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The capitalisation of interest and section 8F

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.

Investing abroad? The foreign investment allowance is at your disposal

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.

Proposed amendments to clarify income tax treatment of statutory mergers

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.

SA Budget 2019/20 – Tax Budget Proposals

Author: Dave Honeyball. In line with expectations Finance Minister Tito Mboweni did not increase tax rates for income tax, Vat and capital gains tax. For the first time in many years, tax rates have remained unchanged from prior years and the only relief available to individual taxpayers has been a very small increase in the primary, secondary and tertiary rebates. The effect of this is that the tax threshold for individual taxpayers has increased from R78 150 to R79 000. Taxpayers who are fortunate enough to receive inflationary remuneration increases will for the first time in many years not benefit from any tax bracket relief and may in fact move into a different tax bracket by virtue of their increases.

A special dispensation: SARS ruling about special trusts

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 …

One less issue when issuing tax invoices

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 …

When must a reportable arrangement be disclosed to SARS?

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 …

Spiritus Ex Machina: Addressing the Unique BEPS Issues of Autonomous Artificial Intelligence by Using ‘Personality’ and ‘Residence’

{46 Pages Posted: 12 Jan 2019 Last revised: 2 Feb 2019 } Author: Lucas de Lima Carvalho ( University of Sao Paulo (USP), Faculty of Law (FD), Department of Economic, Financial, and Tax Law) Abstract This article analyses two unique BEPS issues associated with the future operations of Autonomous Artificial Intelligence (AAI), namely, “disappearing income” and “powerlessness to tax”. AAI is defined as an AI system that (i) is capable of performing tasks commonly associated with human intelligence and beyond, (ii) is not directly or indirectly controlled by human beings, and (iii) has full managerial power over its own actions and resources. The paper provides policy recommendations to address the BEPS issues associated with AAI, as well as comments on their impacts for tax administration and the broader structure of domestic and international tax law. Click Here to download full document https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3306427 Keywords: Artificial Intelligence, BEPS, Personality, Personhood, Residence, Robot, Singularit