Tax News

Tax Appeal Tribunal ruling: Commissioner Generals discretion must be exercised judiciously

Authors: Celia Becker and Phillip Karugaba. The recent ruling of the Tax Appeals Tribunal (TAT) in the case of Century Bottling Company v Uganda Revenue Authority (URA), has brought the discretion of the Commissioner General of the URA sharply in focus. It is absolutely necessary and indeed important that in the exercise of their functions, public authorities exercise discretion. It is equally important that such discretion is properly exercised taking into account only the relevant considerations and for the proper reasons. The citizen has recourse to court to check the excesses of executive discretion. A public official is therefore not like the cultural leader kamala byona (he who finishes all matters). The formers discretion is very much controlled by law and by the courts.

Deferring tax on the transfer of listed shares to a collective investment scheme portfolio

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.

Inextricably linked contracts? The Constitutional Court has the final say regarding section 24C of the Income Tax Act

Author: Aubrey Mazibuko and Louis Botha. On 21 July 2020, the Constitutional Court (CC) handed down judgment in Big G Restaurants (Pty) Ltd v Commissioner for the South African Revenue Service [2020] ZACC 16, which concerned section 24C of the Income Tax Act 58 of 1962 (Act). At issue before the CC was whether future expenditure incurred in terms of a franchise agreement was deductible against income derived by the taxpayer, Big G Restaurants (Pty) Ltd (Big G) from operating its franchise business.

About tax debts and civil judgments the High Court considers sections 172 and 174 of the TAA

Author: Aubrey Mazibuko and Louis Botha. Under the Tax Administration Act 28 of 2011 (TAA), the South African Revenue Service (SARS) has various powers to collect and enforce the payment of tax debts owing to it. One of the ways in which it can do so is by applying for a civil judgment for the recovery of tax, which is provided for in section 172 of the TAA. On 15 May 2020, the Western Cape Division, Cape Town, (WCHC) delivered judgment in Barnard Labuschagne Inc v South African Revenue Service and Another 2020 ZAWCHC (15 May 2020), which concerned the application of sections 172 and 174 of the TAA. More specifically, the taxpayer, Barnard Labuschagne Inc, sought to rescind a statement filed by SARS under section 172 of the TAA. The judgment deals with a number of related issues, but we focus mainly on the WCHCs interpretation of the TAA Read More …

Deductions available for commission earners

Author: Joon Chong, a Tax Partner a Webber Wentzel. Commission earners could make an argument to SARS that they should be allowed to deduct their normal range of business expenses, even if commission is no longer more than 50% of their total remuneration under the exceptional circumstances of the Covid-19 pandemic. Who is a commission earner? Commission earners who earn more than 50% of their total remuneration as commission income are not limited in the type of business expenses they can claim, as long as these are incurred in the production of their income and are not capital or personal in nature.

Tax Filing Season 2020 for Individuals

In support of the Presidents call to the Covid-19 pandemic, that Social Distancing be observed at all times and that we should at most stay indoors and limit movement, SARS is responding by rapidly enhancing its efforts to further simplify the tax return filing requirements for individual taxpayers and removing the need to travel to our Branches in 2020. Through the increased use of third-party data, SARS will be completing your tax return for you more accurately than ever. Where we have the required information we will provide you with a proposed assessment without the need to file a tax return. This enables you to view, accept or edit your proposed assessment from the comfort of your home or place of work using eFiling or SARS MobiApp.

High Court sets aside notice by SARS to debit a taxpayers bank account

Authors: Heinrich Louw and Ndzalama Dumisa. In the recent case of SIP Project Managers (Pty) Ltd v The Commissioner for the South African Revenue Service (Case Number 11521/2020) (as yet unreported), the High Court set aside a notice by the South African Revenue Service (SARS) to a bank to debit a taxpayers bank account in terms of section 179 of the Tax Administration Act 28 of 2011 (TAA), and ordered SARS to repay the amount to the taxpayer.

COVID-19: Some practical tax issues

Author: Ben Strauss. Businesses and individuals may well ask themselves what practical, day-to-day tax consequences the COVID-19 pandemic now holds for them. For example, a company operating a financial services business may be obliged to incur expenditure which it would not incur in the ordinary course, such as sanitizers, gloves, masks and temperature measuring equipment for screening employees and customers. A taxpayer is entitled to deduct expenditure provided certain requirements are met. Notably, to be deductible, the expenditure must be actually incurred in the production of income as contemplated in section 11(a) of the Income Tax Act, 58 of 1962 (Act).

VAT on imported services payable by non-registered VAT vendors and goods sold in execution – the who, what and how of declarations to SARS

Author: Varusha Moodaley. On 1 June 2020, the South African Revenue Service (SARS) issued an external guide titled Manage Declaration for Non-Registered VAT Vendors (SARS Guide). The SARS Guide provides guidance to non-vendor recipients of imported services and in instances where goods are sold in execution of a debt, on how to settle their VAT liabilities with SARS. On 1 June 2020, the South African Revenue Service (SARS) issued an external guide titled Manage Declaration for Non-Registered VAT Vendors (SARS Guide). The SARS Guide provides guidance to non-vendor recipients of imported services and in instances where goods are sold in execution of a debt, on how to settle their VAT liabilities with SARS. The VAT principles applicable to imported services and goods sold in execution of a debt are first briefly described below.

VAT apportionment v direct attribution: A (preliminary) win for the taxpayer

Author: Gerhard Badenhorst. The debate between taxpayers and the South African Revenue Service (SARS) as to what constitutes a fair and appropriate apportionment formula to determine the deductible value added tax (VAT) incurred on expenses where the taxpayer makes both taxable and exempt supplies, is ongoing. However, it is up to the taxpayer to determine whether an expense incurred is wholly attributable to making taxable supplies, in which case the total amount of VAT incurred is deductible. SARS cannot rule beforehand on whether an expense is directly attributable to taxable supplies, by virtue of a notice published in terms of section 80(2) of the Tax Administration Act 28 of 2011 (GN No. 748 24 June 2016), known as the so-called no-rulings list.