The shoe is on the other foot: The High Court orders SARS to discover documents in the context of a review application

Authors: Louis Botha and Nandipha Mzizi(Cliffe Dekker Hofmeyr). It seldom happens that the South African Revenue Service (SARS) is compelled to provide documents to a taxpayer, while SARS is conducting an audit. In Carte Blanche Marketing CC and Others v Commissioner for the South African Revenue Service (26244/2015) [2017] ZAGPPHC 253 (26 May 2017), the Gauteng Division of the High Court, Pretoria had to decide whether SARS should be compelled to produce certain documents requested by the applicants (Taxpayers) in the context of a review application brought by the Taxpayers. The main proceedings in this matter involve a review application which the Taxpayers brought against SARS seeking to set aside the decision of SARS to audit them in terms of s40 of the Tax Administration Act, No 28 of 2011 (TAA).

Can SARS limit legal professional privilege?

Authors: Natalie Napier and Phillip Lourens (Hogan Lovells). New rules have come into effect for how legal professional privilege is regulated, we look at what effects they may have in practise. Amendments have been made to the Tax Administration Act (the TAA) by the insertion of a new section 42A with effect from 8 January 2016. Section 42A prescribes the procedures and requirements that must be followed by the taxpayer in order to claim legal professional privilege in respect of relevant material required by SARS, during an inquiry or during the conduct of a search and seizure by SARS. 

SARS looks to clear up misconceptions relating to tax exemption for foreign employment income

The South African Revenue Service (SARS) issued Draft Interpretation Note 16 (Issue 2) (Draft IN) for public comment recently. When compared to the current Interpretation Note 16 (IN16), the Draft IN indicates a marked shift, on certain aspects, in SARS’s interpretation of the tax exemption that applies to foreign employment income, under s10(1)(o)(ii) of the Income Tax Act, No 58 of 1962 (Act).

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).

Proposed unilateral extension of prescription by SARS

Section 99 of the Tax Administration Act, 28 of 2011 (“Tax Admin Act”) regulates prescription in relation to tax assessments and provides for a three year prescription period in respect of income tax assessments and a five year prescription period in the case of self-assessment taxes (e.g. value-added tax and employees’ tax). Generally, the prescription period that prohibits SARS from issuing an additional assessment does not apply if the reason why the full amount of tax was not charged was due to fraud, misrepresentation or non-disclosure of material facts by the taxpayer. When the tax is a self-assessment tax, the basis on which the prescription period does not apply differs in that it refers to fraud, as well as intentional and negligent misrepresentation or non-disclosure.

Binding Ruling on issue of capitalisation shares

The South African Revenue Service (SARS) issued Binding Private Ruling No 201 (Ruling) on 13 August 2015. The Applicant, being a natural person, held 100% of the equity shares in a resident operating company (OpCo). OpCo, in turn, owned 100% of the shares in a dormant resident company (Co-Applicant). The parties wished to introduce a black-owned company (BEECo) as a shareholder in OpCo in order to improve its Black Economic Empowerment (BEE) credentials.

Construction and interpretation of tax legislation: then and now

The principle relating to the construction and interpretation of fiscal legislation are in general those relating to the construction and interpretation of statutes. As early as 1926 Judge Stratford held in Farrar’s Estate v CIR that ‘[the] governing rule on interpretationis to endeavour to ascertain the intention of the law-maker from a study of the provisions of the enactment in question‘. In regard to tax legislation, Income Tax Acts in particular, the language imposing the tax must receive a strict construction.  Judge Rowlett held in Cape Brandy Syndicate v I.R. Comrs that ‘…in a taxing Act one has to look at what is clearly said.  There is no room for any intendment.  There is no equity about a tax.  There is no presumption as to a tax.  Nothing is to be read in, nothing is to be implied.  One can only look fairly at the language used’.

A “how to guide” for SARS objections and appeals

Author: Anton Lockem of Shepstone & Wylie Attorneys As a taxpayer, if you receive an assessment from the Commissioner of the South African Revenue Services (“SARS”) that you disagree with, you can lodge an objection in line with the Tax Administration Act, No. 28 of 2011 (“the Act”). Under section 96(2) of the Act, the Commissioner has to supply the taxpayer with the grounds of the assessment.  It is often the case that the taxpayer needs to demand that the Commissioner comply with this statutory obligation, as there have been many cases where grounds have not been supplied.  Thetaxpayer is required to submit a request for grounds within 30 days of receiving an assessment.  Once grounds have been supplied, the taxpayer has 30 days to submit an objection to the assessment. Taxpayers need to submit the correct documentation for their objection in order for it to be valid: For personal income tax payers a notice of objection or form NOO is required via efiling; For corporate Read More …

Constitutional Court judgment on the in duplum rule – does it limit interest payable on a tax debt?

The recent Constitutional Court judgment of Paulsen and Another v Slip Knot Investments 777 (Pty) Limited 2015 centered on the common law in duplum rule.  The in duplum rule operates to protect debtors from becoming over-indebted to creditors  by only allowing arrear interest to accumulate up to the capital amount loaned to a debtor.  Interest ceases to run once the accumulated arrear interest equals the capital amount. In this case, the Constitutional Court held that the operation of the in duplum rule is no longer suspended for the duration of litigation.

Binding Private Ruling – Exemption from donations tax and the net value of an estate

On 1 July 2015, the South African Revenue Service (SARS) released Binding Private Ruling 197 (BPR 197) dealing with the donations tax consequences arising from the onward or subsequent donation of funds received by way of a donation from a foreign source. BPR 197 further deals with the estate duty consequences that will apply in the event of the foreign sourced funds being retained or used to acquire property that is located and remains outside South Africa.