The lawfulness of retrospective amendments in tax law

Author: Beric Croome. On 29 May 2017, Judge Fabricius delivered judgment in the Gauteng High Court in the case of Pienaar Brothers (Pty) Ltd vs Commissioner for the South African Revenue Service and the Minister of Finance, in a case dealing with the Taxation Laws Amendment Act, 2007 (the Amending Act) which inserted section 44(9A) into the Income Tax Act, 1962 (the Act). The taxpayer sought an order declaring that section 34(2) of the Amending Act is inconsistent with the Constitution, and invalid to the extent that it provides that section 44 (9A) of the Act shall be deemed to have come into operation on 21 February 2007 and to be applicable to any reduction or redemption of the share capital or share premium of a resultant in company, including the acquisition by that company of its shares in terms of section 85 of the Companies Act, on or after Read More …

Ubi ius, ubi remedium: Proposed amendments to the Tax Administration Act

Author: Louis Botha (Associate at Cliffe Dekker Hofmeyr). Currently, in terms of section 9 of the Tax Administration Act, No 28 of 2011 (TAA) a decision made by a South African Revenue Services (SARS) official and a notice to a specific person issued by SARS, excluding a decision given effect to in an assessment or notice of assessment is regarded as made by a SARS official, authorised to do so or duly issued by SARS, until proven to the contrary. Furthermore, s9 makes provision for such a decision to be withdrawn or amended by the SARS official, a SARS official to whom the SARS official reports or a senior SARS official, at the request of the relevant person.  

Foreign employment income exemption is this the end?

Author: Nandipha Mzizi (Candidate Attorney at Cliffe Dekker Hofmeyr). Currently, s10(1)(o)(ii) of the Income Tax Act, No 58 of 1962 (Act), states that if a South African resident works in a foreign country for more than 183 days a year, with more than 60 of those days being continuous, foreign employment income earned is exempt from tax, subject to certain conditions. This exemption is only available to employees from the private sector. Early this year in the 2017 Budget, it was proposed that the exemption be adjusted as it was excessively generous for those that still benefited from it, ie private sector employees. It was proposed that foreign employment income will only be exempt from tax if it was subject to tax in the foreign country.

Under the radar: Today one tax rate, tomorrow another?

Author: Louis Botha and Heinrich Louw. Since the first version of the Draft Taxation Laws Amendment Bill, 2016 (First Draft TLAB) and the Explanatory Memorandum thereto (Memorandum) were released on 8 July 2016, the proposed amendments applicable to trusts and employee share schemes received most of the attention. However, another proposed amendment with potentially far-reaching consequences that has received little attention since the release of the First Draft TLAB is one which could lead to a taxpayer paying tax at one rate today and another rate tomorrow, as and when the Minister of Finance (Minister) says so.

No “halfway-house” for Government Grants

Author: Esther van Schalkwyk, Senior Tax Consultant at BDO SA. In terms of a proposed amendment contained in the Draft Taxation Laws Amendment Bill of 2016 (‘Draft TLAB’), the taxation of government grants will likely change. National Treasury proposed a special inclusion in taxpayers’ “gross income” of “any amount received by or accrued to a person by way of a government grant as contemplated in section 12P”.

Taxation Laws Amendment Bill released for comment

Authors: Bernard du Plessis and Peter Dachs (ENSafrica). The Taxation Laws Amendment Bill 2016 has been released for public comment. It introduces various interesting amendments to South Africa’s tax law, which include the following: Use of trusts In circumstances where an interest-free loan has been advanced to a trust by a connected person (which includes a beneficiary or a relative of a beneficiary), it is proposed that a market-related rate of interest (currently 8%) is deemed to be paid on that loan. This deemed interest will not be tax deductible in the hands of the trust but will be taxable in the hands of the lender and will not qualify for an interest exemption.

Home is where the mine is

Author: Ntebaleng Sekabate (Tax Associate at ENSafrica). On 15 April 2016, the Minister of Mineral Resources published the draft Reviewed Broad Based Black-Economic Empowerment Charter for the South African Mining and Minerals Industry 2016 (“the draft reviewed Mining Charter”) for public comment, addressing among other issues, the targets to be met by the mining industry in respect of the housing and living conditions of mine workers.

Tax Administration – Rules of prescription

A fundamental reason for the existence of the rules of prescription in our tax law is to provide a taxpayer with certainty as regards its tax position. It is therefore important that such rules are clear and not subject to unfettered discretions. In disputes with the Commissioner for South African Revenue Service (the Commissioner or SARS), prescription is a powerful defence available to compliant taxpayers, allowing them to bring finality to their tax assessments. For some time, amendments to the prescription provisions have been on the cards. SARS has motivated for such amendments due to the fact that it has been involved in protracted information entitlement disputes which it alleges are being used as a delaying tactic to force audits closer to the end of a prescription period.  SARS also alleges that it has difficulty finalising certain audits within prescription periods due to their sheer complexity.