Over the past few years, we have regularly raised concerns about the future of South Africa’s golden goose, the taxpayer. However, as this year’s tax season kicks off, our fears remain unabated, especially when we consider facts such as these recently highlighted by Economist Mike Schüssler: • According to the World Bank, South Africa has the seventh highest tax revenue to GDP ratio when social security taxes such as unemployment insurance and compulsory pensions are left out.
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The taxation of risk policies – throw away existing principles
The National Treasury released the first batch of fiscal amendments on 10 June 2014. One of the most significant amendments relates to the way in which risk policies will be taxed in the hands of long-term insurance companies (“Insurers“). By way of background, the business of an insurer has to date been divided into four separate funds for tax purposes, being – the individual policyholder fund relating to policies owned by individuals; the company policyholder fund relating to policies owned by corporates; the untaxed policyholder fund relating to policies owned by untaxed entities and annuity contracts; and the corporate fund which reflected the remaining assets of the insurer.
Raise tobacco tax to save lives
Author: Wilma Stassen (All Africa) As the globe marks world no-tobacco Day today, experts say it is time for South Africa to hike up tobacco taxes to save lives. “Higher taxes both increase government revenues and reduce consumption, making it the most cost-effective tobacco control measure available to governments,” says Dr Yussuf Saloojee from the National Council Against Smoking (NCAS). “Despite this, tobacco tax is comparatively low in South Africa.”
Discussion paper on the assumption of contingent liabilities in a going concern acquisition
SARS released the above discussion paper in December 2013 and it was open for comment to 31 March 2014. It deals with the treatment of so-called ‘free-standing’ contingent liabilities from the points of view of the seller as well as the purchaser, where the contingent liabilities are assumed by the purchaser as part settlement of the purchase price for the acquisition of the assets of a going concern.
Beverage tax aimed at reducing alcohol abuse
A major review of the taxation of alcoholic beverages is being undertaken by the Treasury as a contribution to the government’s fight against alcohol abuse and is likely to result in higher taxes and prices. The industry, faced with a deluge of regulatory proposals, is likely to resist the Treasury’s suggestions as it believes it is already over-taxed.It is also having to fight off a proposed ban on liquor advertising, which Health Minister Aaron Motsoaledi is pushing for, as well as restricted trading hours.
The comparability challenge in South African transfer pricing
By AJ Jansen van Nieuwenhuizen A key aspect of transfer pricing is the determination of an arm’s length or market related price. A common approach is to establish a range of profit margins through benchmarking against comparable companies’ financial data and the profit margins that they earn. One of the challenges for taxpayers in South Africa (and other developing countries), is that besides for listed companies, there is very little publicly available
Convertible debt instruments
Author: Arnaaz Camay of ENSafrica The Taxation Laws Amendment Act, 31 of 2013 (the “TLAA”) introduced with effect from 1 April 2014, a new section 8F into the Income Tax Act, 58 of 1962 (the “Act”) in order to reduce the opportunity for the creation of equity instruments that are artificially disguised as debt instruments (“hybrid debt instruments”).
First tax professionals could qualify by year-end
Author: Ingé Lamprecht| JOHANNESBURG – An estimated 3 000 individuals could qualify as tax professionals in the next five years. Last month the South African Quality Authority (Saqa) registered “tax professional” as an occupational qualification. Saqa is responsible for overseeing the development of the National Qualification Framework (NQF) in South Africa. The qualification will give students specialist tax knowledge and practical experience. It was introduced following a request from the South African Revenue Service (Sars) and the South African Institute of Tax Professionals (Sait) in 2008 to the Finance, Accounting, Management Consulting and other Financial Services (Fasset) Seta for the development of a qualification in tax. Ronel de Kock, head of education at Sait, says Fasset commissioned research into the need for and the potential uptake of a tax qualification. The research, finalised in July 2009, confirmed that such a need existed and the process was started. The Big Four professional Read More …
Deductibility of audit fees – Commissioner for the South African Revenue Service v Mobile Telephone Networks Holdings (Pty) Ltd, (966/2012) [2014] ZASCA 4 (7 March 2014)
On 7th March 2014 the Supreme Court of Appeal delivered judgment in the as yet unreported case of Commissioner for the South African Revenue Service v Mobile Telephone Networks Holdings (Pty) Ltd, (966/2012) [2014] ZASCA 4 (7 March 2014) which dealt with the deductibility of audit fees incurred for a dual or mixed purpose and the apportionment thereof for tax purposes in light of section 11(a) of the Income Tax Act 58 of 1962, as amended (‘the Act’) read with sections 23(f) and 23(g) of the Act.
Reportable arrangements – a bad moon rising
Authors: Ruaan van Eeden and Danielle Botha (DLA Cliffe Dekker Hofmeyr) Draft Public Notice The South African Revenue Service (SARS) recently issued a Draft Public Notice (Draft Notice) listing transactions that constitute reportable arrangements (RA’s) for purposes of s35(2) of the Tax administration Act, No 28 of 2011 (TAA). The Draft Notice, once finalised, is intended to be supplementary to any previous notices issued with regard to RA’s and serves as an extension of the existing listed RA’s. Existing reportable arrangements include certain arrangements qualifying as hybrid equity instruments in terms of s8E and 8F of the Income Tax Act, No 58 of 1962 (ITA).