SARS rules on the PAYE and VAT implications of non-executive directors remuneration

Author: Beric Croome and Gerhard Badenhorst (Tax Executives at ENSafrica). The South African National Treasury indicated in the 2016 Budget Review that there are differing views as to whether the remuneration paid to a non-executive director (NED) is subject to employees tax, that is, pay-as-you-earn (PAYE) and whether a NED should register for value-added tax (VAT). It was suggested that these issues be investigated to provide clarity. In its final response document on the Taxation Laws Amendment Bill, 2016, National Treasury and the South African Revenue Service (SARS) proposed that SARS address the uncertainties relating to VAT and PAYE in relation to NED remuneration in an interpretation note.

Hybrid debt instruments what you need to know

Author: Michael Reifarth (Tax Executive at ENSafrica). The hybrid debt rules were introduced into the Income Tax Act, 1962 (the Act) and came into effect in 2014 by way of specific anti-avoidance provisions contained in section 8F and 8FA of the Act. The provisions relating to hybrid debt instruments as contained in section 8F of the Act seek to identify and provide for specific tax treatment of certain debt instruments that contain equity-like features. In instances where section 8F applies to a hybrid debt instrument, the legislation disallows the deduction of the amounts of interest incurred by the issuer and furthermore deems such amounts to be dividends in specie declared and paid by the issuer.

Trusts – the new position

On 19 January 2017 the Taxation Laws Amendment Act, No 16 of 2016 (2016 Amendment Act) came into effect. The 2016 Amendment Act introduced s7C into the Income Tax Act, No 58 of 1962 (Act) which provision will come into effect on 1 March 2017. Section 7C will bring about some important changes to the tax dispensation applicable to trusts.

The wait is over: This is what the Special Voluntary Disclosure Programme will offer

The Minister of Finance announced the Special Voluntary Disclosure Programme (SVDP) in the 2016 Budget Speech. The legislation governing the SVDP finally came into effect on 19 January 2017 when the Rates and Monetary Amounts and Amendment of Revenue Laws Act, No 13 of 2016 (Revenue Laws Act) and the Rates and Monetary Amounts and Amendment of Revenue Laws (Administration) Act, No 14 of 2016 (Revenue Laws Administration Act) were published in the Government Gazette.

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.