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.

The use of electronic or digital signatures in tax matters

Author: Carmen Gers and Jadyne Devnarain (ENSafrica). With tax litigation becoming more prevalent in recent years, taxpayers are now faced with new issues. One such issue is: when and to what extent will documents bearing an electronic signature be acceptable under the relevant tax legislation?

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.

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.

Radebe: Zuma heard of Cosatu objections after he signed tax bill

Author: Liesl Peyper (News24). Cape Town – When President Jacob Zuma signed the Taxation Laws Amendment Act late last year he wasn’t aware of Cosatu’s objections with regard to the proposed annuitisation of provident fund benefits. “The concerns were only brought to the President’s attention after he had signed the bill,” said Minister in the Presidency Jeff Radebe. At a post-cabinet briefing on Thursday morning Radebe had to field a barrage of questions from journalists about the postponement of the provident fund rules in the legislation.

Government backtracks on new tax changes

Author: Liesl Peyper (News 24). Cape Town – For the second year in a row President Jacob Zuma’s government has been forced to backpedal on provisions in the Tax Amendment Act that compel South Africans to put two-thirds of their provident fund savings in a retirement annuity. The provision meant that retirees would be allowed to take only one-third in cash, while they are currently entitled to the full amount. Business Day reported that Finance Minister Pravin Gordhan tabled a proposed postponement at a meeting on Monday with the representatives of the National Economic Development and Labour Council.

The fine tax line during retrenchments

Author: Amanda Visser (IOL). The different tax treatment of lump sum withdrawals following retrenchment seems at odds with efforts to give relief in difficult times. In March 2011 the Income Tax Act was changed, treating severance benefits similar to lump sum payments from pension or provident funds. However, it appears as if policy is not taking heed of the dire employment situation in the country.

South Africa signed two new double tax agreements with Kenya and Hong Kong

Readers will note from SARS Watch that a new double taxation agreement between South Africa and Kenya was recently published in the Gazette. Subsequent to this, a further agreement, this time with Hong Kong, was published in the Gazette on 24 November 2015. Both of these agreements come into effect in South Africa as from 1 January 2016. In Kenya, the DTA also takes effect on 1 January 2016, whereas the agreement with Hong Kong will be effective in that jurisdiction from 1 April 2016.