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.
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”.
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.
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?
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.
Author: Mareli Treurnicht (Senior Associate at Cliffe Dekker Hofmeyr). With effect from 1 March 2015, the South African Government (Government) introduced tax free investments (TFI). In this regard, the Income Tax Act, No 58 of 1962 (Act) was amended to introduce a new s12T, in addition to the notice and regulations published in the Government Gazette on 25 February 2015. Section 12T exempts certain taxpayers from paying normal tax on any amount received by, or accrued in respect of a TFI. Section 12T further states that, in determining the aggregate capital gain or capital loss of a person in respect of a year of assessment, any capital gain or capital loss in respect of the disposal of a TFI must be disregarded. Contributions to a TFI must be limited to cash, R30,000.00 in aggregate during any year of assessment and R500,000.00 in aggregate.
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.
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.
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.
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.