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Author: Ben Strauss. Ms X inherited a large number of valuable shares in a blue chip listed company. She has no other material assets. She is concerned that, from a wealth planning perspective, all her eggs are in one basket. She wishes to diversify her portfolio. If Ms X sold her shares with a view to buying a mixture of other shares or investments, she would ordinarily incur capital gains tax (CGT) on the capital gain derived in respect of the sale, assuming that she holds her shares as a long-term investment, that is, not for speculative purposes.

The provisions of section 8F of the Income Tax Act, 58 of 1962 (the Act) regulate hybrid debt instruments. Broadly speaking, from the time that an interest-bearing debt qualifies as a hybrid debt instrument, the interest incurred in respect thereof will be deemed to be a dividend in specie that is declared by the company which incurred such amount (i.e. the borrower) to the person to whom that amount accrued (i.e. the lender). Furthermore, the borrower is denied a tax deduction in respect of such interest.

Authors: Ashika Nichha, Tax Consultant, BDO South Africa. Section 12R of the Income Tax Act 52 of 1962, as a consequence of an initiative by the Department of Trade and Industry, was introduced in 2014 to enhance trade through the Special Economic Zone Act 16 of 2014 and attract direct foreign investment.

Author: Ben Strauss. The timing of income tax in relation to retailer gift cards was recently an issue in the interesting case in the Cape Town Tax Court, case number IT 24510, reported as A Company v The Commissioner for the South African Revenue Service (IT 24510) [ZATC] 1 (17April 2019). Judge Binns-Ward neatly set the scene in the opening paragraph of the judgment:

Author: Louis Botha. It is common nowadays for SouthAfrican persons to diversify their investment portfolio and to invest in foreign jurisdictions. When doing so, South African residents must ensure that they transfer funds abroad in a manner that complies with SouthAfricas exchange control rules. In our Tax & Exchange Control Alert of 6 October 2017, we explained how South African resident individuals can make use of their annual single discretionary allowance (SDA) of R1 million, to transfer and take funds abroad without the prior approval of the South African Reserve Bank (SARB) and without first having to obtain a tax clearance certificate.

Sections 113 and 115 of the Companies Act, 2008 provide for an automatic statutory merger of two companies. The transfer occurs by way of operation of law, and barring any express prohibition to the contrary in a contractual arrangement, no third party consent is generally required to implement the merger. This type of transaction may typically give effect to a desired corporate reorganisation, in terms of which an existing company is liquidated, wound up and/or deregistered.

In recent times, the issue of mental health and the importance of caring for vulnerable persons with mental illnesses has become more prominent. Of course, the effect of mental illness on persons may differ depending on the nature of the illness. In the case of very serious forms of mental illness, a person may not be able to look after their own affairs any longer. From a tax perspective, the Income Tax Act, No 58 of 1962 (Act), makes provision for the creation of so-called special trusts, where the trust is created for the benefit of a person who cannot take care of his own affairs due to a disability (Beneficiary), including as a result of a serious mental illness. Share page The trustees of such a trust would then have to administer the assets of the trust in favour of the Beneficiary. In order for a trust to become Read More …

A tax invoice plays a pivotal role in the VAT system for suppliers and recipients alike. In terms of the Value-Added Tax Act, No 89 of 1991 (VAT Act), a supplying vendor is obliged to issue a tax invoice that complies with the requirements of the VAT Act within 21 days of making a taxable supply to a recipient. Similarly, a recipient vendor will only be entitled to claim an input tax deduction in respect of a VAT cost incurred for the purpose of making taxable supplies, to the extent that he or she is in possession of a valid tax invoice at the time of claiming the deduction. Share page A tax invoice is therefore an essential part of the audit trail of a vendor and its enterprise activities, and the failure to issue a tax invoice is a contravention of the VAT Act and an offence in terms Read More …

Under the Tax Administration Act, No 28 of 2011 (TAA) persons who enter into certain types of transactions must report the details of those transactions to SARS. These types of transactions are called “reportable arrangements”. Share page The list of transactions that must be reported are set out in s35(1) of the TAA, and in s35(2) of the TAA as read with a SARS notice issued pursuant to that provision. The term “reportable arrangement” is defined in s34 of the TAA as “an ‘arrangement’ referred to in section 35(1) or 35(2) that is not an excluded ‘arrangement’ referred to in section 36”. The term “arrangement” is defined in s34 of the TAA as “any transaction, operation, scheme, agreement or understanding (whether enforceable or not)”. The term “participant” is defined in s34 of the TAA, simply put, as a person who promotes the arrangement, a person who may obtain a tax Read More …