Amendments to the Special Voluntary Disclosure Programme

Author: Mareli Treurnicht. On 24 February 2016 the Minister of Finance announced the Special Voluntary Disclosure Programme (SVDP) as part of the 2016 Budget Speech. On the same date, the draft Rates and Monetary Amounts and Amendment of Revenue Laws Bill (First Draft Revenue Laws Bill) and the draft Rates and Monetary Amounts and Amendment of Revenue Laws (Administration) Bill were released. These bills contained the proposed provisions in respect of the SVDP. Following input from the public, National Treasury released the amended draft Rates and Monetary Amounts and Amendment of Revenue Laws Bill (Second Draft Revenue Laws Bill) and the amended draft Rates and Monetary Amounts and Amendment of Revenue Laws (Administration) Bill (Second Draft Revenue Laws Administration Bill) on 19 July 2016. An Explanatory Memorandum and a media statement on the SVDP accompanied these bills.

About mines and houses: a ruling on expenditure incurred to implement a housing scheme

In our Alert of 29 April 2016, we discussed the Ruling dealing with the tax consequences of a housing scheme carried out by a mining company, specifically whether such a housing scheme would give rise to a fringe benefit in the hands of the beneficiaries of the scheme (Every house has a story: Does employer-provided accommodation always constitute a fringe benefit?). In this article, we discuss another Ruling dealing with certain tax consequences from the perspective of the mines which implement the housing scheme. On 10 June 2016, the South African Revenue Service (SARS) issued Binding Private Ruling 239 (Ruling) which deals with the income tax consequences resulting from cash contributions to be made by the Applicant (as a party to a mining joint venture) to a special purpose vehicle established to provide housing for the employees of the joint venture and the Applicant’s group of companies.

Tax relief to revive flagging SA shipping industry

Author: David Warneke, Tax Partner, BDO South Africa. From 1 April 2014[1], South African (SA) resident companies engaged in international shipping have enjoyed a far better income tax dispensation than before. If you are involved in this industry, make sure your company is enjoying the benefits described below. Prior to this date, international shipping income derived by such companies was generally subject to SA tax at the rate of 28%, the rate applicable to other types of companies. The only particular incentive for such companies was related to tax depreciation on the cost of their ships. SA had a wholly uncompetitive tax dispensation for such companies, whereas in order to attract such companies, many other jurisdictions have either introduced a ‘tonnage tax’ – tax based on the tonnage of the ship rather than profits of the shipping company – or exempted such income from tax altogether.

Cross Border Interest Paid by a South African Resident: Tax Issues that Arise

Author: Siyasanga Madikazi (Tax Trainee), BDO South Africa. Cross border transactions, as well as growth in international trade between companies within the same group, has increased significantly in recent years. This often results in debts between resident and non-resident companies and numerous complexities from a South African tax perspective. Interest payments by residents to non-residents are generally subject to interest withholding tax (WHT) at 15%. Whether WHT applies depends on whether a Double Tax Agreement (DTA) between South Africa and the country of residence of the recipient exists to give South Africa the rights to tax. It also depends on whether the interest is subject to South African income tax (as opposed to interest WHT) in the hands of the non-resident recipient.

Reportable Arrangements – Foreign Services

Author: Khutjisho Ramosebudi (Tax Trainee), BDO South Africa. SARS Public Notice 140 (3 February 2016) contains a new list of Reportable Arrangements (RAs) in terms of the Tax Administration Act (TAA). The RA regime acts as an early warning for SARS in respect of various types of arrangements that could pose a risk to the fiscus. RAs do not necessarily allow SARS to act, for example, by disregarding or re-characterising steps in or parts to the arrangement in terms of the general anti-avoidance provisions in the Income Tax Act.

Brief window of opportunity for South Africans named in the Panama Papers

A number of South African individuals, trusts and companies feature in the recent data leak involving clients of Panamanian law firm Mossack Fonseca. Although the publication of the data by the International Consortium of Investigative Journalists does not allege any violation of tax laws or exchange control regulations by those identified in it, the South African Revenue Service (“SARS”) and the South African Reserve Bank (“SARB”) have indicated that they will be investigating the tax and exchange control affairs of these South Africans. As a result, those named in the leak should consider urgent steps to address any potential tax or exchange control transgressions.

Update on the taxation of South African dividends to the Netherlands

Author: Stephan Spamer and Howmera Parak (ENSafrica). In 2014 and 2015, ENSafrica published two articles on the “most favoured nation clause” contained in article 10(10) of the protocol (“2008 Netherlands Protocol”) issued under the Netherlands/South Africa (“SA”) double tax agreement (“Netherlands/SA DTA”). In the 2014 article, ENSafrica highlighted the view that has been expressed in the market that article 10(10) of the 2008 Netherlands Protocol gives rise to a complete exemption from dividends tax in SA

Can a controlled foreign company have more than one foreign business establishment?

In terms of the South African controlled foreign company (“CFC“) legislation contained in section 9D of the Income Tax Act, 58 of 1962 (the “Act“), where South African residents directly or indirectly hold more than 50% of the total participation rights (essentially, the right to participate in the benefits of the rights attaching to a share) in a foreign company, a proportional amount of the “net income” of that foreign company (as a CFC) will be included in the income of those residents. In determining the “net income” of the CFC, section 9D(9)(b) of the Act exempts, inter alia, any amount which is attributable to any foreign business establishment (“FBE”) of that CFC.

International Tax – Reportable arrangement: non-resident service providers

The South African Revenue Service (SARS) published a Public Notice, Notice No. 140  in the Government Gazette (No 39650) on 3 February 2016, in terms of section 35(2) and 36(4)  the Tax Administration Act, 2011 (TAA). Among other things, the notice lists an additional reportable arrangement that was not included in previous notices. The following arrangement is now a reportable arrangement: An arrangement for the rendering of consultancy, construction, engineering, installation, logistical, managerial, supervisory, technical or training services to a person that is a:

Automatic Exchange of Information – FATCA, CRS, UK CDOT and other ominous acronyms

Author: Lisa Brunton (Senior Associate at Cleffe Dekker Hofmeyr). By now, we’re all familiar with the term, Automatic Exchange of Information (AEOI), otherwise referred to as ‘routine exchange’, but do we really appreciate what it means? From a South African fiscal perspective, AEOI involves the systematic and periodic transmission of taxpayer information by the source jurisdiction to the residence jurisdiction. This may also include instances where tax residence is based on differing criteria (eg domicile in the United Kingdom (UK); citizenship in the United States of America (USA)) or where an entity or person has tax obligations in several jurisdictions.