Amendments to the Special Voluntary Disclosure Programme

Author: Mareli Treurnicht. On 24 February 2016 the Minister of Finance announced the Special Voluntary Disclosure Programme (SVDP) as part of the 2016 Budget Speech. On the same date, the draft Rates and Monetary Amounts and Amendment of Revenue Laws Bill (First Draft Revenue Laws Bill) and the draft Rates and Monetary Amounts and Amendment of Revenue Laws (Administration) Bill were released. These bills contained the proposed provisions in respect of the SVDP. Following input from the public, National Treasury released the amended draft Rates and Monetary Amounts and Amendment of Revenue Laws Bill (Second Draft Revenue Laws Bill) and the amended draft Rates and Monetary Amounts and Amendment of Revenue Laws (Administration) Bill (Second Draft Revenue Laws Administration Bill) on 19 July 2016. An Explanatory Memorandum and a media statement on the SVDP accompanied these bills.

Value-added tax: SARS takes away on take-away

Author: Ben Strauss. Recently the Cape Tax Court handed down an important judgment about value-added tax (VAT). The taxpayer (D) was a registered VAT vendor. It operated a foods delivery business. D contracted with food outlets and restaurants to advertise their menus in booklets which D had printed and delivered to households. Customers who wished to place orders for food phoned an operator at D’s premises who took the orders. D’s staff would then pass the details of the order to the relevant food outlet and despatch a driver to collect and pay for the food that had been ordered. The driver then delivered the food to the customer. D’s branding was on the drivers’ uniforms.

Good news for employers: increase in thresholds for exemption of employer-provided bursaries

On 8 July 2016, the National Treasury (Treasury) released the draft Taxation Laws Amendment Bill 2016 (TLAB). The TLAB aims to give effect to the various tax proposals announced in the 2016 National Budget. By way of background, s10(1)(q) of the Income Tax Act, No 58 of 1962 (Act) exempts from taxable income, any “bona fide” scholarship or bursary granted to assist or enable any person to study at a recognised educational or research institution. However, if such scholarship or bursary has been granted by an employer to an employee or relative of such employee, the exemption will not apply:

Where there’s smoke there’s fire (and carbon tax) – National Treasury releases the Draft Regulations: Carbon Offsets

In November 2015, the Draft Carbon Tax Bill (Draft Bill) was published by National Treasury, setting out the framework within which carbon tax would be levied. We reported on the main tenets of the Draft Bill in our Tax Alert of 20 November 2015 (Carbon tax in South Africa). On 20 June 2016, flesh was given to this framework with the release of the Draft Regulations: Carbon Offsets (Draft Regulations), which were published in terms of clause 20(b) of the Draft Bill. The Explanatory Note for the Draft Regulations on Carbon Offset (Explanatory Note) was released at the same time. Section 4 of the Draft Bill states that carbon tax will be levied in respect of greenhouse gas (GHG) emissions resulting from:

Exchange control circular issued in respect of special voluntary disclosure programme

Author: Mareli Treurnicht. On 13 July 2016 the Financial Surveillance Department (FinSurv) of the South African Reserve Bank (SARB) issued exchange control circular no. 6/2016 (Circular) regarding details and information required in an application for exchange control relief submitted as part of the joint tax and exchange control Special Voluntary Disclosure Programme (SVDP) which was announced by the Minister of Finance in the 2016 Budget Speech.

About mines and houses: a ruling on expenditure incurred to implement a housing scheme

In our Alert of 29 April 2016, we discussed the Ruling dealing with the tax consequences of a housing scheme carried out by a mining company, specifically whether such a housing scheme would give rise to a fringe benefit in the hands of the beneficiaries of the scheme (Every house has a story: Does employer-provided accommodation always constitute a fringe benefit?). In this article, we discuss another Ruling dealing with certain tax consequences from the perspective of the mines which implement the housing scheme. On 10 June 2016, the South African Revenue Service (SARS) issued Binding Private Ruling 239 (Ruling) which deals with the income tax consequences resulting from cash contributions to be made by the Applicant (as a party to a mining joint venture) to a special purpose vehicle established to provide housing for the employees of the joint venture and the Applicant’s group of companies.

Beware of tax on dividend stripping and manipulation of dividend rights

Author: Ben Strauss. Dividends paid by local companies are generally exempt from income tax in the hands of shareholders and, in certain cases, are either exempt from dividends tax or subject to a reduced rate of dividends tax. Taxpayers may be tempted to enter into transactions where they either do “dividend stripping”, or manipulate the right to receive dividends to avoid income tax, capital gains tax (CGT) or dividends tax.

Reinstatement of a deregistered company in the context of an amalgamation transaction

The South African Revenue Service recently released Binding Private Ruling No 237 (Ruling), which dealt with the reinstatement of a deregistered company in the context of the transfer of immovable properties in terms of an amalgamation transaction. A company (Company) had previously sold its business as a going concern to another company (Applicant) in terms of an “amalgamation transaction” as defined in s44 of the Income Tax Act, No 58 of 1962 (Act). The assets of the business included certain immovable properties.

High Court (Gauteng Division, Pretoria) decision on whether SARS is no longer bound by a compromise agreement in the circumstances under consideration

This case dealt with whether the South African Revenue Service (“SARS”) was no longer bound to a compromise agreement entered into between the taxpayer and SARS in terms of the Tax Administration Act (the “Admin Act”) as a result of alleged non-disclosures and misstatements made by the taxpayer, who expressly warranted the truth of the facts furnished by him. The taxpayer had been assessed to pay income tax, with interest, in the aggregate amount of R18 192 295.36 by May 2014 in respect of the 2005 to 2011 tax years. The taxpayer objected to the assessments and alleged that the amounts in question constituted donations or dividends in respect of which he declared he could not be assessed to tax. The taxpayer addressed four requests for a compromise to SARS. The taxpayer and SARS finally concluded a compromise agreement on 21 May 2014. By 1 December 2014, the taxpayer had … Continue reading

Supreme Court of Appeal decision on whether grapes delivered to a co-operative winery, pressed and pooled, constitute produce held and not disposed of for purposes of the First Schedule to the Income Tax Act taxpayer derived a portion of his taxable income from wine farming. In particular, he received payments from a co-operative winery (the “co-op”) in respect of grapes which he delivered to the co-op for the purpose of being made into wine. The South African Revenue Service (“SARS”) assessed the taxpayer on the basis that the grapes that he had already delivered to the co-op constituted “produce held and not disposed of at the end of the year of assessment” in terms of paragraph 3 of the First Schedule (“First Schedule”) to the Income Tax Act. The Tax Court’s decision was in favour of SARS, whereafter the taxpayer took the matter on appeal to the Supreme Court of Appeal (“SCA”). The issues on appeal to the SCA were as follows: whether the income received by the taxpayer, which is generated by the sale of wine, constitutes income “derived from agricultural or … Continue reading