The Commissioner for the South African Revenue Service (SARS) issued an important notice (SARS Notice) on 16 March 2015. The SARS Notice was published in terms of s35(2) and s36(4) of the Tax Administration Act, No 28 of 2011 (TAA). Sections 34 to 39 of the TAA deal with so-called ‘reportable arrangements’. Essentially, if an arrangement has certain characteristics (as listed in s35(1) of the TAA) or if SARS has listed the arrangement in a public notice (in terms of s35(2) of the TAA), then the person who promotes the arrangement (called a promoter) and the person who may derive a tax benefit from the arrangement (called the participant) must report the arrangement to SARS.
Author: Nyasha Musviba
Transfer Pricing Reportable arrangements – Notice published in Government Gazette
A public notice (the “Notice”) was issued in the Government Gazette dated 16 March 2015 in terms of which the Commissioner for the South African Revenue Service lists arrangements which are listed as reportable arrangements in terms of section 35(2) of the Tax Administration Act No 28 of 2011 (“TAA”), and excluded arrangements in terms of section 36(4) of the TAA. The effective date of the Notice is 16 March 2015.
Budget 2015: VAT untouched
Author: Deborah Tickle, Partner International Corporate Tax KPMG. Taxpayers were warned as far back as October 2014 that Budget 2015 would not be a happy one for them. Finance Minister, Nhlanhla Nene made it abundantly clear that more tax revenue was needed in the 2015/2016 year to cover the country’s budget deficit or “gap” between expenditure and revenue. The only question was which taxes would increase to “mind” this gap.
Budget 2015 – Pocket Tax Guide 2015
Download pocket guide: Pocket-Tax-Guide-2015
Taxation of shares – Beware when you issue shares
Generally there are no tax consequences when a company issues shares. This is the case regardless of whether the shares are issued for cash or in order to settle the purchase consideration that may have arisen pursuant to the acquisition of assets by the company. This follows from the provisions of paragraph 11(2)(b) of the Eighth Schedule to the Income Tax Act, No 58 of 1962 (Act) to the extent that there is no disposal of an asset by a company in respect of the issue of a share in the company.
Approval of final notice and regulations for tax free investments
On 20 February 2015, National Treasury issued a media statement indicating that the Minister of Finance approved the final notice and regulations introducing tax free investments, which came into effect on 1 March 2015. The preamble of the regulations, which should be read in conjunction with s12T of the Income Tax Act, No. 58 of 1962 (Act), provides some insight into the Government’s objectives in introducing tax free
Binding Ruling on notional funding arrangement
The degree to which black people participate in the ownership of an entity is an important measure of an entity’s compliance with the black economic empowerment (BEE) legislation and the amended codes. The difficultly with many BEE transactions is that the participants do not have the funding available to acquire ownership (shares) in the measured entity. Historically, where the participants have used third party funding (eg preference shares) to finance the acquisition of shares in the measured entity, the funding has proved too costly, leaving the participants with no meaningful ownership in the measured entity.
The VAT treatment of joint venture interests
Substantial uncertainty has arisen over the last few months pursuant to the Value-added Tax (VAT) treatment of interests in unincorporated joint ventures. This has especially become relevant in the context of property owners owning an undivided interest in property and forming a joint venture so as to lease the property to third parties. From a strict legal perspective, the joint venture may have had to register as a separate vendor in terms of s51 of the Value-Added Tax Act, No 89 of 1991 (VAT Act), it being a body of persons. In this context the requirement is to register as a separate VAT vendor irrespective of the question whether a partnership is formed between the property owners.
Binding Ruling – Conversion of a PBO to a for-profit Company
In Binding Private Ruling 188 (‘BPR’) SARS recently dealt with the conversion of a tax exempt Public Benefit Organisation (‘PBO’) to a for-profit company. Parties to the proposed transaction were a company incorporated in a foreign country and limited by guarantee, which is registered in South Africa as an external company (the ‘Applicant’ or ‘Applicant PBO’) under section 23(1)(a) of the Companies Act, 2008, and a PBO under section 30 or the Income Tax Act (‘the Act’). Section 30 governs PBOs in the Act.
Binding Ruling – Waiver of an Intra-Group Loan that Funded the Acquisition of a Mining Operation
SARS recently released Binding Private Ruling 187 (‘BPR’) which deals with the waiver of a loan that funded the acquisition of a mining operation as a going concern under an intra-group transaction, as contemplated in section 45 of the Income Tax Act (the ‘Act’). Parties to the proposed transaction were a company incorporated in and a resident of South Africa (the ‘Applicant’), and a second company incorporated in and a resident of South Africa (the ‘Co-Applicant’).