Pretoria, 27 November 2015 – A chartered accountant and former SARS employee was arrested for alleged VAT fraud of more than R5-million at her place of work in Centurion earlier today. The fraud happened over a nine year period. The female suspect is a director of a closed corporation (cc) that provides consultancy and bookkeeping services. She is alleged to have submitted false VAT invoices and bank statements to SARS between 2007 and 2015 to substantiate VAT refund claims amounting to R5, 1 million. The investigation commenced after SARS’ risk engines identified the taxpayer for an audit due to the unusual refund trend that emerged over the years. Upon requesting supporting documentation, SARS’s investigators established through third party verification that fictional invoices had been submitted to SARS. They also found that bank statements that were submitted to substantiate refund claims were not authentic.
Author: Nyasha Musviba
Taxation of trusts in the future
Author: Heinrich Louw (Senior Associate at Cliffe Dekker Hofmeyr). Earlier this year the Davis Tax Committee (DTC) released its first report on estate duty for public comment. The report contained a number of disconcerting recommendations with regard to the taxation of trusts. The DTC was tasked with considering the use of trusts as vehicles employed by taxpayers to divest themselves of their assets during their lifetime, thereby saving estate duty upon their death. On the DTC’s analysis, there are two main problems with the current regime relating to the taxation of trusts.
Corrections of tax assessments – what is readily apparent to SARS?
Author: David Warneke Director and Head of Tax Technical at BDO South Africa. The latest version of the Tax Administration Laws Amendment Bill of 2015, which is likely to be promulgated in its current form, proposes that in future SARS will not be permitted to entertain so-called ‘requests for correction’ of tax assessments, except if SARS is satisfied that there is a (currently undefined) ‘readily apparent’ undisputed error in the assessment. In my view, it is likely that taxpayers will be severely prejudiced by this amendment. What is ‘readily apparent’ to one person may not be so to another. The number of cases in which SARS is likely to grant requests for corrections is likely to drop dramatically and a lack of consistency in interpretation between SARS’ assessors may be taken as a given.
The onus of proof rule for the imposition of understatement penalties
Author: Ruaan van Eeden As a basic principle, under s102(1) of the Tax Administration Act, No 28 of 2011 (TAA), the onus of proof that an amount is not taxable or that an amount is deductible, rests on the taxpayer, whereas under s102(2) of the TAA, the onus of proof pertaining to the facts upon which an understatement penalty is imposed, is upon the South African Revenue Service (SARS).
Carbon tax in South Africa
Author: Heinrich Louw. After having been the subject of various discussion papers since 2011, the introduction of a carbon tax in South Africa is becoming a reality with the release of the Draft Carbon Tax Bill (Draft Bill) earlier this month. It has been clear since at least 2013 that South Africa would opt for a carbon tax in order to price carbon, as opposed to an emissions trading scheme. The Draft Bill now sets out the mechanics of the carbon tax.
The importance of tax litigation strategy
Recently, the Kwazulu-Natal High Court had to consider whether it could adjudicate on papers put before it by SARS in motion proceedings, or, whether the matter ought to be referred for oral evidence given the fact that the taxpayer had raised material dispute of facts to the SARS’ allegations. What is of interest in this case is not what the Court ultimately decided, but rather its reasons for doing so. Within those reasons lie valuable lessons to be learnt when SARS or a taxpayer engages in litigation.
Notable reduction in employee’s take-home pay rectified in latest version of tax bill
The removal of a few words in the latest version of the Taxation Laws Amendment Bill, 2015, appears to have rectified a loophole contained in an earlier version of the Bill that would have resulted in a notable reduction in an employee’s take-home pay if they belonged to a retirement fund.
Contradictory legislation: VAT zero-rating of supplies to custom controlled areas / IDZ operators
Generally speaking, the export of movable goods qualifies for VAT zero-rating. The term ‘export’ is defined in the Value Added Tax Act, 1991 (“VAT Act) as inter alia that which is consigned or delivered by the vendor to the recipient at an address in an export country. An exception to the above zero-rating can be found in section 11(1)(m) of the VAT Act, where movable goods are supplied to a customs controlled area enterprise or an Industrial Development Zone (IDZ) operator in South Africa. According to this section of the Act, the VAT zero rating would be applicable if the goods are physically delivered to the enterprise or operator either by:
How must SARS issue a notice in terms of s172(1) of the Tax Administration Act?
One of the interesting Tax Administration cases of 2015 was Lifman and Others v The Commissioner of the South African Revenue Services and others (unreported), where the Western Cape High Court took a purposive approach to the interpretation of section 172(1) of the Tax Administration Act, No 28 of 2011 (“the Act”) i.e.: in light of the purpose for which it was enacted. The facts of the case are that during an inquiry in terms of section 50 of the Act into notorious Cape Town underground boss, Mark Lifman’s affairs, SARS found that Lifman and a number of close corporations (“CC’s”) of which he was the sole member, owed approximately R13 million in taxes.
Calculating a capital gain: current case law
Capital Gains Tax (CGT) is payable on the disposal of capital assets that were in the seller’s possession on, or were acquired after, 1 October 2001. In the recent Supreme Court of Appeal (“SCA”) judgement of The Commissioner for the South African Revenue Service v Stepney Investments (Pty) Ltd, the SCA considered the various valuation methods available in determining the value of a capital gain, namely the discount cash flow method (“DCF”) and the net asset value method (“NAV”).