Author: Linda Ensor (BDlive) Finance Minister Pravin Gordhan is widely expected to announce a new foreign exchange control and tax amnesty in his budget on Wednesday in a bid to encourage taxpayers who have not disclosed billions of rand worth of offshore assets to declare them and pay the due tax. The move would help to reduce the government’s revenue shortfall, as well as broaden the tax base for future years. A new amnesty, along the lines of the previous one in 2003, is one of a raft of measures Mr Gordhan is expected to announce as the government tries to stave off a downgrade of SA’s sovereign credit rating to junk status.
Author: Nyasha Musviba
SARS eases the compliance burden on certain generous taxpayers
On 2 September 2014, the South African Revenue Service (SARS) first issued Binding General Ruling 24 (Ruling). The Ruling dealt with some of the requirements that need to be met under s18A of the Income Tax Act, No 58 of 1962 (Act), in order to qualify for a deduction in terms of s37C(3) of the Act. However, due to the uncertainty that persisted regarding the application of these provisions, SARS reissued the Ruling on 15 February 2016.
SARS’s investigative powers – a possible backstage pass to matters pending before court?
Author: Yashika Govind (Associate at CLiffe Dekker Hofmeyr). Chapter 5 of the Tax Administration Act, No 28 of 2011 (TAA) confers a broad range of information-gathering powers on the South African Revenue Service (SARS). Taxpayers are often assessed for more than one tax period at a time, however, the waters become muddied when there are parallel processes carried on in which the issues being investigated by SARS, overlap with disputes pending before the Tax Court. The taxpayer is then saddled with defending itself in respect of a tax period before court while simultaneously sourcing and providing relevant material pertaining to the same legal issues for an audit of a later tax period. In these circumstances, there is often an overlap of facts, law and witnesses which will ultimately be presented in court, thus rendering the information gathering process questionable.
Cosatu forces state to capitulate on new retirement law
Author: Linda Ensor (BDlive). The government has once again caved in to trade union pressure by agreeing to a two-year delay in the introduction of the compulsory annuitisation of two-thirds of provident fund savings on retirement. This is the second time that the Treasury has unsuccessfully tried to implement the provision and then backtracked in the face of strong opposition from the Congress of South African Trade Unions (Cosatu). The proposed postponement was tabled by Finance Minister Pravin Gordhan at an urgent meeting on Monday with the social partners of the National Economic Development and Labour Council.
Africa tax in brief
Author: Celia Becker (ENSafrica). KENYA: Amnesty granted to landlords In terms of the new section 123C, introduced into the Income Tax Act by Finance Act 2015 (the “Act”), the Kenya Revenue Authority (“KRA”) has granted a tax amnesty to landlords with effect from 1st January 2016. The Act provides amnesty for persons who shall willingly declare their 2014 and 2015 rent, pay the implied principal tax and file returns (original or amended) between 1 July 2015 and 30 June 2016. For the two years (2014 and 2015), penalties and interest shall be waived, as well as the principal, interest and penalties for 2013 and prior years.
Settlors beware: control over the assets of a trust
The establishment of an offshore discretionary trust (“the Trust”) by a South African tax resident person (“Settlor”) gives rise to various South African tax considerations. In terms of current law (which may or may not be impacted upon by the various proposals set out in the Davis Tax Committee’s First Interim Report on Estate Duty), the following taxes may typically be triggered by the Settlor in respect of the disposal of assets to the Trust in settlement thereof: capital gains tax at a maximum effective rate of approximately 13.65% of the capital gain realised; donations tax at a rate of 20% of the amount or the market value of the assets donated; and any income derived by the Trust in respect of any donation made by the Settlor may be attributed to the Settlor and accordingly subject to South African income tax in his/her hands.
Mandatory transfer pricing documentation
Author: Okkie Kellerman (ENSafrica). On 15 December 2015, SARS issued a draft Public Notice that sets out the additional record-keeping requirements for transfer pricing transactions. It proposes extensive and comprehensive documentation requirements that must now be kept by taxpayers with a consolidated South African turnover of R1 billion or more. Although this provides South African taxpayers with clarity on the information that must be retained for transfer pricing purposes, these requirements are fairly onerous and will increase the compliance burden of these taxpayers, resulting in additional costs.
Tax administration: SARS’ constitutional obligations and taxpayers’ rights
Author: Andries Myburgh (Tax Director at ENSafrica). Given recent media coverage of the various Constitutional Court challenges involving government institutions and the Presidency; the perceived power struggle between the Commissioner for the South African Revenue Service (“SARS”) and the Minister of Finance; as well as SARS’ continued pressure to collect revenue in difficult economic times that see corporate taxpayers endure declining revenues and increasing costs; it is useful to remind taxpayers and their shareholders of their constitutional rights and SARS’ constitutional obligations when it performs its functions in administering various taxation legislation. This topic is very complex and, accordingly, what follows is a very broad overview of these issues. Taxpayers and their shareholders are encouraged to obtain specialised legal advice or assistance when confronted with potential investigations or audits by SARS.
Radebe: Zuma heard of Cosatu objections after he signed tax bill
Author: Liesl Peyper (News24). Cape Town – When President Jacob Zuma signed the Taxation Laws Amendment Act late last year he wasn’t aware of Cosatu’s objections with regard to the proposed annuitisation of provident fund benefits. “The concerns were only brought to the President’s attention after he had signed the bill,” said Minister in the Presidency Jeff Radebe. At a post-cabinet briefing on Thursday morning Radebe had to field a barrage of questions from journalists about the postponement of the provident fund rules in the legislation.
Government backtracks on new tax changes
Author: Liesl Peyper (News 24). Cape Town – For the second year in a row President Jacob Zuma’s government has been forced to backpedal on provisions in the Tax Amendment Act that compel South Africans to put two-thirds of their provident fund savings in a retirement annuity. The provision meant that retirees would be allowed to take only one-third in cash, while they are currently entitled to the full amount. Business Day reported that Finance Minister Pravin Gordhan tabled a proposed postponement at a meeting on Monday with the representatives of the National Economic Development and Labour Council.