Author: Roy Cokayne (IOL) An increase in VAT in South Africa was inevitable, said Citibank economist Gina Schoeman. The only question mark was about the timing of an increase in the VAT rate, she told a Ford breakfast yesterday. Schoeman stressed that South Africa had one of the lowest VAT rates in the world and one of the most efficient VAT collection streams. She said an increase in the VAT rate from 14 to 16 percent would add R30 billion to South Africa’s tax revenue and narrow the deficit by 4 percentage points. However, Schoeman said an increase in the VAT rate was hurtful to the consumer, which was the reason government was not keen on doing it as soon as most expected.
Author: Nyasha Musviba
Retroactive application of a double tax agreement
On 16 October 2015, a Protocol amending the double tax agreement (DTA) between South Africa and Cyprus was published in the Gazette. In normal circumstances, the promulgation of a protocol does not cause much excitement; however, one of the articles in the Protocol raises unusual issues. Article IV contains two paragraphs: The first states that each of the states shall notify the other of the completion of the procedures required by its domestic law to bring the Protocol into effect, and that the Protocol shall come into effect on the date of receipt of the later of these notifications. The operative date in that respect was 18 September 2015.
The deductibility of a taxpayer’s losses incurred as a result of an ‘inherent risk’ of his trade
Where an accident or other mishap results in a taxpayer’s incurring an involuntary loss, a question can arise as to whether that loss is deductible for income tax purposes in terms of the general deduction formula laid down in section 11(a) of the Income Tax Act 58 of 1962 as having been incurred in the production of income. In Port Elizabeth Electric Tramway Co v CIR 1936 CPD 241,Watermeyer J expressed the underlying principle by saying that – ‘all expenses attached to the performance of a business operation bona fide performed for the purpose of earning income are deductible whether such expenses are necessary for its performance or attached to it by chance or are bona fide incurred for the more efficient performance of such operation provided they are so closely connected with it that they may be regarded as part of the cost of performing it.’ (Emphasis added.) Particular risks are inherent Read More …
Global Forum on tax transparency pushes forward international co-operation against tax evasion
Major implementation milestones are being met by members of the world’s leading forum on tax transparency as the international community continues to move ahead towards greater tax transparency. The imminent shift to the automatic exchange of information will send a strong warning to tax evaders. Significant strides towards a major increase in tax transparency have been made since last year when over 90 members of the Global Forum on Transparency and Exchange of Information for Tax Purposes committed to automatically exchange information, beginning in 2017 or 2018. Panama and the Cook Islands are the latest financial centers to join these commitments bringing the total number to 96.
National Treasury forges ahead with carbon tax plans
Author: Ingé Lamprecht (Moneyweb). National Treasury has signaled its intention to forge ahead with the introduction of a controversial carbon tax, with the publication of a draft bill on Monday. It said however that it has taken the current state of mining and other distressed sectors into account. The combined effect of the exemptions in the carbon tax and the reduction in the electricity levy “will be designed to ensure that such sectors are not adversely affected when the carbon tax is implemented”. “The tax and revenue recycling measures are also designed to be revenue neutral from a macroeconomic perspective, but will not necessarily be neutral for (scope one) companies with significant emissions.”
Proposed gas emissions tax will not impact electricity prices, says Treasury
SA’S proposed taxes on gas emissions will not impact already high electricity prices, nor will it add pressure to sectors such as the mining industry, the Treasury said on Monday. The carbon tax, part of government efforts to reduce harmful emissions in Africa’s worst polluter, was postponed two years ago to 2016 after fears from industry that it would hurt profits already eroded amid a global commodities slump and higher electricity tariffs. In the draft bill, Treasury lists a number of allowances to mitigate the impact the tax would have on industries. Tax-free exemptions would range between 60% and 95% of total emissions, Treasury said.
Draft Carbon Tax Bill for public comment
Author: National Treasury The National Treasury has publishes the Draft Carbon Tax Bill for public comment. Briefly, the carbon tax seeks to price carbon by obliging the polluter to internalise the external costs of emitting carbon, and contribute towards addressing the harm caused by such pollution. The publication of the Draft Carbon Tax Bill provides an opportunity for further comments on the design and technical details of the carbon tax policy and administration. Written comments should be submitted by the close of business on 15 December 2015 to Dr. Memory Machingambi, email: Memory.Machingambi@treasury.gov.za Please click here to view media statement, Draft Carbon Tax Bill for comment and Draft Explanatory Memorandum on the Carbon Tax Draft Bill
‘Interest’ for purposes of Withholding Tax on Interest (WTI)
Author: Lisa Brunton (Cliffe Dekker Hofmeyr). The Taxation Laws Amendment Bill 2015 (Bill) proposes the insertion of a definition for the term ‘interest’ in s50A of the Income Tax Act, No 58 of 1962 (Act) to clarify the meaning of interest for purposes of the WTI. ‘Interest’ is to be defined in s50A of the Act with reference to paragraphs (a) and (b) of the definition of ‘interest’ under s24J(1), meaning that for WTI purposes, ‘interest’ includes “the gross amount of any interest or related finance charges, discount or premium payable or receivable in terms of or in respect of a financial instrument;” or “the amount (or portion thereof) payable by the borrower to a lender in terms of a lending arrangement as represents compensation for any amount which the lender would, but for such lending arrangement, have been entitled”.
Assuming contingent liabilities in acquiring a going concern
Author: 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.
Claiming VAT prior to Registration
Author: Seelan Muthayan, Director of VAT at BDO South Africa Taxpayers are often unaware of their VAT registration liabilities, which can result in a retrospective VAT registration. This regularly leads to a liability for output tax on supplies made as amounts charged are generally deemed to be VAT inclusive. On the other hand, taxpayers may have incurred expenses during this period and may not be in a position to claim input tax deductions as they would not be in possession of valid tax invoices. This is as a result of them being registered for VAT when they incurred the expenses, with the tax invoices being rendered invalid as they would not contain the taxpayer’s VAT registration number.