Is it time to lower South Africas income tax rates?

Author: David Warneke, Head of Income Tax Technical, BDO South Africa. A fundamental question posed by commentators around the 2018 National Budget was whether an increase in personal or corporate income tax rates, or both, would be announced. The consensus, which proved to be correct, was that such increases were unlikely. The main reasons given were that personal and corporate income tax rates are already high by international standards. Personal income tax rates, mainly due to the introduction of the 45% maximum marginal rate in the 2017/2018 income tax year of assessment for taxable income above R1.5 million, and also since relatively high marginal rates are reached at low taxable income levels, by global standards. Corporate income tax rates, as the rates in most of our main trading partners are lower than ours and globally rates are decreasing.

Notification of commencement of audit

By Yashika Govind, Senior Associate and Nirvasha Singh, Partner at Webber Wentzel. The obligation of SARS to collect tax and taxpayers’ rights are often at odds with each other. In an attempt to address this issue, the Budget 2018 (Budget) proposes to reconcile the taxpayers’ constitutional rights with SARS’ constitutional obligations by including a provision in the Tax Administration Act 28 of 2011 (TAA) stipulating that SARS must inform the taxpayer at commencement of the audit when the information submitted in a tax return will be audited. The provision is intended to cover desk audits which involve inspection or enquiries, without necessarily meeting with the taxpayer or third parties in person.

SARS cuts the 2018 tax season by a month!

TAX SEASON 2018 FOR INDIVIDUALS This just in: SARS announced on their website that they have shortened the 2018 tax season for non-provisional tax payers (individual tax payers who earn a salary and who do not have additional income sources such as interest or rental income) by month to allow more time for finalising verifications and audits before year end. In the past, non-provisional tax payers, submitting their tax returns via efiling, had until the end of November to do so. This year, the tax season for non-provisional tax payers will close on the 31st of October 2018. The 2018 tax season for non-provisional tax payers will start on the 1st of July 2018 and end on the 31st of October 2018, for tax payers submitting their returns via e-filing. Tax payers who manually submit their tax returns will have until the 21st of September 2018 to do so. Provisional Read More …

Procedure is everything: A win for the taxpayer and the importance of the right to just administrative action

Author: Louis Botha (Associate at Cliffe Dekker Hofmeyr). In recent times, taxpayers have often been unsuccessful in their disputes with the South African Revenue Service (SARS), especially where the dispute involved the interpretation or application of the substantive provisions of tax legislation. However, where disputes have involved compliance with the procedural requirements of tax legislation, taxpayers have generally had greater success. The judgment in Mr A v The Commissioner for the South African Revenue Service (Case No. IT13726) (as yet unreported), falls into the second category and is the subject of this article.

SARS issues new guide to understatement penalties – a march toward further certainty?

Author: Jerome Brink (Senior Associate at Cliffe Dekker Hofmeyr). The Tax Administration Act, No 28 of 2011 (TAA) was promulgated with effect from 1 October 2012. The rationale behind the introduction of the TAA was that it would streamline, modernise and align the previous tax administration provisions to ultimately lower the cost and burden of tax administration in South Africa. One of the key changes to the tax administration regime in South Africa pursuant to the promulgation of the TAA was the conversion from the imposition of additional tax by SARS to the understatement penalty regime.

Common misconceptions: Tax treatment of directors’ fees derived by non-residents

Author: Leani Nortje, Senior Associate, Webber Wentzel. Many non-residents that derive directors’ fees from a South African tax resident company believe that because they are non-resident and pay tax in their country of residence on such directors’ fees they are not liable to tax in South Africa. This is a common misconception as non-residents remain taxable on South African sourced income (subject to tax treaty relief).

Did the punishment fit the crime? The Tax Court reduces an understatement penalty imposed by SARS

Author: Louis Botha (Associate at Cliffe Dekker Hofmeyr). The imposition of understatement penalties in terms of Chapter 16 of the Tax Administration Act, No 28 of 2011 (TA Act) and the factors to consider when imposing such a penalty: An issue that our courts have not dealt with much. In this regard, the judgment of the Tax Court in XYZ CC v The Commissioner for the South African Revenue Service (Case No. 14055) (as yet unreported), handed down on 20 November 2017, sets out some helpful principles.

Deductibility of legal expenses

Author: Gigi Nyanin (Associate at Cliffe Dekker Hofmeyr). For purposes of determining the taxable income derived by any person from carrying on a trade, s11(c) of the Income Tax Act, No. 58 of 1962 (Act) provides for the deduction of legal expenses which arise in the course of or by reason of a taxpayers ordinary trading operations. More specifically, any legal expenses actually incurred by a taxpayer in respect of any claim, dispute or action at law arising in the course of or by reason of the ordinary operations undertaken by the [taxpayer] in the carrying on of [its] trade will be deductible.

A win against SARS: late delivery of SARSs rule 31 Statement

Author: Mareli Treurnicht (Director at Cliffe Dekker Hofmeyr). On 17 October 2017 the Tax Court (Western Cape Division: Cape Town) delivered judgment in the matter between S Company v The Commissioner for the South African Revenue Service (SARS) under case number IT0122/2017. The judgment was handed down by Judge Cloete. This judgment is of great interest to any taxpayers currently involved in prolonged disputes with SARS, in particular where there are delays on the part of SARS.

Taxation of Income from two sources

What to do if you receive income from two sources? Taxpayers who receive income from more than one source of employment or pension are reminded that the employees tax (PAYE) deducted by the respective employers or pension funds may not be enough to cover their final tax liability on assessment. The reason for this is the manner in which a taxpayers tax liability is calculated on assessment. The South African tax system is based on the principle of adding together all sources of income of a taxpayer into a single sum, and applying a progressive tax rate table to determine the final tax liability of the taxpayer on assessment. A progressive tax rate system means that the more income is earned, the higher is the marginal tax rate and more tax is paid on assessment.