New ITR14 requires country-by-country reporting in company tax returns

Authors:  Lavina Daya and Scott Salusbury. In October 2015, the Organisation for Economic Cooperation and Development (“OECD”) published its final reports on the Base Erosion and Profit Shifting (“BEPS”) project, including the final report on BEPS Action 13, Transfer Pricing and Country-by-Country Reporting (“Action 13 Report”). The Action 13 Report recommended a three-tiered approach to transfer pricing documentation, requiring a global master file and local file to be submitted by multinational enterprises (“MNEs”) to local tax authorities and a country-by-country (“CbC”) report to be submitted by the “ultimate parent entity” of an MNE in the jurisdiction in which it is tax resident. The CbC report will contain information to provide the tax authorities with an overview of the global allocation of income, business activities and taxes paid within the MNE. The tax authorities of various jurisdictions will share CbC reports through automatic exchange of information mechanisms, such as the Multilateral Competent … Continue reading

Tax Administration – Correction of errors in assessments

The Tax Administration Laws Amendment Act of 2015, which was promulgated on 8 January 2016, amended section 93(1)(d) of the TAA and  in future SARS will not be permitted to entertain so-called ‘requests for correction’ of tax assessments, except if SARS is satisfied that there is a (currently undefined) ‘readily apparent’ undisputed error in the assessment. It is likely that taxpayers will be severely discriminated against by this amendment. What is ‘readily apparent’ to one person may not be so to another. The number of cases in which SARS is likely to grant requests for corrections is likely to drop dramatically and a lack of consistency in interpretation between SARS’ assessors may be taken as a given.

An uncompromising stance – the dispute between SARS and Julius Malema continues

The High Court (Gauteng Division, Pretoria) recently handed down judgment in the case of Malema v Commissioner for the South African Revenue Service (76306/2015) [2016] ZAGPPHC 263 (29 April 2016).  The issue before the court was whether the South African Revenue Service (SARS) was bound to a compromise agreement entered into between the Malema (Applicant) and SARS as a result of alleged non-disclosures and misstatements made by the Applicant, who expressly warranted the truth of the facts furnished by him. The compromise agreement was concluded in accordance with the provisions of s205 of the Tax Administration Act, No 28 of 2011 (TAA).

SARS Tax Clearance Certificate – be cleared online

Author: Sduduzo Mhlongo (ENSAfrica candidate attorney). The South African Revenue Service (“SARS”) has introduced a new Tax Compliance Status System (“TCS”)  from 18 April 2016 in an effort to improve compliance and to make it easier for taxpayers to manage their tax affairs. The Tax Compliance Status System is a holistic view of the tax compliance level across all registered tax types. The new system makes it stress-free for taxpayers to obtain a Tax Clearance Certificate (“TCC”) and allows taxpayers to obtain a Tax Compliance Status PIN which can be used by authorised third parties to verify the taxpayer’s compliance status online via SARS eFiling. There are 2 steps in the process of obtaining a TCS:

Section 104 of the Tax Administration Act and the meaning of ‘exceptional circumstances’ – a cautionary tale

Author: Heinrich Louw (Senior Associate). In terms of s104 of the Tax Administration Act, No 28 of 2011 (Act), a taxpayer who is aggrieved by an assessment or decision of the South African Revenue Service (SARS), may object to the assessment or decision. The Act states that the objection must be lodged within 30 business days from the date of the assessment. A senior SARS official may extend this period by no more than 21 business days, unless the official “…is satisfied that exceptional circumstances exist which gave rise to the delay in lodging the objection”.

Budget 2016 – Adjustments to personal income tax

Following an increase in individual tax rates in the 2015 Budget and in light of the current economic circumstances which include lower estimated tax revenues, it was highly anticipated that the Minister would announce an increase in personal income tax rates in the 2016 Budget. Expectations varied between an increase in the maximum marginal rate of tax of 1% to 4%, bringing the maximum marginal rate of tax within the 42% to 45% range. It is thus with great surprise that the 2016 Budget introduces adjustments to the bottom three personal income tax brackets which effectively relieves the impact of inflation on lower- and middle-income earners. No amendments to the marginal tax rates were proposed.

SARS’s investigative powers – a possible backstage pass to matters pending before court?

Author: Yashika Govind (Associate at CLiffe Dekker Hofmeyr). Chapter 5 of the Tax Administration Act, No 28 of 2011 (TAA) confers a broad range of information-gathering powers on the South African Revenue Service (SARS). Taxpayers are often assessed for more than one tax period at a time, however, the waters become muddied when there are parallel processes carried on in which the issues being investigated by SARS, overlap with disputes pending before the Tax Court. The taxpayer is then saddled with defending itself in respect of a tax period before court while simultaneously sourcing and providing relevant material pertaining to the same legal issues for an audit of a later tax period. In these circumstances, there is often an overlap of facts, law and witnesses which will ultimately be presented in court, thus rendering the information gathering process questionable.

Tax administration: SARS’ constitutional obligations and taxpayers’ rights

Author: Andries Myburgh (Tax Director at ENSafrica). Given recent media coverage of the various Constitutional Court challenges involving government institutions and the Presidency; the perceived power struggle between the Commissioner for the South African Revenue Service (“SARS”) and the Minister of Finance; as well as SARS’ continued pressure to collect revenue in difficult economic times that see corporate taxpayers endure declining revenues and increasing costs; it is useful to remind taxpayers and their shareholders of their constitutional rights and SARS’ constitutional obligations when it performs its functions in administering various taxation legislation. This topic is very complex and, accordingly, what follows is a very broad overview of these issues. Taxpayers and their shareholders are encouraged to obtain specialised legal advice or assistance when confronted with potential investigations or audits by SARS.

Extent of tax fraud unknown – SARS

Author: Amanda Visser (IOL). The South African Revenue Service (SARS) still does not know the full extent of tax evasion, despite its work probing foreign bank accounts held by South African residents. It has been a year since SARS confirmed some account holders had been using their offshore accounts to evade their tax obligations, both locally and internationally. SARS received the damming information through international exchange of information agreements with foreign financial institutions.

Is tax advice given by an accountant covered by legal professional privilege?

Author: PwC South Africa. Does SARS have the power, in investigating a taxpayer’s affairs or in the context of a disputed tax assessment, to demand that it be allowed to scrutinise documents generated by his professional advisers that record tax advice that was sought and given? This depends on whether those documents are privileged in the legal sense of the word, for neither SARS, nor a court, nor any other person, has the right (unless a court order determines otherwise) to be given sight of another person’s documents that are covered by legal professional privilege.