Author: Gigi Nyanin (Associate at Cliffe Dekker Hofmeyr). For purposes of determining the taxable income derived by any person from carrying on a trade, s11(c) of the Income Tax Act, No. 58 of 1962 (Act) provides for the deduction of legal expenses which arise in the course of or by reason of a taxpayers ordinary trading operations. More specifically, any legal expenses actually incurred by a taxpayer in respect of any claim, dispute or action at law arising in the course of or by reason of the ordinary operations undertaken by the [taxpayer] in the carrying on of [its] trade will be deductible.
Author: Nyasha Musviba
A win against SARS: late delivery of SARSs rule 31 Statement
Author: Mareli Treurnicht (Director at Cliffe Dekker Hofmeyr). On 17 October 2017 the Tax Court (Western Cape Division: Cape Town) delivered judgment in the matter between S Company v The Commissioner for the South African Revenue Service (SARS) under case number IT0122/2017. The judgment was handed down by Judge Cloete. This judgment is of great interest to any taxpayers currently involved in prolonged disputes with SARS, in particular where there are delays on the part of SARS.
Announcement of further revisions to the debt reduction rules in the Income Tax Act
Author: Jerome Brink (Associate at Cliffe Dekker Hofmeyr). The current s19 and paragraph 12A of the Eighth Schedule (Eighth Schedule) were introduced into the Income Tax Act, No 58 of 1962 (Act) with effect from years of assessment commencing on or after 1 January 2013. In essence, these provisions contain the debt reduction rules which attempt to create a uniform system that provides relief to persons under financial distress in certain circumstances. In simple terms, the relevant provisions set out the tax implications arising in respect of a debt that is reduced, cancelled, waived, or discharged by a creditor. The tax implications are dependent on what the debt originally funded, for instance trading stock, other deductible expenditure, allowance assets or capital assets.
No trade, no deduction a judgment about s11(a) of the Income Tax Act
Author: Louis Botha Tax (Cliffe Dekker Hofmeyr). On 20 April 2017, the Tax Court handed down its decision in X Group (Pty) Ltd v The Commissioner for the South African Revenue Service (Case No: 13671) (as yet unreported). The case dealt with an amount of R90 million that X Group (Pty) Ltd (Taxpayer) had claimed as an expense or loss during the 2007 year of assessment, which deduction was disallowed by the South African Revenue Service (SARS).
VAT rulingsHow and when to apply
Author: Varusha Moodaley (Senior Associate at Cliffe Dekker Hofmeyr). Human beings crave certainty even when it limits them. Robin S. Sharma. In practice, circumstances or proposed transactions may arise in terms of which the value-added tax (VAT) implications flowing therefrom are not always clear. It is a persons very desire for certainty that underlies the provisions of the Value-Added Tax Act, No 89 of 1991 (VAT Act) and the Tax Administration Act, No 28 of 2011 (TAA) that enables the Commissioner of the South African Revenue Service (SARS) to issue rulings regarding the VAT treatment of supplies made to or by a vendor in the course or furtherance of his enterprise.
Amendment in respect of foreign employment income exemption
Authors: Nandipha Mzizi and Louis Botha (Cliffe Dekker Hofmeyr). Alongside the 2017 Medium Term Budget Policy Statements, National Treasury released the revised version of the Taxation Laws Amendment Bill 27 of 2017 (Bill) on 25 October 2017. The Bill contains those proposals that were accepted by National Treasury and which were communicated to Parliaments Standing Committee on Finance, during the report-back hearings.
Buying a house and paying transfer duty Separate rights equals separate obligations
Author: Louis Botha (Associate at Cliffe Dekker Hofmeyr). In our recent Tax and Exchange Control Alert of 13 October 2017, we referred to the number of tax court judgments that were recently published by SARS on its website. One of these cases is the matter of Ms A and Mr B v The Commissioner for the South African Revenue Service (Case No IT13974 & 13993) (as yet unreported), handed down by the Tax Court on 24 March 2017. In this case Ms A and Mr B (Taxpayers) appealed against SARSs decision regarding the transfer duty payable on a property which they purchased in terms of a written sale agreement.
The power of prescription reinforced: The SCAs recent approach in respect of immovable property
The Supreme Court of Appeal recently delivered two pertinent judgments dealing with the issue of prescription in respect of immovable property claims. Read together, these decisions send a clear message to holders of real rights ostensibly created via registration of a mortgage bond or title deed conditions: Do not assume the luxury of an extended period within which such rights may be enforced.
TAX FREE INVESTMENTS
What is it? Tax Free Investments were introduced as an incentive to encourage household savings. This incentive is available from 1 March 2015. How will it work? The tax free investments may only be provided by a licenced bank, long-term insurers, a manager of registered collective schemes (with certain exceptions), the National Government, a mutual bank and a co-operative bank. Service providers must be designated by the Minister in the Gazette. As per the current Regulation, only the above are designated.
Taxation of Income from two sources
What to do if you receive income from two sources? Taxpayers who receive income from more than one source of employment or pension are reminded that the employees tax (PAYE) deducted by the respective employers or pension funds may not be enough to cover their final tax liability on assessment. The reason for this is the manner in which a taxpayers tax liability is calculated on assessment. The South African tax system is based on the principle of adding together all sources of income of a taxpayer into a single sum, and applying a progressive tax rate table to determine the final tax liability of the taxpayer on assessment. A progressive tax rate system means that the more income is earned, the higher is the marginal tax rate and more tax is paid on assessment.