Major new tax burden introduced

Author: David Warneke (Partner and head of Tax Technical at BDO South Africa). The Taxation Laws Amendment Act of 2017 (Act 17 of 2017) which was promulgated on 18 December 2017 contains provisions, namely section 22B of the principal Income Tax Act and paragraph 43A of the Eighth Schedule to the Income Tax Act, that will result in a significant compliance burden for companies, even in cases in which they do not result in additional taxation. The provisions deal with disposals of shares in a company (say A) that are held by another company (say B) in circumstances in which B held a significant portion of the equity shares (which the Amendment Act defines as a qualifying interest) in A at any time within the 18 months preceding the disposal. Section 22B applies in situations in which the shares that are the subject of the provision are held as trading Read More …

A win against SARS: late delivery of SARSs rule 31 Statement

Author: Mareli Treurnicht (Director at Cliffe Dekker Hofmeyr). On 17 October 2017 the Tax Court (Western Cape Division: Cape Town) delivered judgment in the matter between S Company v The Commissioner for the South African Revenue Service (SARS) under case number IT0122/2017. The judgment was handed down by Judge Cloete. This judgment is of great interest to any taxpayers currently involved in prolonged disputes with SARS, in particular where there are delays on the part of SARS.

No trade, no deduction a judgment about s11(a) of the Income Tax Act

Author: Louis Botha Tax (Cliffe Dekker Hofmeyr). On 20 April 2017, the Tax Court handed down its decision in X Group (Pty) Ltd v The Commissioner for the South African Revenue Service (Case No: 13671) (as yet unreported). The case dealt with an amount of R90 million that X Group (Pty) Ltd (Taxpayer) had claimed as an expense or loss during the 2007 year of assessment, which deduction was disallowed by the South African Revenue Service (SARS).

Buying a house and paying transfer duty Separate rights equals separate obligations

Author: Louis Botha (Associate at Cliffe Dekker Hofmeyr). In our recent Tax and Exchange Control Alert of 13 October 2017, we referred to the number of tax court judgments that were recently published by SARS on its website. One of these cases is the matter of Ms A and Mr B v The Commissioner for the South African Revenue Service (Case No IT13974 & 13993) (as yet unreported), handed down by the Tax Court on 24 March 2017. In this case Ms A and Mr B (Taxpayers) appealed against SARSs decision regarding the transfer duty payable on a property which they purchased in terms of a written sale agreement.

A taxpayer’s unfortunate experience with SARS

Author: Heinrich Louw. On 21 October 2016 judgment was handed down by the High Court (Gauteng Division, Pretoria) in the matter of BMW South Africa (Pty) Ltd v The Commissioner of the South African Revenue Service (as yet unreported). Briefly, the applicant (Applicant) was a vendor for purposes of Value-added Tax (VAT). The respondent, being the South African Revenue Service (SARS), had made a finding that the Applicant did not pay certain amounts of VAT due in respect of the October 2011 to February 2012 VAT periods.

When is an error a bona fide inadvertent error?

Authors:  Louis Botha, Heinrich Louw and Mark Morgan. On 4 November 2016 judgment was handed down by the Tax Court of South Africa (held in Cape Town) in the matter of ABC Holdings (Pty) Ltd v The Commissioner for the South African Revenue Service, Case number ITI13772. In this case the court had to consider whether the taxpayer, ABC Holdings (Pty) Ltd, was entitled to claim a deductible allowance of enhancement income of R9,354,458.00 received in terms of a contract for future expenditure in terms of s24C of the Income Tax Act, No 58 of 1962 (Act) for its 2011 year of assessment. The other issue that arose in this case and which is the focus of this article, was whether the South African Revenue Service (SARS) was correct to levy an understatement penalty in the circumstances.

Section 73 of the VAT Act: The serious consequences of unlawful tax avoidance

When disputing a tax debt, especially one involving the complex issue of unlawful tax avoidance, taxpayers should always exercise great caution. This sentiment is echoed by the recent judgment in Dale v Aeronastic Properties Ltd (Commissioner for the South African Revenue Service and Others Intervening) (9297/2016) [2016] ZAWCHC 160 (25 October 2016). Although the court in this case was concerned with whether an order to place the respondent taxpayer, Aeronastic Properties Ltd (Aeronastic), under business rescue, its precarious financial situation was caused largely by an expensive tax debt. In the course of its judgment, the court made reference to the taxpayer’s dispute with the South African Revenue Service (SARS), which dispute is the subject of this article.

Sold to the highest bidder…unless you didn’t pay VAT

Before buying anything, a purchaser should always be aware of all its obligations. This is one of the lessons to draw from the decision in Sheriff of the High Court, Piketberg and another v Lourens; In re: Standard Bank of South Africa Ltd v Trustees for the time being of the Eila Trust and others [2016] 4 All SA 239 (WCC). In this case the court had to decide, among other things, whether the sale of a property in execution could be set aside, where the purchaser had not met his obligations in terms of the Value-Added Tax Act, No 89 of 1991 (VAT Act), read with the conditions of sale.

When debt and creativity meet – a recent Tax Court decision

In the current tough economic times, it is common for companies to consider alternative funding arrangements to fund their activities, which minimise their cash flow obligations to third parties in the short term, while also ensuring that they comply with the relevant tax legislation and utilise it to their advantage. One option to consider in this regard, is the creation of a loan account by a debtor in favour of a creditor. In CLDC v The Commissioner for the South African Revenue Service (VAT1247) [2016] ZATC 6 (5 September 2016), handed down by the Tax Court on 5 September 2016, the court had to deal with this issue and specifically the consequences of s22(3) of the Value-Added Tax Act. No 89 of 1991 (VAT Act).

Alas, sometimes you can’t appeal

Author: Louis Botha (Cliffe Dekker). A certain question has been the subject of a number of recent court cases: Is an interim order or a decision which does not dispose finally of a case appealable? The Constitutional Court recently had to answer this question in two separate cases – one involving the changing of street names in Tshwane and the other involving the provisions of the National Credit Act, No 34 of 2005. The issue has now also reared its head within a tax context in the Supreme Court of Appeal (SCA). In Wingate-Pearse v CSARS (830/2015) [2016] ZASCA 109 (1 September 2016), a taxpayer wanted to appeal, among other things, the Tax Court’s decision regarding the onus of proof and the duty to commence leading evidence.