A recent, much publicised decision in the Western Cape High Court declared certain provisions in the Magistrates’ Court Act (MCA) relating to the issuing of emolument attachment orders (EAO) to be invalid and unconstitutional. In the matter of University of Stellenbosch Legal Aid Clinic and Others v Minister of Justice and Correctional Services and Others (Case No. 16703/14) application was made to have EAOs issued against a number of clients of the applicant declared invalid. An EAO permits the attachment of a debtor’s earnings and obliges the debtor’s employer (garnishee) to pay a specified amount out of the debtor’s earnings to the creditor or the creditor’s attorney until the debt and legal costs have been fully paid.
Category: Tax Administration
Disclosure to SARS and the treatment of pay-as-you-earn
Authors: Nicole Paulsen and Gigi Nyanin The disclosure to the South African Revenue Service (SARS) of potential tax defaults can be addressed in various ways. However, the formal Voluntary Disclosure Programme (VDP), as contemplated in the Tax Administration Act, No 28 of 2011 (TAA), is the preferred and recommended option. The VDP is a formal statutory process, regulated under Part B of Chapter 16 of the TAA, in terms of which a taxpayer can approach SARS voluntarily to regularise its tax affairs with the prospect of obtaining various forms of relief. It is important to note that upon a successful VDP application, the VDP process does provide relief in respect of understatement penalties (which could be up to 200% in severe cases), 100% relief from administrative non-compliance penalties and in addition thereto, SARS will not pursue criminal prosecution.
The right of tax authorities to demand production of documents
A recent decision in the Federal Court of Canada in the matter of Minister of National Revenue v BP Canada Energy Company 2015 FC 714 dealt with the Canadian law concerning the right of the Canadian Revenue Authority (‘CRA’) to demand information from taxpayers. In the preparation of its annual financial statements, BP Canada Energy Company (‘BP’) prepared workings in which it analysed tax positions that it had taken in which there might have been a difference between its interpretation of the law and the interpretation of the CRA. These working papers supported a reserve for tax contingencies. They also listed issues on which the interpretation was uncertain (‘issues list’).
Exchange control: Constitutional Court ruling on SARB 10% exit charge to Shuttleworth
During a budget speech in 2003, the Minister of Finance imposed what was termed a 10% exit charge on monies leaving the country in excess of R750 000. In 2009, Mr Shuttleworth applied to the South African Reserve Bank (“the SARB”) for permission to transfer approximately R2.5 billion out of South Africa. The SARB granted Mr Shuttleworth permission to transfer this amount on condition that he paid the exit charge. Mr Shuttleworth paid the charge of approximately R250 million. He was later advised that the exit charge was a tax and had been imposed in a manner not permitted by the Constitution or the applicable statute.
Ex parte preservation orders: Krok v CSARS
This case was an appeal from the Gauteng Division of the High Court to the Supreme Court of Appeal (“SCA”) pertaining to the correctness of the granting of an ex parte preservation order applicationthat was brought against Mr Krok by the Commissioner of the South African Revenue Service (“SARS”) in terms of sections 163 and 185 of the Tax Administration Act No. 28 of 2011 (the “TAA”). The Court had to determine the question having regard to the application of the Double Taxation Agreement (“DTA” – as amended by a protocol) between South Africa and Australia.The DTA provided for the mutual assistance between the two jurisdictions for the collection of taxes.
Tax Court confirms importance of properly recording all matters relating to tax affairs
Author: Esther van Schalkwyk, Tax Consultant, BDO South Africa Section 102 of the Tax Administration Act places the burden of proving, amongst other things, that an amount or item is deductible or may be set-off, on the taxpayer. SARS, on the other hand, bears the onus in respect of, amongst other things, the facts on which SARS based the imposition of an understatement penalty. The Tax Court recently handed down judgment in VAT case no. 867, in which the Court once again confirmed the importance of the onus of proof in tax disputes.
SARS: 2 MILLION INCOME TAX RETURNS SUBMITTED
The South African Revenue Service (SARS) is pleased to announce that it passed the 2 million mark of income tax returns by tax payers. This happened on Thursday, 20 August 2015 at 17:00. This indicates that 44.77% of taxpayers required to submit a tax return have already done so compared to 39.31% at the same time last year. The Tax Season began on 1 July 2015, when taxpayers could officially commence completing and submitting their 2015 tax returns. So far, 2 001 287 personal income tax returns have been submitted to SARS. Of the total submissions, 1 066 978 (53.31%) have been via eFiling while 933 527 (46.64%) of taxpayers opted to submit at our branches. A total of 783 (0.04%) taxpayers have submitted manually via post or a SARS drop box.
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.
How to substantiate an input tax deduction without a tax invoice
The VAT process is fairly simple if you have a tax invoice to substantiate your entitlement to an input tax deduction. However, if the supplying vendor fails to issue you with a tax invoice, the question then arises as to whether you, as the recipient vendor, can rely on section 20(7) or section 16(2)(f) of the Vale-Added Tax Act No 89 of 1991 (the “VAT Act”) by using the contract between the parties to substantiate your entitlement to an input tax deduction? This was the question posed in an appeal in the Western Cape High Court case of South Atlantic Jazz Festival (Pty) Ltd v CSARS 2015. South Atlantic Jazz Festival (Pty) Ltd (the ”appellant”) held annual jazz festivals and had concluded sponsorship agreements with various companies (”sponsors”) in terms of which the sponsors paid money and provided goods and services to the festivals and, in return, the appellant provided branding and marketing. All parties were registered VAT vendors. The court Read More …
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 …