Author: Nyasha Musviba

Author: Scott Edmundson, Partner at Webber Wentzel. The National Treasury has published the Taxation Law Amendment Bill. This bill, effective from 1 January 2023 will have important tax consequences for lessors in the airline industry. Effective 1 April 2021, the Taxation Laws Amendment Act 23 of 2020 (the Amendment Act) amended the definition of “enterprise” in section 1(1) of the Value-Added Tax Act 89 of 1991 (the VAT Act) to include a statutory exemption (in the form of a new proviso (xiii)) for the supply of goods (aircraft, ships and rolling stock) by a non-resident lessor pursuant to a cross-border rental agreement (the Exemption). In terms of the Amendment Act, the Exemption applies to, inter alia, a non-resident lessor leasing an aircraft for use in South Africa, provided: the lessor is not a registered vendor in South Africa for VAT purposes; the supply is made to a recipient (a lessee) Read More …

Author: Joon Chong, Partner at Webber Wentzel. SARS will now consider applications from South African-resident trusts for approval to distribute funds to non-resident trusts. The South African Revenue Service (SARS) practice, until recently, has been to not approve any applications for the release of funds by resident trusts vesting and distributing funds to non-resident trusts. In a statement dated 8 April 2022, SARS clarified that they were still investigating other options related to the distribution of funds / amounts to non-residents and were in discussions on the matter. They also took note of the fact that the South African Reserve Bank (SARB) had relaxed certain exchange control requirements, decided, due to the risks, not to approve these applications. A statement dated 26 August 2022 and published on SARS’ website has clarified SARS’ position. In the statement SARS has confirmed that it will consider approval for the release of funds / Read More …

Proper estate planning eliminates a myriad of life’s “what ifs?”. It involves planning well in advance to avoid a lot of uncertainty and unpleasant eventualities. When a couple contemplates getting married, it is inconceivable that a divorce could ensue. However, Statistics South Africa reports that 4 out of 10 marriages end up in divorces in less than 10 years of marriage. It is therefore crucial to have the foresight to avoid an undesired outcome. A default marital system in South Africa is a marriage in community of property, which is characterised by the maxim: “what’s yours is mine”, and vice versa. Effectively, upon getting married, spouses share half of each other’s undivided and indivisible estates (i.e. assets and liabilities). Such a marriage may be cumbersome to a spouse who is financially frugal when getting married to a spouse who is financially carefree. This is because the debt of a financially Read More …

The power of the South African Revenue Service (SARS) to collect tax from a taxpayer by way of issuing a notice to a third party holding assets belonging to a taxpayer, such as a bank holding a taxpayer’s funds, is provided for in section 179(1) of the Tax Administration Act 28 of 2011 (TAA). SARS may only issue the notice if it complies with the requirement in section 179(5) of the TAA, which is that it must deliver to the tax debtor (the taxpayer) a final demand for payment which must be delivered at least 10 business days before the notice is issued. Importantly, the demand must contain the following: It must set out the recovery steps that SARS may take if the tax debt is not paid and the available debt relief mechanisms under the TAA, including in respect of recovery steps that may be taken under section 179. Read More …

It is not uncommon to sell a property that is utilised for both residential and commercial purposes (for example, a block of flats with shops on the ground floor and residential units above). It is a generally accepted practice that where a commercial property that is being let (thus, making it an enterprise), is sold as a going concern, then it will attract value-added tax (VAT) at the rate of 0%, provided that the transaction falls within the ambit of section 11(1)(e) of the Value-Added Tax Act 89 of 1991 (VAT Act). Section 11(1)(e) of the VAT Act provides that the supply of goods and services will be charged with VAT at the rate of 0% where: (i) the subject matter constitutes an “enterprise” as defined in the VAT Act; (ii) such enterprise is being disposed of as a going concern; (iii) it has been agreed in writing that at Read More …

In the recent Tax Court judgment of Taxpayer A v Commissioner for the South African Revenue Service (IT 25042) (14 July 2022), the court was tasked with determining whether the finance charges incurred by the taxpayer stood to be deducted in terms of section 24J of the Income Tax Act 58 of 1962 (ITA). Facts The taxpayer in this case was a company that conducted the business of property investment and property management, including the letting out of property for purposes of earning rental income and property management income. During the 2016 year of assessment (YOA), the taxpayer entered into various loan agreements in terms of which it borrowed funds for the purposes of facilitating property development and investment. It was in respect of these loans that the taxpayer contended that it had incurred finance charges. In its tax return for the 2016 YOA, the taxpayer claimed a deduction in Read More …

The South African Revenue Service’s (SARS) core function is the efficient and effective administration of tax Acts. This necessarily includes the collection of the proper amount of tax from various taxpayers. Part of the means at SARS’ disposal to ensure this is achieved, is requiring taxpayers to submit relevant information, augmented by data collected from third-party entities. A further mechanism at SARS’ disposal to ensure the information received is full and correct, are the investigatory powers granted to SARS under Chapter 5 of the Tax Administration Act 28 of 2011 (TAA). A familiar part of the tax administration process for corporate taxpayers is the preparation and submission of a corporate income tax supplementary declaration form titled IT14SD (IT14SD). In this form, companies selected for verification by SARS are required to reconcile income tax, Value-Added Tax (VAT), Pay-As-You-Earn (PAYE) and Customs declarations after the submission of their corporate income tax returns. Read More …

On appeal from a full bench of the High Court, the Supreme Court of Appeal (SCA) dispensed with a taxpayer’s request for default judgment against the South African Revenue Service (SARS) in the recent case of Commissioner, SARS v Candice-Jean van der Merwe [2022] ZASCA 106. Although the facts surrounding the SCA’s decision were unique to that case, it does beg a broader question regarding a taxpayer’s right to be provided with grounds for an assessment issued under section 95 of the Tax Administration Act 28 of 2011 (TAA). Facts The taxpayer in this case received a large sum of money from an overseas benefactor which she declared as a donation when filing her tax return for the 2014 tax year. SARS disagreed with this and included the amount received in the taxpayer’s gross income, thus subjecting her to normal tax. The dispute between SARS and the taxpayer was resolved Read More …

Value-added tax (VAT) is levied on the supply of goods or services by registered vendors, on the importation of goods and on the importation of services into South Africa. The VAT on supplies of goods and services must be paid by the supplier, whereas the importer of goods is responsible for the payment of the import VAT. VAT on imported services must be paid by the recipient. Persons who acquire services from foreign suppliers often omit to pay the VAT on these services. It is for this reason that the South African Revenue Service is focusing on imported services in its VAT audits. However, not all services rendered by foreign service suppliers comprise imported services. What are imported services? “Imported services” is defined in the Value-Added Tax Act 89 of 1991 (VAT Act) as services rendered by a supplier who is resident or carries on business outside the Republic, to Read More …

Value-added tax (VAT) is levied on the supply of goods or services by registered vendors, on the importation of goods and on the importation of services into South Africa. The VAT on supplies of goods and services must be paid by the supplier, whereas the importer of goods is responsible for the payment of the import VAT. VAT on imported services must be paid by the recipient. Persons who acquire services from foreign suppliers often omit to pay the VAT on these services. It is for this reason that the South African Revenue Service is focusing on imported services in its VAT audits. However, not all services rendered by foreign service suppliers comprise imported services. What are imported services? “Imported services” is defined in the Value-Added Tax Act 89 of 1991 (VAT Act) as services rendered by a supplier who is resident or carries on business outside the Republic, to Read More …