The 2016/17 Budget announced a concerted drive to target offshore funds and thereby broaden a tax base that is struggling to keep up. “This is not surprising as some companies and wealthy individuals have been making requests about regularising their affairs ahead of the new OECD global standard for the automatic exchange of financial information between tax authorities coming into effect from 2017,” says tax director at Cliffe Dekker Hofmeyr, Ruaan Van Eeden. The proposal is to provide voluntary disclosure relief in respect of tax and exchange control for a period of six months, from 1 October 2016, to allow non-compliant individuals and companies to disclose assets held and income earned offshore. Trusts have been specifically excluded from the voluntary disclosure process.
Category: GAAR
Gordhan to target offshore funds
Author: Linda Ensor (BDlive) Finance Minister Pravin Gordhan is widely expected to announce a new foreign exchange control and tax amnesty in his budget on Wednesday in a bid to encourage taxpayers who have not disclosed billions of rand worth of offshore assets to declare them and pay the due tax. The move would help to reduce the government’s revenue shortfall, as well as broaden the tax base for future years. A new amnesty, along the lines of the previous one in 2003, is one of a raft of measures Mr Gordhan is expected to announce as the government tries to stave off a downgrade of SA’s sovereign credit rating to junk status.
New reportable arrangement: non-resident service providers
The South African Revenue Service (SARS) published notice No 140 in the Government Gazette (No 39650) on 3 February 2016, in terms of s35(2) of the Tax Administration Act, No 28 of 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:
Retroactive application of double tax agreement
On 16 October 2015, a Protocol amending the double tax agreement (DTA) between South Africa and Cyprus was published in the Gazette. In normal circumstances, the promulgation of a protocol does not cause much excitement. However, one of the articles in the Protocol raises unusual issues. Article IV of the Protocol contains two paragraphs: The first paragraph provides that each of the states shall notify the other of the completion of the procedures required by its domestic law to bring the Protocol into effect, and that the Protocol shall come into effect on the date of receipt of the later of these notifications. The operative date in that respect was 18 September 2015.
New rules for international cooperation on taxpayer’s affairs
Author: Ferdie Schneider (BDO). Greater transparency will expose undeclared offshore accounts Globalisation has dramatically increased cross-border financial activities.This necessitated enhanced co-operation and understanding between tax authorities to curb tax evasion and to ensure a fair allocation of taxes among the jurisdictions in which the activities take place. The Organisation for Economic Co-operation and Development (OECD) developed a Common Reporting Standard (CRS) for the automatic exchange of information relevant to tax. Over 50 jurisdictions have agreed to comply with the CSR, including South Africa, committing to exchange data in September 2017. Other jurisdictions will participate from 2018.
Greater tax transparency for multi-nationals a step closer
Author: Amanda Visser (MoneyWeb). Additional record-keeping requirements published. The South African Revenue Service (Sars) has published additional record-keeping requirements for large multi-national companies which they will have to comply with in future. Many companies have already included some of the required information in their transfer pricing documentation and on their annual tax returns, but there seems to be uncertainty about the format in which it must be available to Sars.
Estate duty implications for non-resident individual investors in South African assets
Author: Heinrich Louw. On 21 January 2016, the South African Revenue Service (SARS) issued Binding Private Ruling 217 (Ruling). The Ruling deals with the estate duty implications for non-resident individual investors (Investors), specifically where such an Investor, who is a resident in Country X, purchases a linked investment plan from a company incorporated and resident in Country X, which carries on the business of life insurance (the Company). The key issue was how certain sections of the Estate Duty Act, No 45 of 1955 (EDA), would apply.
Interpretation of the term ‘substantially the whole’
Authors: Nicole Paulsen and Gigi Nyanin. The South African Revenue Service (SARS) released Binding General Ruling No. 20 (issue 2) (BGR 20) on 20 January 2016, which provides clarity on the interpretation of the term ‘substantially the whole’ as referred to in specific sections of the Income Tax Act, No 58 of 1962 (Act).
Victory for taxpayer in motor vehicle salary sacrifice scheme
In Anglo Platinum Management Services v SARS,(1) the Supreme Court of Appeal (SCA) recently ruled in favour of the taxpayer in respect of a motor vehicle salary sacrifice scheme. The judgment underlines the importance of employers and employees properly agreeing, understanding and implementing any remuneration structures that contain a salary sacrifice component. Background A ‘salary sacrifice’ or ‘salary substitution’ arrangement is essentially the substitution of a cash component of an employee’s overall cost-to-company remuneration package for a non-cash benefit, generally resulting in a lower amount subject to the deduction of employees’ tax.
Converting loans into equity: another SARS ruling
Author: Ben Strauss. The issue of ‘converting’ loans into share capital remains a vexing one. The matter was again the subject in Binding Private Ruling 213 (Ruling) issued by the South African Revenue Service (SARS). The facts of the Ruling are common. To fund its operational expenditure, a company resident in South Africa borrowed money from its non-resident holding company and other non-resident companies related to the holding company. The holding company proposed to subscribe for further ordinary no par value shares in the local company. The subscription price would be equal to the total amount of the local company’s indebtedness to the holding company and the related companies. Notably, the subscription price would be paid in cash. The local company would then use the cash to settle the capital of, and the interest on, the loans. SARS ruled as follows in relation to the proposed transaction: The issue of Read More …