Author: Kyle Mandy (PwC) The Taxation Laws Amendment Bill 39 of 2013 proposes the introduction of a new section (section 23M) to the Income Tax Act (ITA) to limit the deduction of interest incurred by a debtor in respect of a debt owed to a creditor that is in a ‘controlling relationship’ with the debtor and the interest in question is not subject to South African tax. The restriction will apply to interest incurred on or after 1 January 2015. In essence, the section limits the deduction for interest paid between connected persons where the interest is not taxed in the hands of the recipient to an amount determined with reference to 40% of taxable income before interest and capital allowances.
Category: Corporate Tax
Income Tax Act 58 of 1962 – Deemed exchange gains & losses
Section 24I(10) of the Income Tax Act 58 of 1962 (ITA) has been replaced by a new provision for years of assessment commencing on or after 1 January 2013. Section 24I(10) of the ITA deferred unrealised exchange gains and losses on exchange items between connected persons and groups companies until they were realised. However, section 24I(10) has been deleted and replaced with section 24I(10A)with effect from years of assessment commencing on or after 1 January 2013.
Transfer Pricing adjustments: What are the consequences?
Author: Billy Joubert (Deloitte) South Africa’s transfer pricing rules changed radically for years of assessment starting on or after 1 April 2012. This means that the consequences of such an adjustment being made now are very different, depending on whether the adjustment relates to a year of assessment commencing before – or after – 1 April 2012. Perhaps the most fundamental change was in relation to the mechanics for making transfer pricing adjustments. As regards the consequences of TP adjustments, these are also now very different. Many of the TP adjustments currently being made or contemplated relate to years of assessment commencing before 1 April 2012. For ease of reference we shall refer to such years as old years.
2014 – The South African “Tax Year” Ahead In Perspective
Aurthor: Hugo Van Zyl (Cross Border Tax and Exchange Control Specialist) The first and very important note to make, in dealing with South African tax issues: tax year 2014 ends on the last day of FEBRUARY 2014. The South African tax year for most individuals, are 1 March until the last day of February in the next calendar year. Corporates can change their tax year-end to align with the last day of their financial year-end, yet Trusts partners in a JV or partnership, are obliged to file assuming a tax year-end on the last day of February, despite their financial year-end being the last day of another month. Yes, sadly this date, Friday 28th 2014, is not even listed on the SARS webpage on important dates, yet is an extremely important tax deadline.
New Clarity on SARS Views requires careful drafting of Sales of Going Concern Agreements
Tax implications in relation to the assumption of contingent liabilities in part settlement of the purchase price of assets acquired as part of a going concern. The South African Revenue Service (SARS) released a detailed discussion paper, on 4 December 2013, presenting SARS’ initial views regarding the tax implications for the seller and purchaser in relation to the assumption of contingent liabilities (specifically “free-standing contingent liabilities”) in part settlement of the purchase price of assets acquired as part of a going concern. Such liabilities would include, for example, provisions for bonuses, leave pay, warranties etc.
Tax Administration Act – Suspension of payment of tax
Any taxpayer who wishes to object to or appeal against an assessment issued by the South African Revenue Service (SARS) must be aware that their obligation to pay any tax under that assessment is not automatically suspended by virtue of the submission of the objection or appeal itself. Any taxpayer who wishes for an objection or appeal to first be concluded before paying the tax due under an assessment would have to lodge a separate request for suspension of payment of tax in terms of section 164 of the Tax Administration Act No. 28 of 2011 (the TAA).
Sars’ bizarre decision in Shauwn Mpisane case
Tender queen’s company given a tax-clearance certificate by taxman despite state charges of tax fraud Shauwn Mpisane, Durban’s tender queen, has won a major battle to keep her business empire intact. She’s been awarded tax clearance by the SA Revenue Service (Sars). Mpisane is due back in court on Wednesday on tax fraud charges – charges brought against her by Sars. City Press can reveal that Mpisane’s Zikhulise Cleaning, Maintenance and Transport was awarded tax clearance on September 20, despite the court case, after repeated applications were refused by Sars officials in Durban. The clearance, which City Press has seen, is valid for a year. It states that Mpisane is in “good standing” with Sars and had not, as at that date, contravened the Income Tax Act or the Value Added Tax Act.
Income Tax Deductions v Value-Added Tax Deductions
Broadly speaking, in their ordinary business operations, certain entities are entitled to claim certain deductions for income tax and value-added tax (“VAT”) purposes. In this article we discuss the tests used by South African courts and in practice, for income tax and VAT purposes, in order to determine whether a taxpayer will be entitled to such deductions. Consideration will be given specifically to the deduction of legal expenses incurred by a taxpayer in terms of section 11(c) of the Income Tax Act No. 58 of 1962 (“Income Tax Act”) and the deduction of input tax in respect thereof in terms of section 1 read with section 7 of the Value-Added Tax Act No. 89 of 1991 (the “VAT Act”).
Taxpayer's rights on SARS audits
The Tax Administration Act, Act 28 of 2011 (the TAA) came into effect on 1 October 2012. Its promulgation brought with it many changes to not only taxpayers’ rights and obligations but the reciprocal rights and obligations on the part of the South African Revenue Service (SARS) in its continuous business of revenue collection. Some of the amendments and repeals of sections previously contained in the Income Tax Act No. 58 of 1962 (the Act) have seen a welcome improvement in taxpayers’ rights. One of these improvements is contained in section 42 of the TAA.
Determining A 'Group Of Companies' For Purposes Of The Corporate Rules
Author: Andrew Lewis (CliffeDekkerHofmeyr) The Income Tax Act, No 58 of 1962 (the Act) contains a definition of a ‘group of companies’ in s1 of the Act. However, a narrower definition of the term ‘group of companies’ is contained in s41 of the Act, which applies to certain corporate tax roll-over rules and other provisions contained in the Act. It is important to identify which companies fall within the different definitions of a ‘group of companies’ in order to determine whether one qualifies for the applicable tax relief.