Author: Andrew Lewis (Cliffe Dekker Hofmeyr) The corporate tax rollover relief provisions contained in section 41 to section 47 of the Income Tax Act, No 58 of 1962 (Act) were recently expanded to cater for international corporate restructurings. The South African Revenue Service (SARS) released Binding Private Ruling 178 (BPR 178) on 14 August 2014 where the applicant sought clarity on the tax consequences of an international corporate restructuring in terms of section 42 (asset-for-share transactions) and s45 (intra-group transactions).
Category: Corporate Tax
Challenges for corporate taxpayers and the role of advisors
Author: Pieter van der Zwan (North-West University) Being a corporate taxpayer in an environment with constant developments in legislation and regulations coupled with complex tax issues that arise on a regular basis is not an easy task. One need not look further than a number of cases that appeared before the courts over the past year to see evidence of this. It is submitted that the nature of the challenges faced highlights the fact that the role of a corporate tax advisor’s involvement in the tax affairs of a client has evolved to be much more than merely assisting to complete an income tax or provisional tax return just before the submission deadline arrives. This article deals with four of the challenges that a corporate taxpayer in South Africa may face as well as the role that a corporate tax advisor could, and arguably should, be fulfilling in addressing these Read More …
Tax advisory work in the context of Mergers and Acquisitions
Author: Stephen Zaaiman (Renmere) It is difficult to define the term ‘Mergers and Acquisitions’ or ‘M&A’ as an abstract concept. Whereas most commercially-minded practitioners ‘know it when they see it’, it often seems that no single definition quite succeeds in capturing the concept within four corners. This is particularly true in the field of tax where it is not uncommon for the resident M&A practitioner to declare jurisdictional authority over anything ranging from a residential lease agreement to a capital allowance review.
Branch vs. Subsidiary: Key tax considerations
Author: Wendy Lumsden Foreign investors frequently face the decision of whether to conduct operations in South Africa as a branch or whether to setup a subsidiary for undertaking South African activities. This article highlights the key South African tax consequences of a Branch as opposed to those of a Subsidiary and considers some of the other key considerations, such as legal liability.
Discussion paper on the assumption of contingent liabilities in a going concern acquisition
SARS released the above discussion paper in December 2013 and it was open for comment to 31 March 2014. It deals with the treatment of so-called ‘free-standing’ contingent liabilities from the points of view of the seller as well as the purchaser, where the contingent liabilities are assumed by the purchaser as part settlement of the purchase price for the acquisition of the assets of a going concern. It distinguishes between valuation provisions, ‘embedded’ obligations and free-standing contingent liabilities. A valuation provision, for example a provision for doubtful debts and an embedded obligation, for example the statutory duty to reforest timber plantations after harvesting, have an impact on the market value of the asset to which they are attached.
Legal professional privilege
On 17 March 2014 judgment was handed down in the Western Cape High Court in the case of A Company and two others v Commissioner for the South African Revenue Service (case no 16360/2013 – as yet unreported). The facts were briefly as follows: The applicants were three companies in a group of companies. In the course of conducting an audit of the applicants’ tax affairs, the South African Revenue Service (SARS) directed a request for relevant material at the applicants in terms of section 46 of the Tax Administration Act, No 28 of 2011(the TAA).
Collective investment schemes
Section 25BA prior to 1 January 2014 Prior to the amendments contained in the Taxation Laws Amendment Act No. 31 of 2013 (the TLAA), a Collective Investment Scheme (CIS) was taxed on a semi-flow through regime in terms of section 25BA of the Income Tax Act No. 58 of 1962 (the Act).
Limited available to PPP receiving exempt income from government
The DTLAB introduces section 12NA, which aims to regulate the tax treatment of allowances available to public private partnerships (PPP) receiving exempt contributions from the government in terms of section 10(1)(zI). The proposed section will limit the allowable deduction to the amount of expenditure actually incurred in effecting improvements to land or buildings owned by government, reduced by the aggregate exempt contributions received from government. This limit is intended to address an ostensible “double dipping” in the context of PPPs.
What is your compliance status?
Currently, section 256 of the Tax Administration Act, No 28 of 2011 (TAA) houses the provisions governing the application for and granting of Tax Clearance Certificates (TCC). It is commonplace for taxpayers to require a TCC for a number of reasons including tenders, good standing, foreign investment allowance and emigration. The amendments to section 256 propose to remove the granting of a TCC and instead provide the taxpayer with a “confirmation of the taxpayer’s tax compliance status”.
Not all hybrids are cost effective!
The provisions of section 8F became effective on 1 April 2014. In terms of this section any interest incurred on or after that date in respect of a “hybrid debt instrument” will be deemed to be a dividend in specie declared and paid on the last day of assessment by the company; and is not deductible for income tax.