Author: Prenisha Govender, Associate in the Tax Practice, Baker McKenzie Johannesburg. The recent High Court judgment Graspan Colliery v The Commissioner for the South African Revenue Services (8420/18)  could have significant implications for mining operators and their ability to claim diesel refunds. The judgment dealt with the interpretation of Note 6(f)(iii) to Schedule 6 of the Customs and Excise Act, 1964 and the limitations with regard to what activities constitute primary production activities in mining, for the purposes of claiming diesel refunds. What is included in primary production activities in mining is defined in Note 6(f)(iii)(aa)-(vv) to Schedule 6. The list of activities included in Note 6(f)(iii) was considered non-exhaustive, following the Glencore Operations SA (Pty) Ltd v The Commissioner for the South African Revenue Service judgment. In this judgment, the court concluded that the word “include” in Note 6(f)(iii) goes beyond its primary meaning, and activities that qualify Read More …
From 1 January 2021, there is no longer a prohibition on loop structures in South Africa. This is a significant exchange control relaxation that will impact many structures for both corporates and individuals. A loop structure is essentially an arrangement whereby a South African resident invests in an offshore vehicle which, in turn, invests in South African assets.
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.
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.
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 …