Authors: Ruaan van Eeden and Danielle Botha (DLA Cliffe Dekker Hofmeyr) Draft Public Notice The South African Revenue Service (SARS) recently issued a Draft Public Notice (Draft Notice) listing transactions that constitute reportable arrangements (RA’s) for purposes of s35(2) of the Tax administration Act, No 28 of 2011 (TAA). The Draft Notice, once finalised, is intended to be supplementary to any previous notices issued with regard to RA’s and serves as an extension of the existing listed RA’s. Existing reportable arrangements include certain arrangements qualifying as hybrid equity instruments in terms of s8E and 8F of the Income Tax Act, No 58 of 1962 (ITA).
Category: SARS Binding Rulings
Buy-back of shares at a purchase price in excess of their market value
Author: Andrew Lewis (DLA Cliff Dekker Hofmeyer) An interesting advance tax ruling was released by the South African Revenue Service (SARS) on 12 March 2014. Binding Private Ruling 164 (Ruling) deals with the buy-back of ordinary shares by a company at an amount in excess of the market value of the shares. The facts of the proposed transaction are relatively simple. As part of a Broad-Based Black Economic Empowerment (B-BBEE) transaction, a company (BEECo) acquired 40% of the ordinary shares (shares) in a South African incorporated and resident company (applicant). The acquisition of the shares was financed by the BEECo through the issue of cumulative redeemable preference shares to various investors, the majority of which were financial institutions.
Re-financing and buy-back of shares
Author: Heinrich Louw (DLA Cliff Dekker Hofmeyer) The South African Revenue Service (SARS) released Binding Private Ruling 163 (Ruling) on 12 March 2014. The Ruling deals with the tax consequences of a transaction involving the re-financing of various loans and the application of the proceeds for purposes of a share buy-back. The facts are briefly as follows. Company X owns 49.3% of the issued shares of company Y. The balance of the issued shares of company Y are held by various individuals, companies, trustees of trusts and executors of deceased estates (other shareholders).
Exemption employee share ownership plan rulings
Introduction The tax implications for the various participants of a share incentive scheme are complex and the legislation is not necessarily clear. In recent years, share incentive schemes have been a particular focus of the South African Revenue Service (SARS) and the National Treasury, and there have been regular amendments to the tax legislation. It is no wonder that SARS is issuing a number of binding private and binding class rulings that relate to share incentive schemes. Rulings Binding Private Ruling 161 is one such recent ruling. Released on February 5 2014, the ruling deals with the income tax and employees’ tax consequences for the employer and the trust used to facilitate an employee share ownership plan (ESOP).
Trusts – Distributions from and donations to foreign trusts
On 18 November 2013 the South African Revenue Service (SARS) issued Binding Private Ruling 157 (BPR). The Applicant, a natural person and resident in South Africa, was a beneficiary of two non-resident discretionary trusts A and B. Trusts A and B held various foreign assets such as loan accounts, cash, and shares. Specifically, trusts A and B held all the shares in non-resident companies A and B. It was proposed that trusts A and B would distribute certain of their foreign assets to the Applicant. Upon receipt, the Applicant would donate the assets to a non-resident trust C.
Ruling on definition of 'listed shares'
The South African Revenue Service (SARS) released Binding Class Ruling 42 on February 7 2014. The factual circumstances in respect of which the ruling was made are as follows: Company Y is a company incorporated and resident in foreign country Y. Company X is a company incorporated and resident in country X. Company X is a wholly owned subsidiary of Company Y. Company X is to be listed on the JSE Limited. Company X’s business is investment in foreign debt instruments, on which it will receive interest returns. Company X intends to raise funds for its business by issuing certain preferred securities. The preferred securities will be issued through its branch in country Y. The preferred securities would:
THE Employment Tax Incentive (ETI) calculations explained
Formulas are sometimes difficult to understand so we have step-by-step examples and a handy ETI calculator. The examples and the ETI calculator are intended to help you work out your incentive amount which may be claimed. We draw your attention to the following: Disclaimer: What is contained in this calculator is intended as a guide only and is not considered to be a legal reference nor is it a binding ruling. The calculator does not take the place of legislation and readers who are in doubt regarding any aspect of the information displayed in the questionnaire should refer to the relevant legislation, or seek a formal opinion from a suitably qualified individual. More information Contact us It remains the responsibility of the employer to ensure the information provided, when using the ETI calculator, is accurate and the requirements are met for the employer and the employees to qualify. [spoiler title=”Example Read More …
Ruling on the definition of 'listed shares' for purposes of the foreign dividend exemption
Author: Heinrich Louw (Cliff Dekker Hofmeyer) The South African Revenue Service (SARS) released Binding Class Ruling No 42 on 7 February 2014. The factual circumstances in respect of which the ruling was made are as follow: Company Y is a company incorporated and resident in foreign country Y. Company X is a company incorporated and resident in country X. Company X is also a wholly-owned subsidiary of Company Y. Company X is to be listed on the JSE Limited. Its business is investment in foreign debt instruments, on which it will receive interest returns.
Employee share ownership plan ruling
Author: Andrew Lewis (Senior Associate at Cliff Dekker Hofmeyer) The tax implications for the various participants of a share incentive scheme are complex and the legislation is not necessarily clear. In recent years, share incentive schemes have been a particular focus of the South African Revenue Service (SARS) and National Treasury with regular amendments to the tax legislation. It is no wonder that we see a number of binding private and binding class rulings being issued by SARS that relate to share incentive schemes. Binding Private Ruling No 161 (BPR 161) is one such recent ruling, released on 5 February 2014, which deals with the income tax and employees’ tax consequences for the employer company and the trust used to facilitate an employee share ownership plan (ESOP).
Amalgamation transactions following asset-for-share transactions
The South African Revenue Service (SARS) recently released Binding Private Ruling 159 (Ruling), which deals with the disposal of assets, being shares, in terms of an amalgamation transaction immediately after having acquired those shares in terms of an asset-for-share transaction. The facts were that companies A and B are controlled by various shareholders (individuals and family trusts). The shareholders wanted to hold their investments through a single company and not through both companies A and B.