Authors: Louis Botha and Nandipha Mzizi(Cliffe Dekker Hofmeyr). It seldom happens that the South African Revenue Service (SARS) is compelled to provide documents to a taxpayer, while SARS is conducting an audit. In Carte Blanche Marketing CC and Others v Commissioner for the South African Revenue Service (26244/2015) [2017] ZAGPPHC 253 (26 May 2017), the Gauteng Division of the High Court, Pretoria had to decide whether SARS should be compelled to produce certain documents requested by the applicants (Taxpayers) in the context of a review application brought by the Taxpayers. The main proceedings in this matter involve a review application which the Taxpayers brought against SARS seeking to set aside the decision of SARS to audit them in terms of s40 of the Tax Administration Act, No 28 of 2011 (TAA).
Author: Nyasha Musviba
Investment by a venture capital company
Author: Gigi Nyanin (Associate at Cliffe Dekker Hofmyer). The South African Revenue Service (SARS) released Binding Private Ruling 274 (BPR 274) on 6 June 2017, which deals with the investment by a venture capital company (VCC) in a company providing and expanding plants for the generation of solar electricity. By way of background, the VCC tax regime was introduced into the Income Tax Act, No 58 of 1962 (Act) in 2009 to encourage investment into small and medium-sized enterprises and junior mining companies. The relevant legislation, which is found in s12J of the Act, provides for the formation of an investment holding company, described as a VCC. Investors subscribe for shares in the VCC and claim an income tax deduction for the subscription price incurred. The VCC, in turn, invests in qualifying companies (ie investee companies).
SARS rules on the PAYE and VAT implications of non-executive directors remuneration
Author: Beric Croome and Gerhard Badenhorst (Tax Executives at ENSafrica). The South African National Treasury indicated in the 2016 Budget Review that there are differing views as to whether the remuneration paid to a non-executive director (NED) is subject to employees tax, that is, pay-as-you-earn (PAYE) and whether a NED should register for value-added tax (VAT). It was suggested that these issues be investigated to provide clarity. In its final response document on the Taxation Laws Amendment Bill, 2016, National Treasury and the South African Revenue Service (SARS) proposed that SARS address the uncertainties relating to VAT and PAYE in relation to NED remuneration in an interpretation note.
Navigating transfer pricing documentation requirements in South Africa
Author: Elsabe Strydom and Richard Wilkinson 9tax Associates at ENSafrica). Now that the final regulations relating to country-by-country reporting standards (the CbC Regulations) have been published by the South African Minister of Finance on 23 December 2016, it is important to take stock and consider the CbC Regulations in the context of various other South African developments regarding the implementation of the recommendations contained in the final Action 13 report issued by the Organisation for Economic Cooperation and Development (OECD) on transfer pricing documentation. Accordingly, we have summarised below the current status of the master file/local file returns that also form part of the OECDs Action 13 report, the Final Notice on Transfer Pricing Record Keeping Requirements, issued by the South African Revenue Service (SARS), as well as the transfer pricing disclosure requirements in the corporate income tax return (ITR14).
Hybrid debt instruments what you need to know
Author: Michael Reifarth (Tax Executive at ENSafrica). The hybrid debt rules were introduced into the Income Tax Act, 1962 (the Act) and came into effect in 2014 by way of specific anti-avoidance provisions contained in section 8F and 8FA of the Act. The provisions relating to hybrid debt instruments as contained in section 8F of the Act seek to identify and provide for specific tax treatment of certain debt instruments that contain equity-like features. In instances where section 8F applies to a hybrid debt instrument, the legislation disallows the deduction of the amounts of interest incurred by the issuer and furthermore deems such amounts to be dividends in specie declared and paid by the issuer.
Does the regulation of a hedge fund as a collective investment scheme result in different tax implications?
Author: Magda Snyckers (Tax Director at ENSafrica). Before 1 April 2015, hedge funds were unregulated and were constituted (broadly speaking) as limited liability partnerships or trusts. For tax purposes, these structures functioned as flow-through entities with investors being responsible for the disclosure and payment of tax resulting from investment activities. As such, fund managers were not typically involved in the disclosure of and accounting for the tax resulting from investment activities.
New tax measure takes aim at offshore trusts – Budget 2017/18
Author: David Warneke, Head of Technical Tax, BDO SA. A bombshell hidden in the detail of the 2017 Budget review relates to the taxation of offshore trusts. It refers to the 2015 Budget review in which it was announced that measures would be introduced to the tax treatment of foreign companies held by interposed trusts. No specific countermeasures were however introduced and the 2017 Budget review proposes that such countermeasures be introduced to curb abuses.
South Africas Budget 2017/18 in Perspective
Author: Ferdie Schneider, National Head of Tax at BDO SA. The Minister of Finance earlier today delivered his Budget Speech for 2017/18 amidst depressed GDP prospects, and negative balance of payment figures. GDP is estimated to be 0.5% in 2016, increasing to 1.3%, 2%, and 2.2% in 2017, 2018, and 2019, respectively. Consumer Price Index (CPI) inflation is estimated to be 6.4% in 2016 and 2017, and decrease to 5.7% and 5.6% in 2018 and 2019, respectively. The balance of payments current account as a percentage of GDP is expected to slightly decrease from 2016 at -4%, 2017 at -3.9%, 2018 at -3.7%, and 3.8% in 2019.
VAT changes from the Budget Speech 2017
Author: Seelan Muthayan, VAT Director, BDO SA. Expanding the VAT Base In order to expand the current VAT base, it is proposed in 2018/19 that the supply of fuel will no longer be zero rated. This will no doubt have a direct impact on transport costs. Government will look at either freezing or reducing fuel levies in order to reduce the impact on transport cost. As part of the focus globally to deal with base erosion and profit shifting, more attention will be given to businesses providing foreign electronic services to South African Consumers. As previously mentioned in the 2015 budget the regulations dealing with which electronic services are subject to VAT will be updated with a view to removing any uncertainties and current practical difficulties being experienced.
Dividends Tax or Anti-Avoidance?
Author: Ian Statham, Corporate Tax Partner and Keelen Snyders,Tax Trainee at BDO Tax Services The Minister of Finance, in his 2017 budget speech, announced an increase in the top marginal rate to 45% for personal income tax. This will apply to individuals earning a taxable income of more than R1,5m per annum. The budget highlighted that this will impact 100 000 taxpayers and contribute almost R10bn to the fiscus.