Author: Jerome Brink (Senior Associate at Cliffe Dekker Hofmeyr). The Tax Administration Act, No 28 of 2011 (TAA) was promulgated with effect from 1 October 2012. The rationale behind the introduction of the TAA was that it would streamline, modernise and align the previous tax administration provisions to ultimately lower the cost and burden of tax administration in South Africa. One of the key changes to the tax administration regime in South Africa pursuant to the promulgation of the TAA was the conversion from the imposition of additional tax by SARS to the understatement penalty regime.
Author: Nyasha Musviba
Ignorance is not bliss: A recent judgment about understatement penalties and a caution to taxpayers
Author: Louis Botha and Louise Kotze (Cliffe Dekker Hofmeyr)In the recent matter of Mr A & XYZ CC v The Commissioner for the South African Revenue Service (Case Nos IT13725 & VAT1426, IT13727 & VAT1096), which involved four combined cases, the South African Revenue Service (SARS) issued assessments to Mr A and XYZ CC (Taxpayers) relating to income tax for the 2007 to 2012 years of assessment and Value-Added Tax (VAT) for the 2006 to 2013 periods.
Recent developments in the PBO arena – tax compliance in the religious sector and general tax provisions applicable to PBOs
Author: Louis Botha (Tax Associate at Cliffe Dekker Hofmeyr). On 26 January 2018 the South African Revenue Service (SARS) issued a media release (Media Statement) regarding its intention to investigate possible tax non-compliance in the religious sector. In this article we will discuss the issues raised by SARS in the Media Statement as well as some of the relevant legal provisions that have to be met in order for organisations, including religious organisations, to be approved as a public benefit organisation (PBO).
Hybrid Equity Instruments: Redemption versus repurchase
Author: Leani Nortje, a Senior Associate at Webber Wentzel. Section 8E of the Income Tax Act, 1962 (the Act) applies to inter alia deem a share to be a hybrid equity instrument if certain requirements are met, with the result that otherwise exempt dividends paid in respect of that share are deemed to be fully taxable income. One of the requirements that must be met for purposes of section 8E to apply is that the issuer of the share must be obliged to redeem the share in whole or in part, or the share may at the option of the holder be redeemed in whole or in part, within three years from the date of issue of the share. Section 8E therefore requires a “redemption” of the relevant shares.
Common misconceptions: Tax treatment of directors’ fees derived by non-residents
Author: Leani Nortje, Senior Associate, Webber Wentzel. Many non-residents that derive directors’ fees from a South African tax resident company believe that because they are non-resident and pay tax in their country of residence on such directors’ fees they are not liable to tax in South Africa. This is a common misconception as non-residents remain taxable on South African sourced income (subject to tax treaty relief).
Tax treatment of excessive debt financing under review
Authors: Joon Chong, Partner and Karen Miller, Consultant – Webber Wentzel. Malusi Gigaba stated in the Budget Review 2018 (Budget) that: “The deductibility of interest payments on debt acts as an incentive to use debt rather than equity funding, and can be used to strip profits from high tax countries.” He goes further by stating that “[a] discussion document inviting comments will soon be published to facilitate public consultation”. This is a welcome development as it is approximately five years since the South African Revenue Service (SARS) issued its draft interpretation note (IN) into acceptable levels of debt. Taxpayers and foreign investors will therefore welcome the prospect of getting closer to greater clarification on what constitutes an arm’s length acceptable level of debt and interest rate.
SA Budget 2018/19 – Tax rates for retirement lump sum benefits
RETIREMENT LUMP SUM benefits Tax relief on retirement lump sum benefits is allocated once in a lifetime in other words if it’s used up you can’t claim it again. For example, if a person used R300 000 of the R500 000 with the first lump sum, the balance left is R200 000 and once this is used up this relief is not available again. For more details on how it works, read our Budget Tax Guide. Withdrawal Benefit 2019 tax year (1 March 2018 – 28 February 2019) – No changes from last year – No changes from last year Taxable income (R)? Rate of tax (R)? 0 – 25 000? ?0% ?25 001 – 660 000 ?18% of taxable income above 25 000 ?660 001 – 990 000 ?114 300 + 27% of taxable income above 660 000 ?990 001 and above ??203 400 + 36% of taxable income Read More …
SA Budget 2018/19 – Tax rates for interest and dividends
interest and dividends Interest Exemptions – no changes from last year Interest from a South African source earned by a natural person is exempt, per annum, up to an amount of: ? ?2019 2018?? 2017? 2016? ?2015 ?Person younger than 65 ??R23 800 ?R23 800 ?R23 800 ?R23 800 ?R23 800 ?Person 65 and older ??R34 500 ?R34 500 ?R34 500 ?R34 500 ?R34 500 Please note: For the 2012 tax year – Foreign interest and foreign dividends are only exempt up to R3 700 out of the total exemption. From 1 March 2015 (2016 tax year), a final withholding tax at a rate of 15% will be charged on interest from a South African source payable to non-residents. Interest is exempt where earned by non-residents who are physically absent from South Africa for at least 181 days during the 12 month period before the interest accrues and the debt from which Read More …
SA Budget 2018 – Medical Tax Credit Rates
Medical Tax Credit Rates Medical Scheme Fees Tax Credit was introduced from 1 March 2012 but didn’t affect all categories of taxpayers at once. There are two different start dates depending on the age of the taxpayer: Taxpayers younger than 65 – converted to the Medical Tax Credit from 1 March 2012 Taxpayers 65 and older – converted to the Medical Tax Credit from 1 March 2014 Medical Tax Credit Rates from 2013 tax year onwards – see changes from last year ?Per month (R) 2019? ?2018 2017?? ?2016 ?2015 ?For the taxpayer who paid the medical scheme contributions R?310? ?R303 ?R286 270 ?257 ?For the first dependant ?R310 ?R303 ?R286 ?270 ?257 ?For each additional dependant(s) ?R209 ?R204 ?R192 ?181 ?172 Capped deduction prior to 2013 tax year ?Capped deduction per month ?2012 ?For the taxpayer who paid the medical scheme contributions? ?720 ??For the first dependant ?720 ??For Read More …
SA Budget 2018 – Tax rates for Companies, trusts and Small Business Corporations (SBC)
Companies, trusts and Small Business Corporations (SBC) Companies – no changes from last year ?Financial years ending on any date between ?Rate of Tax ??1 April 2018 – 31 March 2019 ?28% ?1 April 2017 – 31 March 2018 ?28% ?1 April 2016 – 31 March 2017 ??28% ?1 April 2015 – 31 March 2016 ?28% ?1 April 2014 – 31 March 2015 ?28% Top Tip: Personal Service Providers are no longer taxed separately and are taxed as a company or as a Trust. The following rates of tax apply for financial years ending on any date between 1 April 2011 – 31 March 2012 for: ?Type ?Rate of tax Personal service provider companies? ?33% ?Foreign resident companies which earn income from a source in South Africa ?33% Trusts (other than special trusts) – no changes from last year Year of assessment ?Rate of Tax ??1 March 2018 – 28 Read More …