On 22 July 2015, Her Majesty’s Revenue and Customs (HMRC – the United Kingdom’s counterpart to SARS) published a 35-page consultation document containing the results of research undertaken by a well-known London-based research organisation, entitled Exploring Large Business Tax Strategy Behaviour The study set out to gain an understanding of how large businesses develop and adjust their tax strategies. HMRC regards such knowledge as key to its effectiveness in improving compliance. Overall aim of the research
Author: Nyasha Musviba
Seven reasons to get your trust in order
Author: Sumesh Somaroo, audit and assurance partner, BDO Durban Durban, September 2015. There are several common mistakes made in the operation of trusts that have been set up for estate planning purposes, to protect assets from creditors and for potential tax savings. So says Sumesh Somaroo, a partner at the Durban office of audit, advisory and tax firm, BDO South Africa, who warned that the verification of trust tax returns by SARS was on the increase and that it was important for people to get their trusts in order.
Six ways to spend your tax rebate responsibly
Figuring out how you want to spend your tax rebate will be easier if you already have a list of financial goals. Whenever you get a pay-out, it helps enormously in resisting those impulses if it is already ‘mentally allocated’. You may be tempted, but the refund is less likely to be wasted. This is according to Lisa Griffith, Associate Director at BDO Wealth Advisers, who recommends that those who receive a tax refund must ask themselves what they are wanting to achieve in the forthcoming year? “Do you want to save for a deposit on a house? Or perhaps save for retirement? Maybe you are trying to pay off debt,” she says. Griffiths gives some guidance on key objectives that you should consider putting your tax rebate toward:
New tax changes mean new tax schemes
Consumers and businesses by now have had a few months to assess the impact of tax changes indicated by the Finance Minister in his most recent Budget Speech. ‘’Be wary though that with these changes also come charlatans who pounce on uninformed business owners and individuals with offers ranging from sophisticated tax avoidance schemes to offers of services or products to ensure compliance,” warns BDO Pretoria Consultant and ex-Managing Partner, Roy Edge. “This is nothing new, we see it all the time where individuals or groups lure unsuspecting people into parting with hard-earned money by investing in new and creative tax schemes.”
Tax treatment of contributions to retirement funds
Author: Jenny Klein The date of implementation of new rules relating to the tax treatment of contributions to retirement funds, which were expected to take effect on 1 March 2015, was postponed until 1 March 2016, in terms of the Taxation Laws Amendment Act of 2014. Among other changes, the new rules will affect the employees’ tax implications of employer contributions to retirement funds, and the deductibility for income tax purposes by the member of such contributions, thus affecting both participating employers and members. In addition, depending on the nature of the benefits available to members, the retirement fund may be obliged to provide information to the participating employer in respect of contributions for specific categories of fund members. The implications of some of these changes are highlighted below.
Finality of advance payments by non-residents disposing of immovable property
Author: Ruaan van Eeden The 2015 Taxation Laws Amendment Bill (TLAB) proposes an amendment to s35A of the Income Tax Act, No 58 of 1962 (Act), dealing with the withholding of amounts from payments due to non-resident sellers of immovable property situated in South Africa. The proposed amendment raises an interesting point regarding administrative compliance with a country’s tax laws through the submission of returns for assessment versus a final withholding tax.
Another ruling on the capitalisation of shareholder loans
Author: Heinrich Louw The South African Revenue Service (SARS) released Binding Private Ruling 208 (Ruling) on 8 October 2015. The Ruling concerned the use of subscription proceeds to repay a shareholder loan. Company A and Company B each held 50% of the issued shares in Company C. Company A wanted to acquire Company B’s shares (Shares) in Company C. Company B had a loan claim against Company C, which was used to finance operational expenditure of Company C. Company A only wanted to acquire the Shares and not the loan claim.
Disclosure to SARS and the treatment of pay-as-you-earn
Authors: Nicole Paulsen and Gigi Nyanin The disclosure to the South African Revenue Service (SARS) of potential tax defaults can be addressed in various ways. However, the formal Voluntary Disclosure Programme (VDP), as contemplated in the Tax Administration Act, No 28 of 2011 (TAA), is the preferred and recommended option. The VDP is a formal statutory process, regulated under Part B of Chapter 16 of the TAA, in terms of which a taxpayer can approach SARS voluntarily to regularise its tax affairs with the prospect of obtaining various forms of relief. It is important to note that upon a successful VDP application, the VDP process does provide relief in respect of understatement penalties (which could be up to 200% in severe cases), 100% relief from administrative non-compliance penalties and in addition thereto, SARS will not pursue criminal prosecution.
Market value of shares on valuation date
Author: Heinrich Louw An interesting judgment was handed down in the Supreme Court of Appeal (SCA) on 30 September 2015 in the case of Commissioner for the South Africa Revenue Service v Stepney Investments (Pty) Ltd. The matter concerned the determination of the valuation date value of certain shares for purposes of calculating the capital gain or loss that arose upon their disposal Stepney Investments (Pty) Ltd (Taxpayer) owned certain shares in Emanzini Leisure Resorts (Pty) Ltd (Company). The Company was mainly involved in the casino, hotel and leisure sector. At the relevant time the Company was awarded a casino licence for a period of 15 years in respect of a particular area and intended to establish a casino at a particular site. Unfortunately the Company became involved in a litigious dispute with a third party in respect of the development of the casino on the preferred premises, causing a Read More …
Tax treatment of contributions to retirement funds
Author: Jenny Klein (Tax Manager at ENSAfrica) The date of implementation of new rules relating to the tax treatment of contributions to retirement funds, which were expected to take effect on 1 March 2015, was postponed until 1 March 2016, in terms of the Taxation Laws Amendment Act of 2014. Among other changes, the new rules will affect the employees’ tax implications of employer contributions to retirement funds, and the deductibility for income tax purposes by the member of such contributions, thus affecting both participating employers and members. In addition, depending on the nature of the benefits available to members, the retirement fund may be obliged to provide information to the participating employer in respect of contributions for specific categories of fund members. The implications of some of these changes are highlighted below.