On 9 June 2014, the South African Revenue Service (SARS) announced that South Africa and the United States (US) had entered into an inter-governmental agreement (IGA) which facilitates the implementation of the US Foreign Account Tax Compliance Act (FATCA), and signifies an important step in South Africa’s journey in a global movement towards the automatic exchange of information for tax purposes. The so-called “Model 1A” agreement has not yet been ratified by Parliament. However, Public Notices confirming its implementation have been gazetted.
Category: GAAR
Getting to grips with Base Erosion and Profit Shifting (BEPS)
By AJ Jansen van Nieuwenhuizen, Tax Partner, Grant Thornton Johannesburg The winds of change blowing through South Africa to expand its tax base and revenues are not unique. Countries around the world are looking for ways to improve their financial situation and their attentions are increasingly focused on company profits. Especially since the low levels of corporate tax which multinationals like Amazon, Apple, Google and Starbucks paid in the past hit world headlines in 2013 and the term Base Erosion and Profit Shifting (BEPS) became commonly used in government and business circles.
Companies feel the pinch from changes to tax act
Author: Amanda Visser (BDLive) Some local companies are starting to feel the pinch following changes to the Income Tax Act which reclassify debt to equity when certain characteristics are present. Tax experts said last week the changes caught companies — whose loans from their multinational holding companies were subordinated in favour of creditors when they
Bribe tycoon Hathurani hit with R1.2bn tax bill
Author: Loni Prinsloo (BDLive) The SA Revenue Service (SARS) has swooped on Edrees Hathurani, the controversial cash-and-carry tycoon at the centre of a bribery scandal involving the regulator, the Financial Services Board (FSB). On Friday morning, SARS officials served a court order on Hathurani’s Africa Cash ‘n Carry, a warehouse-style business in southern Johannesburg which sells 15 000 products from cosmetics to electronics, effectively freezing its assets.
Rules on amalgamation transaction
Author: Heinrich Louw (DLACliffeDekkerHofmeyr) The South African Revenue Service (SARS) released Binding Private Ruling 171 (Ruling) on 9 June 2014. The facts were as follows. Two individuals, A and B,were each the sole members of close corporations C and D, respectively. C and D each held half of the issued share capital of a company E. It appears that C and D also each had a loan claim against company E, while A and B each had a loan claim against C and D, respectively.
Tax Avoidance -Simulated transactions
In Roshcon (Pty) Ltd v Anchor Auto Body Builders CC [2014] ZASCA 40 (Roshcon) the Supreme Court of Appeal (SCA), in a unanimous judgment drafted by Wallis JA, has clarified the issues caused by its previous decision in SARS v NWK Limited [2011] SA 67 (NWK). Roshcon was not a tax case; it concerned supplier and floor plan agreements relating to the sale of trucks, with a reservation of ownership to a finance house as security until the trucks were fully paid for by the purchaser. On the assumption that NWK had transformed our law in regard to simulated transactions, counsel contended that the agreements in question were a disguise or simulation, amounting in fact to a pledge of the trucks without delivery or possession as required by law. In rejecting this argument, the SCA took great care to reaffirm the well-established principles relating to simulations, and to explain its Read More …
Base erosion and profit shifting (“BEPS”) – do you know what is coming?
As a result of the global financial crisis, the necessity for growth has become paramount and fiscal consolidation non-negotiable. Private sector growth is fundamental for economic recovery and to reduce deficits. There is a general belief, even in developing countries, that governments are losing substantial tax revenues as a result of aggressive tax schemes which result in the eroding of the tax base or the shifting of profits into more favourable tax jurisdictions.
SA Reserve Bank amends exchange control rules
South Africa’s exchange control rules require that a South African resident wishing to assign intellectual property to a foreign entity must obtain prior approval from the South African Reserve Bank. The Reserve Bank’s Financial Surveillance Department has recently issued a circular amending the exchange control rules. The amendment relaxes the exchange control rules, to a limited extent, to allow unlisted South African companies to list on stock exchanges located offshore and raise foreign loans and capital more easily.
Tax Avoidance (GAAR) – Real intention of contracting parties
CIR v Sunnyside Centre (Pty) Ltd [1996] 58 SATC 319 clearly stated that South African taxpayers must sleep in the (contractual) beds they make: “When a scheme works, no tears are shed for the Commissioner. That is because a taxpayer is entitled to order his affairs so as to pay the minimum of tax. When he arranges them so as to attract more than the minimum he has to grin and bear it.”
International tax transparency: the need for automatic exchange of information
In recent years, the international tax environment has seen an increase in the global drive towards greater financial transparency and the automatic exchange of financial information, which replaces the earlier standard of information exchange on request.