JOHANNESBURG – Taxpayers who accidentally reduce their tax liability due to a reasonable mistake without any intent to defraud the Taxman, won’t be subjected to harsh understatement penalties in future. The Tax Administration Laws Amendment Bill was introduced in the National Assembly last week and revises regulations to such an extent that the South African Revenue Service (Sars) won’t impose penalties in cases where the understatement by the taxpayer “results from a bona fide inadvertent error”. This follows criticism from tax practitioners and taxpayers on the harsh penalties previously imposed even where taxpayers had no intention of deceiving Sars.
Category: Corporate Tax
IN 75 – Exclusion of Certain Companies and Shares From "group of companies"
This Note provides guidance on the application of the proviso to the definition in section 41(1). Under certain circumstances the corporate rules provide relief from income tax when assets are disposed of between companies forming part of the same “group of companies” as defined in section 41(1). Generally these relief measures defer the income tax on income and capital gains until the asset is disposed of to a third party or until a de-grouping occurs.
Issue of shares as consideration
In order for the ownership of assets to pass from a seller to a buyer it is necessary that the parties agree three essential elements: price, terms and structure. These three elements are interdependent in any transaction. For instance, after agreeing the price of a transaction, i.e. the number of rands or rand value of other consideration the seller will receive, the parties will need to agree the terms such as whether the price will be paid by means cash, debt and/or shares as well as the timing of these payments.
SARS to fight for its fair share of the tax pie
Earlier this year Minister Pravin Gordhan (“the Minister”) announced the members of the Tax Review Committee (“the committee”) as well as the committee’s terms of reference. The terms of reference for the committee include inquiring into the role of the South African tax system in the promotion of inclusive economic growth, employment creation, development and fiscal sustainability. The committee is required to take into account recent domestic and global developments and, in particular, the long-term objectives of the National Development Plan (NDP) and thereafter make recommendations to the Minister. Any tax proposals arising from these recommendations will be announced as part of the normal budget and legislative processes.
Securities lending – tax implications arising from the taking of cash collateral
South African residents are taxed on their worldwide income. In particular, the Income Tax Act includes in “gross income” any amount received or accrued that is not of a capital nature. Based on case law, an amount “accrues” to a taxpayer when the taxpayer becomes unconditionally entitled to receive it (CIR v Genn and Company (Pty) Ltd, (20 SATC 113)).
Tax Adminstration Act No 28 of 2011 – Tax Litigation
Tax litigators will now have to consider, inter alia, the impact of certain provisions under the Tax Administration Act No. 28 of 2011 (the TAA) as amended by the Tax Administration Laws Amendment Act No. 21 of 2012 on the doctrine of legal professional privilege and a recent judgment reflecting the view of a court with regards to the adherence to the rules of the Tax Court by the South African Revenue Service (SARS).
International Tax – Mutual Assistance between South Africa and UK DTA
In the recent case of Ben Nevis (Holdings) Limited & Metlika Trading Limited v The Commissioners for HMRC (Her Majesty’s Revenue and Customs) [2013] EWCA, the Court of Appeal of England and Wales considered the interpretation of the mutual assistance provisions in the double tax agreement (DTA) between the United Kingdom (UK) and South Africa (SA).
South Africa Tax Statistics 2013
Author: SARS Legal and Policy The National Treasury and SARS jointly publish tax statistics annually. These aggregated statistics are compiled from SARS’s registers of taxpayers and from tax returns. These statistics complement other published social and economic data. The statistics are finding wide use within government, business, academia and non-governmental organisations.
A New Capital Revenue Tax Decision
Author Peter Surtees (Norton Rose) On 13 June 2013 the Cape tax court delivered judgment on a capital/revenue case, which resulted in a partial victory for both sides. The taxpayer was a company whose sole purpose was to hold a parcel of shares. The question in issue was whether, when the company sold the parcel, the gain was capital or revenue in nature. As was to be expected, in arriving at its decision the court had to determine the intention of the company in holding and then disposing of the shares, and to do this it had to establish the intentions of
Taxation of Foreign Dividends
Author: Tarryn Spearman(Grant Thornton) Significant changes were introduced to the way foreign dividends, received by South African residents, are treated for tax purposes. The purpose of these changes is to eliminate the disparity between the tax treatment of domestic and foreign dividends.