Author: Lisa Brunton (Cliffe Dekker Hofmeyr) The BEPS Project involves input from the 34 member countries of the OECD, all G20 members, and more than 40 developing countries. The objective of the BEPS Project is to close gaps in international tax rules, effectively eliminating or substantially reducing BEPS; and to secure government revenues by ensuring that profits are taxed in the jurisdiction where the economic activities generating such profits are performed and where value is created. In our October 2014 Tax Alerts, we reviewed the 2014 deliverables of the BEPS Project and speculated about whether the OECD would be able to achieve its 2015 objectives timeously.
Author: Nyasha Musviba
Merger of controlled foreign companies
Author: Heinrich Louw A South African incorporated and resident company (Applicant) had two subsidiaries that were incorporated and resident in foreign countries, and were CFCs. The first subsidiary (CFC 1) was a listed passive holding company. The second subsidiary (CFC 2) was a privately held intermediate holding company. In order to consolidate some of the group’s investments, it was proposed that all the assets and liabilities of CFC 1 be transferred to CFC 2 by way of a merger. As a result of the merger, the assets and liabilities of CFC 1 would become that of CFC 2 by operation of law, and CFC 1 would automatically cease to exist.
Increasing disconnect between SARS’ legislated powers and its internal policies
Author: Jerome Brink (Tax Associate at ENSafrica) While the Tax Administration Act, 28 of 2011 (“the TAA”) determined and consolidated the powers and duties of South African Revenue Service (“SARS”) officials engaged in the administration of a tax Act, it also, to a certain extent codified the rights and obligations of taxpayers to whom the TAA applies. Due to the fact that the TAA has now been in effect for a couple of years since its commencement date of 1 October 2012, there is a greater understanding of how the legislation is being practically implemented. Recent experience indicates that there may be a growing disconnect between the internal policies being implemented by SARS officials and the actual powers provided for in the enabling legislation. This article briefly highlights two examples recently encountered in practice.
Proposed amendments to the Tax Administration Act no. 28 of 2011: keeping up with international standards
Authors: Robert Gad, Anneke Meiring and Jadyne Devnarain The purpose of the Tax Administration Act No. 28 of 2011 (“the TAA”), is to ensure the effective and efficient collection of tax, by aligning the administration of the tax Acts to the extent practically possible, prescribing the rights and obligations of taxpayers and other persons to whom the TAA applies, prescribing the powers and duties of persons engaged in the administration of a tax Act, and generally giving effect to the objects and purposes of tax administration.
What is “interest” anyway? section 24J and interest deductions
Author: Morongoa Matlala Introduction Sections 11(a) and 23(g) of the Income Tax Act No. 58 of 1962 (“the Act”) are commonly referred to as the “general deduction formula”. As the name suggests, it is in terms of these sections of the Act that tax deductions in general are sought to be claimed by taxpayers. The Act does, however, contain provisions which are specially tailored for the deduction of specific expenditure. Section 24J of the Act (“section 24J”) is one such provision and allows taxpayers to claim a deduction specifically for interest expenditure.
South African tax legislation: proposed amendments in an international tax context
Authors: Lavina Daya and Yani van der Merwe and Liesl Visser This article sets out a brief summary of some of the proposed amendments introduced by recent South African draft Tax Bills. The article focuses on amendments in the context of international taxation. The draft Taxation Laws Amendment Bill, 2015 (“draft TLAB”) and the draft Tax Administration Laws Amendment Bill, 2015 (“draft TALAB”) were released by National Treasury on July 22, 2015. These draft Bills aim to provide the necessary legislative amendments required to implement most of the tax proposals outlined in the 2015 Budget Review. Specifically, the draft TLAB deals with more substantive changes to tax legislation and the draft TALAB deals with administrative provisions of tax legislation currently administered by the South African Revenue Service (“SARS”). We consider proposed amendments in an international tax context below.
Africa tax in brief
Author: Celia Becker (ENSafrica) ANGOLA: Amendments to Consumption Tax Presidential Legislative Decree (“PLD”) No. 5/15 was enacted and entered into force on 21 September 2015. The PLD amends the applicable rates of consumption tax and customs duties applicable on imports and exports. Amendments to the applicable rates and taxable products include: an increase of the maximum rate of consumption tax on imports from 30% to 80%; an increase of the maximum rate of consumption tax on domestic production from 30% to 65%; and an introduction of consumption tax at the rate of 2% or 5% on various petroleum products.
Action plan to stem tax avoidance is a good start
Author: Mzukisi Qobo (BDlive) The brunt of tax avoidance by big corporations falls heavily on poor countries, with long-term effects on growth and social stability. African countries are the poorer for it. The recent Organisation for Economic Co-operation and Development (OECD) action plan on base erosion and profit shifting, adopted by Group of 20 (G-20) finance ministers in Peru a week ago, has been hailed as groundbreaking. The measures it proposes create an important basis for evolution of new norms on international tax treaties and to curb aggressive tax planning by companies.
Court case puts SARS on the spot over ‘rogue’ unit
Author: Natasha Marrian (BDlive) An alleged tax offender, who was also suspected of drug smuggling, is taking the South African Revenue Service (SARS) to court over millions he paid in penalties in a case that tests the lawfulness of the work of a covert unit of the agency. Martin Wingate-Pearse has argued in court papers that information on his case was obtained through unlawful means, in particular through the work of the alleged “rogue unit” whose existence came to light last year. The case is set to shed further light on the activities of the unit and places SARS in an awkward position as it is forced to defend the actions of a unit it has already found to be unlawful.
Invalidity of emolument attachment orders
A recent, much publicised decision in the Western Cape High Court declared certain provisions in the Magistrates’ Court Act (MCA) relating to the issuing of emolument attachment orders (EAO) to be invalid and unconstitutional. In the matter of University of Stellenbosch Legal Aid Clinic and Others v Minister of Justice and Correctional Services and Others (Case No. 16703/14) application was made to have EAOs issued against a number of clients of the applicant declared invalid. An EAO permits the attachment of a debtor’s earnings and obliges the debtor’s employer (garnishee) to pay a specified amount out of the debtor’s earnings to the creditor or the creditor’s attorney until the debt and legal costs have been fully paid.