Author: Celia Becker (ENSafrica). BOTSWANA: Exchange of information agreement with Isle of Man enters into force The Botswana/Isle of Man Exchange of Information Agreement (2013) entered into force on 5 March 2016 and generally applies from 5 March 2016. KENYA: Stamp duty on nominal share capital Following publication of Legal Notice No. 60 of 2016 dated 12 April 2016, the initial nominal share capital of a limited liability company is now exempt from stamp duty. MALAWI: 2016/17 Budget presented to parliament On 27 May 2016, the Minister of Finance, Economic Planning and Development presented the Budget for 2016/17 to parliament.
Author: Nyasha Musviba
In vino veritas: an important case for the wine farming industry
The South African wine industry is internationally renowned for the quality of wine it produces. From a tax perspective, a specific tax dispensation applies to income derived by a person from “pastoral, agricultural or other farming operations” as contemplated in s26(1) of the Income Tax Act, No 58 of 1962 (Act). To the extent that a person’s taxable income is derived from such operations, the First Schedule to the Act will apply. We previously discussed s26(1) and the First Schedule in our Alert of 8 April 2016: The Kluh-ed up taxpayer wins – a decision on s26 of the Income Tax Act.
Commercial property: three ways to save tax
The effective rate of capital gains tax (CGT) has increased dramatically in recent years. When CGT was introduced in South Africa in 2001 the effective rate for companies was 15%. The effective rate is now 22.4%. So, since 2001 the effective rate of CGT for corporates has increased by nearly 50%. In addition, when a company distributes a profit after tax to its shareholders, they pay dividends tax at a rate of 15% (unless the shareholders qualify for an exemption, or a reduced rate).
Cell Phone Allowances – a Few Things Employers and Employees Need to Know
Many employees receive a cell phone allowance in some form or other as part of their employment remuneration package. Despite these employment benefits being relatively common, some employers and employees still run into unexpected tax consequences. Esther van Schalkwyk, Senior Tax Consultant at BDO South Africa unpacks some of the important aspects of cell phone allowances and highlights the value of proper tax planning. “Cell phone allowances or the use of employer-provided cell phones
Tax relief to revive flagging SA shipping industry
Author: David Warneke, Tax Partner, BDO South Africa. From 1 April 2014[1], South African (SA) resident companies engaged in international shipping have enjoyed a far better income tax dispensation than before. If you are involved in this industry, make sure your company is enjoying the benefits described below. Prior to this date, international shipping income derived by such companies was generally subject to SA tax at the rate of 28%, the rate applicable to other types of companies. The only particular incentive for such companies was related to tax depreciation on the cost of their ships. SA had a wholly uncompetitive tax dispensation for such companies, whereas in order to attract such companies, many other jurisdictions have either introduced a ‘tonnage tax’ – tax based on the tonnage of the ship rather than profits of the shipping company – or exempted such income from tax altogether.
Cross Border Interest Paid by a South African Resident: Tax Issues that Arise
Author: Siyasanga Madikazi (Tax Trainee), BDO South Africa. Cross border transactions, as well as growth in international trade between companies within the same group, has increased significantly in recent years. This often results in debts between resident and non-resident companies and numerous complexities from a South African tax perspective. Interest payments by residents to non-residents are generally subject to interest withholding tax (WHT) at 15%. Whether WHT applies depends on whether a Double Tax Agreement (DTA) between South Africa and the country of residence of the recipient exists to give South Africa the rights to tax. It also depends on whether the interest is subject to South African income tax (as opposed to interest WHT) in the hands of the non-resident recipient.
Reportable Arrangements – Foreign Services
Author: Khutjisho Ramosebudi (Tax Trainee), BDO South Africa. SARS Public Notice 140 (3 February 2016) contains a new list of Reportable Arrangements (RAs) in terms of the Tax Administration Act (TAA). The RA regime acts as an early warning for SARS in respect of various types of arrangements that could pose a risk to the fiscus. RAs do not necessarily allow SARS to act, for example, by disregarding or re-characterising steps in or parts to the arrangement in terms of the general anti-avoidance provisions in the Income Tax Act.
“Exceptional circumstances” when objecting to an assessment
Author: Keelen Snyders, BDO South Africa. A recent tax case highlighted the importance of taxpayers gaining an understanding of the objection process for income tax assessments issued by SARS. The case, which was contested between ABC (Pty) Ltd and the Commissioner, was concerned with the onus on the taxpayer to prove “exceptional circumstances” when objecting to an assessment issued by SARS. In terms of the Tax Administration Act (TAA), a taxpayer may object to an income tax assessment within 30 business days of the date of the assessment. If a taxpayer wishes to object after expiry of this period, a senior SARS official may extend the period by 21 business days provided SARS is satisfied that “reasonable grounds” exist for late submission.
Brief window of opportunity for South Africans named in the Panama Papers
A number of South African individuals, trusts and companies feature in the recent data leak involving clients of Panamanian law firm Mossack Fonseca. Although the publication of the data by the International Consortium of Investigative Journalists does not allege any violation of tax laws or exchange control regulations by those identified in it, the South African Revenue Service (“SARS”) and the South African Reserve Bank (“SARB”) have indicated that they will be investigating the tax and exchange control affairs of these South Africans. As a result, those named in the leak should consider urgent steps to address any potential tax or exchange control transgressions.
Update on the taxation of South African dividends to the Netherlands
Author: Stephan Spamer and Howmera Parak (ENSafrica). In 2014 and 2015, ENSafrica published two articles on the “most favoured nation clause” contained in article 10(10) of the protocol (“2008 Netherlands Protocol”) issued under the Netherlands/South Africa (“SA”) double tax agreement (“Netherlands/SA DTA”). In the 2014 article, ENSafrica highlighted the view that has been expressed in the market that article 10(10) of the 2008 Netherlands Protocol gives rise to a complete exemption from dividends tax in SA