On 7th March 2014 the Supreme Court of Appeal delivered judgment in the as yet unreported case of Commissioner for the South African Revenue Service v Mobile Telephone Networks Holdings (Pty) Ltd, (966/2012) [2014] ZASCA 4 (7 March 2014) which dealt with the deductibility of audit fees incurred for a dual or mixed purpose and the apportionment thereof for tax purposes in the light of section 11(a) of the Income Tax Act 58 of 1962, as amended (‘the Act’) read with sections 23(f) and 23(g) of the Act.
Category: Corporate Tax
SARS’ powers to apply to court to declare a director delinquent in terms of the Companies Act
Section 162 of the Companies Act, Act 71 of 2008 (“the Companies Act”) introduced a new mechanism which allows a broad range of interested and related persons, including qualifying organs of state, the opportunity to apply to court for an order declaring a director of a company delinquent or placing him under an order of probation. Notwithstanding the negative social ramifications such an order has, there are also severe adverse consequences to a director’s
When is a company an operating company for tax purposes?
This is an important question in the context of preference share funding in renewable energy transactions, particularly in determining whether the funding is for a qualifying purpose and therefore exempt from the clutches of s8E and 8EA of the Income Tax Act, No 58 of 1962 (Income Tax Act).
Venture capital companies: part 1 – overview
Author: Mansoor Parker of ENSafrica Introduction This is the first in a series of articles on venture capital companies, a tax-favoured investment vehicle regulated by section 12J of the Income Tax Act, 1962 (“ITA 1962”). The venture capital company (“VCC”) scheme, introduced in 2009, is a tax-based scheme designed to encourage individual and corporate investors to invest in a range of smaller, higher-risk trading companies by investing through the VCCs.
Are audit fees tax deductible?
By Hylton Cameron, Associate Tax Director, Grant Thornton Johannesburg The Supreme Court of Appeals findings in the matter relating to the tax deductibility of audit fees between CSARS v MTN Holdings (Pty) Ltd (MTN) has highlighted the care companies must take in analysing expenses.
Exemptions – Listed shares and the foreign dividend exemption
The South African Revenue Service (SARS) released Binding Class Ruling No. 42 (BCR 42) on 7 February 2014. The factual circumstances in respect of which the ruling was made are as follows: Company Y is a company incorporated and resident in foreign country Y. Company X is a company incorporated and resident in country X. Company X is also a wholly-owned subsidiary of Company Y. Company X is to be listed on the JSE Limited. Its business is investment in foreign debt instruments, on which it will receive interest returns. Company X intends to raise funds for its business by issuing certain preferred securities. The preferred securities will be issued through its branch in country Y.
Subordination of loans and section 8F
Section 8F of the Income Tax Act No. 58 of 1962 (the Act), dealing with hybrid debt instruments was substituted by the Taxation Laws Amendment Act No. 31 of 2013 (the TLAA). In its substituted form the provision is considerably broader in scope than its predecessor. In particular it appears that certain subordination agreements may render the subordinated debt subject to reclassification as hybrid debt with potentially costly consequences. The new treatment applies to amounts of interest incurred on or after 1 April 2014.
Successive corporate reorganisation transactions
Author: Andrew Lewis (CliffeDekkerHofmeyr) A number of advance tax rulings have recently been released by the South African Revenue Service (SARS) relating to the corporate tax rollover relief rules contained in s41 to 47 of the Income Tax Act, No 58 of 1962 (Act). The most recent ruling in this regard is Binding Private Ruling No 168 (BPR 168), which was released on 17 April 2014.
Beware: You can be held liable for a company’s tax debts
Author: Erich Bell (SAIT Technical Advisor) Generally an individual may choose to run his business in the form of a company or close corporation for various commercial and other reasons. On the one hand it may be to ensure the continuity of the business should a key person pass on, or on the other hand to prevent personal liability in the event that business liquidate. There is a general perception that business owners think that their business (company) is totally separate from them – which in a legal sense is correct – and that
CORPORATE RULES: DISPOSAL OF ASSETS WITHIN 18 MONTHS OF ACQUISITION
1. Summary This ruling deals with the effect of section 42(7) on the disposal of assets in terms of an “intra-group transaction” as defined in section 45(1) when the disposal will take place within 18 months of the assets having been acquired in terms of an “asset-for-share transaction” as defined in section 42(1).