Tax News

TAX FREE INVESTMENTS

What is it? Tax Free Investments were introduced as an incentive to encourage household savings. This incentive is available from 1 March 2015. How will it work? The tax free investments may only be provided by a licenced bank, long-term insurers, a manager of registered collective schemes (with certain exceptions), the National Government, a mutual bank and a co-operative bank. Service providers must be designated by the Minister in the Gazette. As per the current Regulation, only the above are designated.

Taxation of Income from two sources

What to do if you receive income from two sources? Taxpayers who receive income from more than one source of employment or pension are reminded that the employees tax (PAYE) deducted by the respective employers or pension funds may not be enough to cover their final tax liability on assessment. The reason for this is the manner in which a taxpayers tax liability is calculated on assessment. The South African tax system is based on the principle of adding together all sources of income of a taxpayer into a single sum, and applying a progressive tax rate table to determine the final tax liability of the taxpayer on assessment. A progressive tax rate system means that the more income is earned, the higher is the marginal tax rate and more tax is paid on assessment.

Africa Tax in Brief

CAMEROON: Treaty with South Africa enters into force On 13 July 2017, the Cameroon/South Africa Income Tax Treaty, 2015 entered into force and generally applies from 1 January 2018. GHANA: Value-added tax (VAT) on selected medical supplies abolished In terms of the VAT (Exemption of Active Ingredients, Selected Inputs and Selected Drugs or Pharmaceuticals) (Amendment) Regulations 2017, presented to Parliament on 1 August 2017, the 17.5% VAT/National Health Insurance Levy on selected imported medicines that are not produced locally, is abolished pursuant to the Budget for 2017.

The income tax implications of a return of capital

Author: Alexa Muller (Tax Associate at ENSAfrica). In terms of the South African Income Tax Act, 1962 (the Act), distributions received by or accrued to a shareholder of a company may constitute either a dividend or a return of capital each of which would give rise to different tax implications for the shareholder or company concerned. The term dividend, as defined in section 1 of the Act, excludes, inter alia, an amount distributed to the extent that the amount results in a reduction of the contributed tax capital of the company making the distribution. A return of capital, as defined in section 1 of the Act, means any amount transferred by a South African tax resident company for the benefit for or on behalf of any person in respect of any share in that company to the extent that that transfer results in a reduction of contributed tax capital of Read More …

What are the tax and exchange control implications of Bitcoin?

Author: Robert Gad, Nicolette Smit, Megan McCormack, Jo-Paula Roman(tax Directors at ENSAfrica). With virtual currencies such as Bitcoin becoming ever more popular and accessible, it is important that South African taxpayers carefully consider the tax and exchange control uncertainties that accompany the incorporation of these relatively new systems into businesses and/or investment portfolios. We highlight below some of the tax and exchange control consequences arising from transactions involving Bitcoin. We have not considered the tax and exchange control consequences of the mining of Bitcoin, as this will be considered in a separate article.

Unintended consequences of the new CFC rules

Author: Judith Becker (Tax Associate at ENSAfrica). In the 2017 South African Budget speech, the Minister of Finance raised governments concern that the current Controlled Foreign Company (CFC) rules do not capture foreign companies held by interposed trusts or foundations, and it was announced that countermeasures for the treatment of foreign companies held by trusts or foundations will be considered. Treasury, in an attempt to cover these loopholes, has introduced certain changes into the CFC legislation and a section that might have more disadvantages than Treasury intended.

Lights, camera, action! The tax exemption in respect of films

Authors: Nandipha Mzizi and Louis Botha. From the beginning of the production stage to the actual editing of the final film and exhibition, the industry contributes to the economy, revenue, job creation and economic activity. The results from the economic impact modelling report for 2017, prepared by Urban-Econ Development Economists for the National Film and Video Foundation (NFVF) (NFVF Report), reveal that the film industry has had a positive economic impact on the South African economy. During the 2016/17 financial year, the film industry in South Africa had a direct impact of R4,4 billion on economic production. The NFVF Report also revealed that the operations of the film industry in South Africa raised the level of production by approximately R12,2 billion in total.

Do foreign financial services providers need to register as external companies?

Authors: Wayne Murray, Lebogang Maimane, John Gillmer and Badian Maasdorp. The Financial Services Board (FSB) sent a letter dated 6 September 2017 to its registered foreign financial services providers (FSPs) advising them that it had come to the attention of the FSB that certain foreign FSPs conducting financial services related business in South Africa (also referred to as the Republic below in quoted legislation) are not registered as external companies in the country. According to the FSB, this registration is required in terms of s23 of the Companies Act, No 71 of 2008 (Companies Act).

The golden rule: SARS clarifies a vendors entitlement to claim input tax in respect of second-hand gold

Author: Varusha Moodaley. Subjection to certain exceptions, the Value-Added Tax Act, No 89 of 1991 (VAT Act) entitles a vendor to claim a notional input tax deduction in respect of second-hand goods acquired under a non-taxable supply, where such second-hand goods are acquired from a resident of the Republic for the purpose of consumption, use or supply in the course of making taxable supplies.