abroad, is currently not clear. The South African Revenue Service (“SARS”) holds the view that lumps sum benefits should be treated differently from annuity payments. This view impacts on the tax treatment of provident fund payments and the lump sum portion of pension fund payments.
Proposed gambling tax
In 2011 government announced a national gambling tax proposal, that with effect from 1 April 2012, all gambling winnings above R25,000, including those from the National Lottery, would be subject to a final 15 per cent withholding tax. It was also indicated that similar gambling taxes exist in India, the Netherlands and the United States. According to the Minister the proposed gambling tax would assist in discouraging excessive gambling in South Africa.
Reforming the taxation of trusts: a long time coming
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.
Retirement reform
Treasury released a further Consultation Paper together with the Budget documentation. The reform Consultation Paper is trying to bring together the strands of thinking that were set out very clearly in the four papers released by the National Treasury in September/October 2012.
VAT registration of foreign businesses
The tax issues associated with e commerce on the Internet remains largely unresolved. Enforcement of tax compliance is generally reliant or can be pin-pointed to geographical areas however in cyber space or the Internet world these geographical boundaries do not exist. The underlying question is whether existing direct and indirect principles can be successfully implemented in imposing and enforcing the taxation of e commerce. E commerce changes things of fundamental importance from a direct and indirect tax
Cross issue of shares
DLA Cliffe Dekker HofmeyrAndrew LewisSouth Africa Section 24B of the Act was initially introduced to deal with the acquisition of assets through the issue of shares. Pursuant to the judgment of CIR v Labat Africa Limited 72 SATC 75 a company would ordinarily not incur expenditure in connection with the issue of its own shares and thus the need for s24B. Section 24B of the Income Tax Act was recently amended to only deal with the issue of shares in exchange to the issue of shares (ie the cross-issue of shares), being an “anti-avoidance” provision. Section 24B(2) of the Income Tax Act provides that if a company acquires shares that are issued to that company “directly or indirectly in exchange for shares issued by that company“, that company incurs no expenditure for the acquisition of the shares issued to it. As a result, the subsequent disposal of the shares by Read More …
Withholding taxes – extended to service fees
Taxpayers have been anticipating the introduction of a withholding tax on interest paid to non-residents for a number of years now. The effective date for the commencement of the withholding tax on interest will be further delayed from 1 July 2013 to 1 March 2014. The royalty withholding tax to be imposed at a rate of 15% (which is currently imposed at a rate of 12%) will also be delayed until 1 March 2014.