Author: Mansoor Parker and Andrew Gilder (ENSafrica) On Monday, 2 November 2015, the South African National Treasury published a Draft Carbon Tax Bill (the “Bill”) for public comment, with the comment period commencing immediately and continuing until 15 December 2015. At first glance, the Bill does not stray too far from the carbon tax design that Treasury has been proposing since 2010 in various discussion papers, national budget speeches and their associated explanatory memoranda and responses to stakeholder commentary on the design. The Bill does not change the essentials, but it does progress certain of the detail while providing only a tantalising glimpse of some of the more interesting aspects of the design. While the proposed tax is vaunted as the carbon tax, this is not the only or the first carbon tax imposed in South Africa. Emissions on new vehicles are subject to emissions taxation and approximately five years Read More …
Author: Nyasha Musviba
Multilateral Competent Authority Agreement
OECD, South Africa November 10 2015. Confronted with high tax rates in their countries of residence, individuals and multinational enterprises are increasingly developing global strategies in order to maximise profits. It is thus not surprising that taxpayers’ links with countries that have favourable tax climates are becoming more tenuous. Although many countries have legislation to curb the ensuing tax avoidance, this problem cannot be addressed only on a national level, as avoidance schemes are encouraged by the very existence of low tax and tax haven jurisdictions. These sovereign jurisdictions are entitled to promulgate their own tax legislation, however onerous (or not) the legislation may be. This issue therefore appears can only be addressed on an international level, if at all.
The opportunities of relaxed exchange controls
Recent relaxations of exchange controls in South Africa have encouraged growing cross-border investments and facilitated freer participation in global financial markets and opportunities. To understand the extent to which exchange controls in South Africa have been relaxed since their inception, it helps to look at their history, which can be broadly categorised into three phases: It all began in 1939 with the introduction of restrictions on the outflow of funds to non-sterling area countries. These were extended during 1961 to 1993 in response to the worsening internal political situation, the introduction of economic and financial sanctions against South Africa in the mid-eighties, and a moratorium on the repayment of South Africa’s foreign debt. The 1961-1993 era was characterised by a comprehensive system of exchange controls embracing both current and capital account transactions over residents and non-residents. The third phase commenced in 1993 and spearheaded a period of gradual relaxation of Read More …
Assuming contingent liabilities in acquiring a going concern
By Erich Bell, Senior Tax Consultant at BDO South Africa. SARS issued a draft interpretation note (DIN) in September 2015 on the tax implications of the assumption of contingent liabilities where a business is sold as a going concern. This article sheds some light on the assumption of contingent liabilities which specifically formed part of the purchase price relating to the acquisition of the business as a going concern.1 A purchaser can settle the purchase price for the acquisition of a business as a going concern by employing a combination of: cash consideration, assuming the seller’s debts, assuming the seller’s contingent liabilities, loan funding, or share issues.
Tax Transparency – the Common Reporting Standard: Implications for South Africa
Globally, taxpayers are becoming more interdependent, and engage in cross-border financial activities with more regularity. With this, comes the need for enhanced co-operation and understanding across countries on issues such as tax administration and transparency, to curb tax evasion and ensure a fair allocation of taxes to tax jurisdictions. “The Common Reporting Standard (CRS) developed by the The Organisation for Economic Co-operation and Development (OECD), is a global standard for the automatic exchange of information relevant to tax. Over 50 jurisdictions have agreed to comply with the CSR, including South Africa, committing to exchange data in September 2017, and other jurisdictions will begin participating from 2018” states Ferdie Schneider, National Head of Tax at BDO South Africa.
OECD delivers international standard for collection of VAT on cross-border sales
Governments have taken an important step towards ensuring that consumption taxes on cross-border transactions are effectively paid in the jurisdiction where products are consumed, while minimizing the risks that uncoordinated tax rules distort international trade. The decision by representatives of more than 100 countries and jurisdictions to endorse the new OECD International VAT/GST Guidelines as the preferred international standard for coherent and efficient application of Value Added Tax/Goods and Services Tax to the international trade in services was one of the highlights of the annual meeting of the OECD Global Forum on VAT on 5-6 November, in Paris, France. See Statement of Outcomes here.
VAT Refund Administrator (“VRA”) – VAT Refund Claims
The VRA is an entity appointed by the South African Revenue Services (“SARS”) to administer VAT refund claims on movable goods purchased and exported from South Africa, by qualifying purchasers not registered for VAT. Qualifying purchasers generally include foreign businesses purchasing movable goods from South African suppliers on which VAT at 14% was charged, and where the foreign purchaser is responsible for exporting the goods from South Africa via road, rail, sea or air through a designated commercial port. Where movable goods of a qualifying purchaser are exported from South Africa by a cartage contractor, the qualifying purchaser is not required to present themselves at the port of exportation.
Lodging a Complaint against the South African Revenue Service
Author: Dr Beric Croome The Tax Administration Act No. 28 of 2011 (“TAA”) which took effect on 1 October 2012 created the Office of the Tax Ombud to deal with complaints against the South African Revenue Service (“SARS”) empowering that office to deal with complaints made by a taxpayer regarding a service matter or procedural or administrative matter arising from the application of the provisions of a tax Act by SARS. Before a taxpayer can lodge a complaint with the Office of the Tax Ombud, it is important that they have exhausted the internal complaints resolution mechanisms within SARS, unless there are compelling circumstances to do so. The TAA prescribes what constitutes compelling circumstances and those are not dealt with further in this article.
Transfer pricing drains us of tax blood
Author: Xolani Mbanjwa (Fin24) Transfer pricing by multinationals has cost South Africa an estimated R250 billion over three years and, with it, lost tax revenue. This is according to Sunia Manik, group executive for the large business centre at the SA Revenue Service (SARS), adding that it was being done through “service payments” made to overseas businesses, and was eroding the country’s tax base. Speaking about the new transfer pricing guidelines from the Organisation for Economic Cooperation and Development (OECD) at a seminar in Johannesburg this week, Manik said the figure included almost R80 billion in so-called management fees paid overseas from South Africa.
SARS uses banks to collect debt
Author: Amanda Visser (IOL) Several financial institutions, including banks, have accused the South African Revenue Service (SARS) of not following its own processes when collecting outstanding tax debt; instead using them as its first port of call. Statistics by the Banking Association of South Africa indicate banks each receive between 4 000 and 8 000 appointments on a monthly basis to collect tax debt on SARS’s behalf. This has increased from an average of 150 per month in previous years. The administrative cost per appointment amounts to R200.