An employee incentive scheme that is commonly used works as follows: A company forms a trust. The company funds the trust, and the trust then uses the funds to buy shares in the company. The employees of the company are given units in the trust, usually free of charge. The units entitle the employees to receive distributions from the trust on the underlying shares. The employees forfeit their units in certain circumstances and may generally not dispose of their units. The trust may “repurchase” the units from the employees in certain circumstances.
Author: Nyasha Musviba
The wait is over: This is what the Special Voluntary Disclosure Programme will offer
The Minister of Finance announced the Special Voluntary Disclosure Programme (SVDP) in the 2016 Budget Speech. The legislation governing the SVDP finally came into effect on 19 January 2017 when the Rates and Monetary Amounts and Amendment of Revenue Laws Act, No 13 of 2016 (Revenue Laws Act) and the Rates and Monetary Amounts and Amendment of Revenue Laws (Administration) Act, No 14 of 2016 (Revenue Laws Administration Act) were published in the Government Gazette.
Customs and Excise Highlights
Before we delve into the first Customs and Excise instalment of 2017, we would like to wish you a happy and prosperous new year. Without further ado, please find the selected highlights from the Customs and Excise environment below: FTW reported that SARS aims to launch the new customs legislation during the first half of 2017. The process is planned to be phased in over a two year period and will commence with the registration, licensing and accreditation process, of which the first deliverable will be Customs Sufficient Knowledge. We remind readers that all current registration and licenses will have to be re-applied for under the new legislation. We will use this Alert to advise you as to when the process will commence. Should you wish us to inform you of the commencement via email, please send a request to petr.erasmus@cdhlegal.com. Naturally, we remain available to assist with such re-registration Read More …
SARS ruling on tax on taking over contingent liabilities in sale of business
The South African Revenue Service (SARS) has sought to provide guidance on a difficult tax issue: the assumption (taking over) of contingent liabilities on the acquisition of a business as a going concern. In this regard SARS has issued Interpretation Note 94 dated 19 December 2016 (IN). The matter is best discussed by way of examples. Example 1: The seller (S) runs a toy shop. He owns the shop building and a stock of toys. The value of the building is R60 and the value of the stock is R30. He owes a supplier R15. S has two employees:
New Public Notice published in respect of mandatory documentation required for transfer pricing transactions
Section 29(1)(b) of the Tax Administration Act, No 28 of 2011 (TAA) provides that a person must keep records, books of account or documents that are specifically required by the Commissioner of the South African Revenue Service (SARS) by public notice. On 28 October 2016, the long-awaited final public notice (Public Notice) regarding the record keeping requirements pertaining to transfer pricing transactions was published under the powers afforded to SARS in s29(1)(b) of the TAA.
Under the radar: Today one tax rate, tomorrow another?
Author: Louis Botha and Heinrich Louw. Since the first version of the Draft Taxation Laws Amendment Bill, 2016 (First Draft TLAB) and the Explanatory Memorandum thereto (Memorandum) were released on 8 July 2016, the proposed amendments applicable to trusts and employee share schemes received most of the attention. However, another proposed amendment with potentially far-reaching consequences that has received little attention since the release of the First Draft TLAB is one which could lead to a taxpayer paying tax at one rate today and another rate tomorrow, as and when the Minister of Finance (Minister) says so.
A taxpayer’s unfortunate experience with SARS
Author: Heinrich Louw. On 21 October 2016 judgment was handed down by the High Court (Gauteng Division, Pretoria) in the matter of BMW South Africa (Pty) Ltd v The Commissioner of the South African Revenue Service (as yet unreported). Briefly, the applicant (Applicant) was a vendor for purposes of Value-added Tax (VAT). The respondent, being the South African Revenue Service (SARS), had made a finding that the Applicant did not pay certain amounts of VAT due in respect of the October 2011 to February 2012 VAT periods.
Tax consequences of the part waiver of a loan and the reduction of the interest rate
Authors: Heinrich Louw, Gigi Nyanin and Mark Morgan. On 10 October 2016, the South African Revenue Service (SARS) issued binding private ruling 252 (Ruling) which determines the donations tax and capital gains tax (CGT) consequences of the waiver of a portion of a loan and the reduction of interest on the remaining balance of the loan to 0%. By way of background, debt relief in South Africa has become somewhat of a norm due to the current stressed economic climate. One of the most common means of debt relief by creditors has been the waiver of the whole or part of a debt. For the years of assessment commencing before 1 January 2013, the reduction of debt was subject to income tax, donations tax and/or CGT, which had the result of effectively undermining the economic benefit of the debt relief.
The price is not right: Advertising and the VAT Act
Author: Louis Botha. An efficient advertising campaign can often be the difference between a successful and an unsuccessful business venture. When advertising the price of a product, however, businesses must be mindful of the provisions of the Value-Added Tax Act 89 of 1991 (VAT Act). This issue recently came up in the matter of Security Outfitters Safety Gear/L Munian/2016-4420F, a ruling handed down by the Directorate of the Advertising Standards Authority of South Africa (ASA Directorate) on 18 November 2016 (Ruling).
When is an error a bona fide inadvertent error?
Authors: Louis Botha, Heinrich Louw and Mark Morgan. On 4 November 2016 judgment was handed down by the Tax Court of South Africa (held in Cape Town) in the matter of ABC Holdings (Pty) Ltd v The Commissioner for the South African Revenue Service, Case number ITI13772. In this case the court had to consider whether the taxpayer, ABC Holdings (Pty) Ltd, was entitled to claim a deductible allowance of enhancement income of R9,354,458.00 received in terms of a contract for future expenditure in terms of s24C of the Income Tax Act, No 58 of 1962 (Act) for its 2011 year of assessment. The other issue that arose in this case and which is the focus of this article, was whether the South African Revenue Service (SARS) was correct to levy an understatement penalty in the circumstances.