Does the regulation of a hedge fund as a collective investment scheme result in different tax implications?

Author: Magda Snyckers (Tax Director at ENSafrica). Before 1 April 2015, hedge funds were unregulated and were constituted (broadly speaking) as limited liability partnerships or trusts. For tax purposes, these structures functioned as flow-through entities with investors being responsible for the disclosure and payment of tax resulting from investment activities. As such, fund managers were not typically involved in the disclosure of and accounting for the tax resulting from investment activities.

Customs and Excise Highlights

Before we delve into the first Customs and Excise instalment of 2017, we would like to wish you a happy and prosperous new year. Without further ado, please find the selected highlights from the Customs and Excise environment below: FTW reported that SARS aims to launch the new customs legislation during the first half of 2017. The process is planned to be phased in over a two year period and will commence with the registration, licensing and accreditation process, of which the first deliverable will be Customs Sufficient Knowledge. We remind readers that all current registration and licenses will have to be re-applied for under the new legislation. We will use this Alert to advise you as to when the process will commence. Should you wish us to inform you of the commencement via email, please send a request to Naturally, we remain available to assist with such re-registration Read More …

Tax exemption of membership based organisations – time for a rethink?

Membership based organisations are fundamental to the sustainability and development of the economy of South Africa as they provide vital industry and professional support services to a wide range of important occupations and trades ranging from accountants, lawyers and doctors to artisans and engineers. The majority of these organisations operate on a non-profit basis for the benefit of their members and ultimately play an important role in increasing employment in South Africa and uplifting poor communities.

The European Commission upsets the Apple cart

On 30 August 2016, the European Commission (EC) issued a press release in which it announced that Ireland, a member of the European Union (EU), gave illegal tax benefits to certain companies in the Apple group worth up to €13 billion. The EC found that Ireland had contravened the “EU state aid rules because it allowed Apple to pay substantially less tax than other businesses. Ireland must now recover the illegal aid”.

Africa tax in brief

DEMOCRATIC REPUBLIC OF THE CONGO (DRC): Refund of input VAT credit suspended In terms of the DRC value added tax (“VAT”) legislation, export businesses, companies ceasing their activities, oil and mining companies (during the exploration phase) and companies making significant investments are entitled to request input VAT credit refunds. However, on 18 April 2016, the government announced the suspension of the refund of input VAT credits for all taxpayers in an attempt to bolster its decreasing tax revenues resulting from the decrease in commodity prices.

SARS’ constitutional obligations and taxpayers’ rights

Given media coverage of the various Constitutional Court challenges involving government institutions and the Presidency; the perceived power struggle between the Commissioner for the South African Revenue Service (SARS) and the Minister of Finance; as well as SARS’ continued pressure to collect revenue in difficult economic times that see corporate taxpayers endure declining revenues and increasing costs; it is useful to remind taxpayers and their shareholders of their constitutional rights and SARS’ constitutional obligations when it performs its functions in administering various taxation statutes. This topic is very complex and, accordingly, what follows is a very broad overview of these issues. Taxpayers and their shareholders are encouraged to obtain specialised legal advice or assistance when confronted with potential investigations or audits by SARS.

2015/2016 Annual Reconciliation Declaration (EMP501) and Employees Income Tax Certificates [IRP5/IT3(a)s] to SARS

Employer Annual Reconciliation Employers are required to submit their Pay-As-You-Earn (PAYE) Employer Annual Reconciliations between 18 April and 31 May 2016 to SARS, confirming or correcting payroll tax amounts which were declared during the 2015/2016 tax period. This year, employers are urged to accurately verify and update each employee’s personal and financial details before submitting their Annual Reconciliation Declaration (EMP501) and Employees Income Tax Certificates [IRP5/IT3(a)s] to SARS.

Vendor beware: capital gains tax on instalment sales

Taxpayers should take great care when selling assets where the price is paid in instalments as the transaction may trigger some tricky capital gains tax (CGT) consequences. Consider the case of New Adventure Shelf 122 (Pty) Ltd vs The Commissioner of the South African Revenue Service (7007/2015) [2016] ZAWCHC 9 (17 February 2016). In this case the taxpayer acquired immovable property in 1999. In the taxpayer’s 2007 tax year it sold and transferred the property to a third party for a profit. The buyer had to pay the price of the property in instalments over more than one tax year.

Budget 2016 – Special Voluntary Disclosure Programme in respect of offshore assets and income

Following recent rumours that the Minister may announce an amnesty in respect of offshore assets and income, National Treasury released a media statement earlier today announcing the introduction of such a Special Voluntary Disclosure Programme (VDP). According to the media statement, the purpose of the VDP is to give non-compliant taxpayers an opportunity to voluntarily disclose offshore assets and income. The media statement warned that, with a new global standard for the automatic exchange of information between tax authorities providing SARS with information regarding such offshore assets and income from 2017, time is running out for taxpayers who have not disclosed assets abroad. The VDP will provide both individuals and companies with an opportunity to regularise their tax and exchange control affairs through one joint process.