Author: Ben Strauss. Businesses and individuals may well ask themselves what practical, day-to-day tax consequences the COVID-19 pandemic now holds for them. For example, a company operating a financial services business may be obliged to incur expenditure which it would not incur in the ordinary course, such as sanitizers, gloves, masks and temperature measuring equipment for screening employees and customers. A taxpayer is entitled to deduct expenditure provided certain requirements are met. Notably, to be deductible, the expenditure must be actually incurred in the production of income as contemplated in section 11(a) of the Income Tax Act, 58 of 1962 (Act).
Author: Nyasha Musviba
VAT on imported services payable by non-registered VAT vendors and goods sold in execution – the who, what and how of declarations to SARS
Author: Varusha Moodaley. On 1 June 2020, the South African Revenue Service (SARS) issued an external guide titled Manage Declaration for Non-Registered VAT Vendors (SARS Guide). The SARS Guide provides guidance to non-vendor recipients of imported services and in instances where goods are sold in execution of a debt, on how to settle their VAT liabilities with SARS. On 1 June 2020, the South African Revenue Service (SARS) issued an external guide titled Manage Declaration for Non-Registered VAT Vendors (SARS Guide). The SARS Guide provides guidance to non-vendor recipients of imported services and in instances where goods are sold in execution of a debt, on how to settle their VAT liabilities with SARS. The VAT principles applicable to imported services and goods sold in execution of a debt are first briefly described below.
VAT apportionment v direct attribution: A (preliminary) win for the taxpayer
Author: Gerhard Badenhorst. The debate between taxpayers and the South African Revenue Service (SARS) as to what constitutes a fair and appropriate apportionment formula to determine the deductible value added tax (VAT) incurred on expenses where the taxpayer makes both taxable and exempt supplies, is ongoing. However, it is up to the taxpayer to determine whether an expense incurred is wholly attributable to making taxable supplies, in which case the total amount of VAT incurred is deductible. SARS cannot rule beforehand on whether an expense is directly attributable to taxable supplies, by virtue of a notice published in terms of section 80(2) of the Tax Administration Act 28 of 2011 (GN No. 748 24 June 2016), known as the so-called no-rulings list.
Value-added tax & transfer duty: Clarity or confusion?
Author: Varusha Moodaley. Where fixed property is purchased by a VAT vendor from a non-vendor, transfer duty is payable thereon by the purchaser. The fixed property purchased from a non-vendor is regarded as second-hand goods in terms of the VAT, Act 89 of 1991 (VAT Act). To the extent that the property is purchased for the purpose of making taxable supplies, the purchasing VAT vendor is entitled to a notional input tax deduction equal to the tax fraction (15/115) of the lesser of the consideration in money paid by the vendor for the supply of the fixed property, or the open market value thereof.
Tax treatment of losses incurred during lockdown
Authors: Aubrey Mazibuko, Emil Brincker and Louis Botha. There is little doubt that the national lockdown in response to the COVID-19 health crisis has had a negative financial impact on individuals and business alike. In our Tax & Exchange Control Alert of 28 May 2020, we discussed some of the practical day-to-day tax consequences that the lockdown may have on businesses. In this alert we take a look at the effect that the national lockdown may have on expenditure or losses incurred by individuals and businesses. We also the look at the tax consequences that may arise as a result of employers providing their employees with personal protective equipment. To this end we will consider two scenarios.
Tax disputes in the time of eFiling “Late” objections are not always late
Author: Esther van Schalkwyk , Tax Manager at BDO. While eFiling has played a crucial role in managing ones tax affairs remotely during the Covid-19 pandemic and lockdown, there are some discrepancies in the way SARS is handling disputes to tax assessments. In some instances, taxpayers whose objections are not late are prompted on eFiling to motivate why their late objection should be condoned. Whats more worrying is that we have seen such objections being disallowed for being late (despite a senior SARS official presumably having applied his/her mind). Such unlawful disallowances by SARS seem to occur mainly where taxpayers have exercised their right to request reasons for the assessment before objecting.
Covid-19: TERS – 5 important updates
Authors: Joon Chong,Dhevarsha Ramjettan,Johan Olivier,Shane Johnson,Bianca Viljoen,Zipho Tile. Since the launch of TERS, there has been (almost) daily changes introduced by the Unemployment Insurance Fund. Important amendments to TERS were gazetted on 8 April 2020. Following those amendments, the Minister of Employment & Labour signed off on further amendments and corrections on 16 and 20 April 2020, respectively. In addition to these changes, the UIF has also publicly released the method of calculation for TERS benefits. We highlight 5 important updates on TERS for employers below.
Covid-19: How to manage ‘place of effective management’ tax risk during lockdown
Authors: Anne Bennett, Donald Fisher-Jeffes and Neo Penn from Webber Wentzel. Covid-19 is only anticipated to peak in South Africa (SA) in September 2020, with international air travel only being permitted once the current lockdown restrictions are reduced to Level 1. This may result in some chief executive officers, or other senior executives/board members of foreign companies being unable to travel from SA to attend board meetings or conduct business in the country where the company is tax resident. Could this put the foreign company at risk of becoming South African tax resident?
Estimating the tax effects of the sale of a business in the hands of a seller
Author: Craig Miller from Webber Wentzel. Tax practitioners are often asked to calculate the indicative effects of the prospective sale of a business (assuming no roll-over relief applies) for the seller. Invariably, the tax practitioner will be informed by the private equity or corporate finance practitioner that enterprise value (EV) is the estimated fair value of the operations of the business. However, this may give rise to a misunderstanding. A tax practitioner is likely to be confused by reference to the “business” (a term only appearing three times in the Income Tax Act) and will not always understand how this value is calculated.
SARS and the fiscus may benefit when executives have to pay back
Author: Craig Miller, a Director at Webber Wentzel. On occasions when company executives have to pay back a portion of their remuneration, the fiscus may unjustifiably benefit at the expense of employers from the tax previously paid on these amounts. This situation could be made fairer by adding a simple provision to the Income Tax Act. Company executives may sometimes have to pay back some of their remuneration to their former employers. This could arise either from current economic volatility impacting incentive arrangements, or the various corporate financial scandals which have engulfed SA over the last few years.