Over the past few years there has been uncertainty surrounding the circumstances of South African residents receiving pension payments for services rendered or partly rendered outside South Africa. The South African Revenue Service (SARS) has previously taken the view that if the fund was located in South Africa, then the source was deemed to be in South Africa and therefore rendered the total amount of the pension payment as being taxable in South Africa, irrespective of the fact that the pension may have related partly to services that were rendered outside the country.
Tax News
Deferral of the implementation of the electronic Tax compliance status system
Tax clearance certificates (TCCs) are issued by the South African Revenue Service (SARS) to, inter alia, validate the status of a taxpayer and confirm that such taxpayer’s tax affairs are in order. TCCs are, almost without exception, required for tender or bid applications, to reflect good standing, foreign investment and for emigration purposes. A TCC is only valid for one year from the date of issue in respect of a tender and/or good standing, provided the taxpayer remains compliant with SARS requirements.
Overall tax cost and compliance burden lower for businesses around the world: World Bank and PwC Report
Paying taxes has become easier over the past year for medium-sized companies around the world, according to a new report released by the World Bank and PwC today. The time it takes such a company to meet its tax obligations dropped by four hours on average in 2013, according to the Paying Taxes, 2015 study. The report also discloses that the average total tax rate such a company paid and the number of payments also declined. This is a trend seen every year over the ten-year period covered by the publication.
Binding Ruling – Draft ruling on unbundling transactions
Author: Emil Brincker – Tax Director (Cliffe Dekker Hofmeyr) The South African Revenue Service (SARS) recently issued a draft Binding General Ruling (BGR) that addresses the interpretation of the words “at the end of the day after that distribution” as used in s46(3)(a)(v) of the Income Tax Act 58 of 1962 (Act). Section 46 of the Act deals with unbundling transactions and provides parties to such a transaction with relief from various taxes that would otherwise become payable.
Professional tax advice vital in mitigation of penalties and interest
Author: Andrew Lewis – Tax Director (Cliffe Dekker Hofmeyr) Judgment was handed down in the Tax Court on 18 November 2014 in the case of Z v The Commissioner for for the South African Revenue Service (case number 13472), as yet unreported. The dispute concerned the calculation by the taxpayer of his capital gains tax liability arising pursuant to the disposal of shares. In 2007 the taxpayer disposed of his shares in a company for R841 million. In and around the time of the disposal of the shares, a company (A) instituted a damages claim against the taxpayer for an amount of R925 million which related to a transaction that took place in 2003. Shortly after the damages action was instituted, the taxpayer agreed to pay A an amount of almost R700 million in full and final settlement of its claim.
No evidence justifying tax penalty
Author: Heinrich Louw – Senior Tax Associate (Cliffe Dekker Hofmeyr) Judgment was handed down in the Tax Court on 18 November 2014 in the case of AB (Pty) Ltd v The Commissioner for the South African Revenue Service (case number 1132, as yet unreported). In this matter the South African Revenue Service (SARS) audited and assessed a vendor in respect of Value-added Tax (VAT). It appeared that the vendor could not adequately explain, nor provide supporting documentation, in respect of discrepancies between its VAT declarations for the relevant periods, and the VAT control account in its books.
Interpretation of fiscal legislation
Author: Emil Brincker – Tax Director at DLA Cliffe Dekker Hofmeyr The judgment of the Supreme Court of Appeal in Commissioner SARS v Bosch (394/2013) [2014] ZASCA 171 (19 November 2014) (Bosch case) dealing with the fiscal consequences of a deferred delivery transaction is not only important in the context of the meaning of simulation, but also with reference to the way in which legislation should be interpreted. In the Bosch case the question arose as to the meaning of s8A of the Income Tax Act, No 58 of 1962, which read that there was to be included in a taxpayer’s income an amount of any gain made by him by the exercise, cession or release during a year of assessment of any right to acquire a marketable security.
Welcome taxation amendments to boost investment in small business
Author: Victoria Williams – SAVCA South African venture capitalists have welcomed the recent Taxation Laws Amendment Bill which introduces two changes to Section 12J of the Income Tax Act. The changes, effective January 2015, should boost investment into entrepreneurial businesses and increase the appeal of venture capital for investors.
Western Cape High Court rules on purpose of preservation orders
Author: Dr Beric Croome – ENSafrica Section 163 of the Tax Administration Act 28 of 2011 (“TAA”) provides that a senior SARS official may authorise an ex parte application to the High Court for an order for the preservation of any assets of a taxpayer, or other person prohibiting any person, subject to the conditions and exceptions as specified in the preservation order, from dealing in any manner with the assets to which the order relates.
Base erosion and profit shifting – a South African perspective
Author: Peter Dachs – ENSafrica The concept of base erosion and profit shifting (BEPS) has been debated at various international forums following discussions at the G20 Finance Ministers and Central Bank Governors meeting and the G20 Heads of State summit in Russia last year. The Organisation for Economic Co-operation and Development’s (OECD) BEPS Action Plan provides for 15 actions to be completed in three phases by December 2015.