In an about-turn the Constitutional Court handed down judgment in the Shuttleworth matter on 18 June 2015. Not only was it found that Shuttleworth’s exit charge constituted a regulatory charge as opposed to a tax, but it was also found that the Exchange Control Regulations were not unconstitutional. Should one consider the history of the matter, Shuttleworth made application to the South African Reserve Bank (Reserve Bank) to transfer approximately R2,5 billion out of South Africa. This approval was granted subject to an exit charge of 10% being imposed on the capital that was exported. The payment of this exit charge was challenged by Shuttleworth:
Author: Nyasha Musviba
VAT clauses in sale agreements relating to immovable property
Parties to sale agreements of immovable property should take great care when drafting the value-added tax (VAT) clauses. Consider the recent case of Lezmin 2358 CC v Tomeridian Properties CC and others [2015] JOL 33210 [GJ]. The facts of the case are complex. Put simply, the seller sold commercial immovable property to the buyer. The sale agreement, which went through a few permutations, stated that: “The purchase price is the sum of R25 000 000 (Twenty Five Million Rand) exclusive of VAT which is payable…”
Cross-issue of shares and tax-free corporate migrations
In the 2015 Budget, the Minister of Finance indicated that paragraph 11(2)(b) of the Eighth Schedule to the Income Tax Act, No 58 of 1962 (Act), which deals with the issue of shares by a company, would be reviewed. National Treasury has now released the first batch of proposals forming part of the draft Taxation Laws Amendment Bill 2015, which specifically addresses paragraph 11(2)(b). The issue of shares by a company (whether for cash, shares or other assets) generally does not constitute a disposal for capital gains tax purposes, although there may be capital gains tax consequences in terms of s24BA of the Act to the extent that there is a mismatch between the value of the shares issued and the cash or assets received.
Notice of judgment in terms of the Tax Administration Act
Judgment was handed down in the matter between Lifman and others v The Commissioner for the South African Revenue Service and others (case no 5961/15, as yet unreported) on 17 June 2015 in the Western Cape Division of the High Court. The applicants were Mark Lifman and a number of close corporations of which he was the sole member. During an enquiry in terms of s50 of the Tax Administration Act, No 28 of 2011 (TAA), conducted by the South African Revenue Service (SARS) into the affairs of the applicants, it came to light that the applicants owed SARS tax of approximately R13 million.
Binding Private Ruling – Exemption from donations tax and the net value of an estate
On 1 July 2015, the South African Revenue Service (SARS) released Binding Private Ruling 197 (BPR 197) dealing with the donations tax consequences arising from the onward or subsequent donation of funds received by way of a donation from a foreign source. BPR 197 further deals with the estate duty consequences that will apply in the event of the foreign sourced funds being retained or used to acquire property that is located and remains outside South Africa.
Binding Private Ruling – Debt reduction by way of set-off
The South African Revenue Service (SARS) published Binding Private Ruling No. 193 (BPR 193) on 15 June 2015, which deals with the repayment of a shareholder loan by way of set-off with an outstanding loan under a subscription agreement. The applicable provisions in the Income Tax Act, No 58 of 1962 (Act) are s19 of the Act and paragraphs 12A and 20(3)(b) of the Eighth Schedule to the Act. The applicant in the transaction to which BPR 193 applies is a company incorporated in and resident of South Africa (Applicant). The second party to the transaction is the holding company of the Applicant and a non-resident for South African tax purposes (Holdco).
Capitalisation of shareholder loans and set-off
The South African Revenue Service (SARS) published Binding Private Ruling 193 (Ruling) on 15 June 2015, which dealt with the partial capitalisation of a shareholder loan. The applicant was tax resident and incorporated in South Africa, and was held by a non-resident holding company. The holding company had previously extended a shareholder loan to the applicant, and at the time of the Ruling an amount of capital and interest remained outstanding.
Binding Private Ruling – Awards from foreign trusts
The South African Revenue Service (SARS) published Binding Private Ruling No 197 (Ruling) on 1 July 2015. The Ruling deals with the receipt of funds from a foreign trust, and the subsequent donation and investment thereof. The applicant was an individual resident in South Africa. The applicant was also a beneficiary of a foreign trust. The foreign trust only held funds sourced from outside South Africa. The trustees of the foreign trust resolved to award a specified amount of the foreign trust funds to the applicant, after which the applicant would be removed as a beneficiary.
The valuation of a usufruct for tax purposes
Author: Alexa Muller – Tax Associate at ENSafrica The value of a usufruct is often needed to be calculated for purposes of taxes, for example: for purposes of estate duty should a testator/testatrix bequeath a usufruct over property to an heir; for purposes of donations, tax should a usufructuary renounce his/her usufructuary rights; or for purposes of capital gains tax, should a property in respect of which a usufruct is registered be disposed of.
Cancellation of contracts in the 21st century
Author: Douglas Molepo – Dispute Resolution Director at ENSafrica Can parties cancel or amend written agreements by email if their written agreement prohibits amendments or cancellation unless in writing and signed by the parties? In the recent case of Spring Forest Trading v Wildberry (case no 725/13), the Supreme Court of Appeal (SCA) answered this question with a firm “yes”, meaning that parties should carefully consider the wording of their contracts before signing on the dotted line.