Author: Okkie Kellerman – Tax Executive at ENSafrica BEPS is a term used by the Organisation for Economic Co-operation and Development (“OECD”) to describe tax planning strategies exploiting gaps and mismatches in tax rules so that profits disappear for tax purposes or profits are shifted to locations with little or no real activity and where profits are subject to little or no taxes. Although BEPS is not illegal it distorts competition between those companies operating cross border and those operating domestically and it leads to inefficient allocation of resources and it seems unfair that some companies can legally avoid paying tax.
Tax News
Base erosion and profit shifting – treaty shopping
Author:Peter Dachs – Tax Director at ENSafrica The concept of base erosion and profit shifting (“BEPS”) has been much discussed at various international forums including the G20 Finance Ministers and Central Bank Governors meeting in July 2013 in Moscow as well as the G20 Heads of State meeting in September 2013. From a South African perspective, the Davis Tax Committee has been set up, inter alia, in order to address the issue of BEPS in a South African context.
Interest-free shareholder loans
Author:Liesl Kruger – Tax Consultant – ENSafrica Loans between companies and their shareholders, or other group companies are a common method of providing finance in the South African corporate environment. Loans of this nature may, however, give rise to tax implications in the hands of the lender or the recipient, and careful consideration should therefore be given to these transactions.
The transfer pricing compliance conundrum
Author: AJ Jansen van Nieuwenhuizen, Tax Partner, Grant Thornton Johannesburg By now, most South African taxpayers should be aware that when they enter into transactions with related parties who are not South African taxpayers, such transactions should be concluded on terms and prices that are at arm’s length in nature. The term “arm’s length” essentially indicates a position that two unrelated parties would adopt in an open market transaction, as a willing buyer and willing seller. Critical to managing tax risk for any taxpayer that has transactions of this nature is being able to defend the transfer pricing (TP) position that they have adopted and the only way to adequately do so is through the preparation of TP policy documentation.
Proposed amendments to Section 9D could offer a simpler means to avoid controlled foreign company imputations
Author: Bruce Russell, tax consultant, Grant Thornton Cape The controlled foreign company (CFC) provisions seeks to reduce the opportunity for income to be diverted and taxed offshore in the hands of foreign companies where: South African tax residents may exercise, directly or indirectly, a majority of the voting rights in the foreign companies or where South African tax residents may participate, directly or indirectly, in the majority of the benefits attached to shares of the foreign companies. In terms of Section 9D of the Income Tax Act, a hypothetical taxable income, “net income”, is calculated as if the CFC is South African tax resident. This net income may be included in the taxable income of the South African tax resident shareholders.
Proposed tax changes to restraint of trade payments
Author: Douglas Gaul, tax manager, Grant Thornton Johannesburg Paragraph (cA) of the definition of gross income was introduced into the Income Tax Act with the intention of preventing avoidance schemes whereby payment due to an employee was disguised as a capital payment for the so-called restraint of trade compensation. This inclusion has however had an impact on legitimate restraint of trade payments and is therefore being reconsidered again. Prior to the introduction of this paragraph, it may have been possible for an employee to avoid paying normal tax on such payments (at the maximum marginal rate of 40%), despite possibly paying capital gains tax at the significantly lower rate of 13.3%.
Good VAT-news from SARS
Author: Cliff Watson, associate tax director, Grant Thornton Johannesburg Repeal of zero rating for farmers In a previous e-taxline (link), we alerted our readers of the potential disadvantage farmers would face as a result of SARS and National Treasury’s proposal to repeal the zero-rating of certain goods such as animal feed, animal remedy, fertilisers and pesticides that are used or consumed for agricultural, pastoral or other farming purposes from 1 April 2015. The proposal would effectively add an additional 14% cost to acquire these products for farmers who are currently qualifying for the zero-rate, naturally affecting these farmers’ cash flows negatively.
Prof. Wanyana Oguttu – First black woman tax law doctorate in SA
The first black woman professor in UNISA’s College of Law is a recent recipient of a national “Distinguished Women in Science” Award presented to her by the then Science and Technology minister Naledi Pandor… Professor Annet Wanyana Oguttu met her husband James at Makerere University in their native Uganda while pursuing her bachelor’s degree in law. She graduated in 1993 and worked briefly as a legal assistant with Mayanja Nkangi and Company Advocates before relocating to Lesotho.
Prof Annet Oguttu – tax law pioneer
Author: Yolande Botha (Tax Talk Editor) Annet Wanyana Oguttu is one of the country’s most accomplished tax professionals. Professor Oguttu completed her doctorate in Tax Law at UNISA in 2008 and she is currently a professor of Tax Law at UNISA where she is the first black woman to hold the position of full professor in the College of Law. She talks to us about her career and her life beyond tax.
Keeping the lid on Pandora's box
Author: Lisa Brunton (Cliffe Dekker Hofmeyr) Analysis of the recent Kluh Investments (Pty) Ltd v Commissioner for the South African Revenue Service case. If only all judgments were formulated with the elegant reasoning and perspicacity of the judgment delivered by Rogers J in the Western Cape Division of the High Court in Kluh Investments (Pty) Ltd v Commissioner for the South African Revenue Service (case number A48/2014, as yet unreported) on 9 September 2014.