Author: Manri Oosthuizen (Moore Stephens) An explanation of rebates on foreign withholding taxes paid in accordance with 6quin of the Income Tax Act 58. It is a common occurrence in many South African businesses to transact with customers outside our borders, especially with customers in the rest of Africa. In most of these transactions, in particular services such as IT-related and management, tax is withheld by the customer in the African country. Tax withheld is based on the invoice amount of the transaction with rates as high as 25 percent.
Tax News
Everything you need to know about STC credits
Author: Mike Dingley (Mazars) Dividends Tax has been payable since 1 April 2012. Prior to this, resident companies that declared dividends were subject to Secondary Tax on Companies (‘STC’). Under the Dividends Tax regime when a company pays a dividend, it is, subject to certain requirements, allowed to deduct unused STC credits from the dividend amount in calculating the amount subject to Dividends Tax. Some changes are in the pipeline though, but for those who need a better understanding, here are some points to note.
The new tax court rules
Author: Alan Lewis (ACBS) This article considers some of the new rules, and their possible impact, on the future litigation process in the tax court. On 11 July 2014, the Minister of Finance promulgated new rules, governing the procedures to lodge an objection and appeal against an assessment, and related matters (“the new rules”). These rules replaced the previous rules, which had been promulgated on 1 April 2003.
Crossborder taxation
Author: Albertus Marais (Mazars) Delving deeper into South African corporate tax residence rules. Tax advisors are often approached by disillusioned corporate clients who have a group company which has been incorporated offshore (quite often in a low-tax jurisdiction such as Mauritius), and which has been assessed by the South African Revenue Services (SARS) on the basis that the company is a tax resident in South Africa. Quite often these structures were set up by previous tax advisors who failed to explain the practical implications linked to having an offshore company, and what needs to be done practically to have that company’s tax residence offshore.
Wearing glasses in the eyes of SARS
Author: Mark Bechard (Iol) The fact that you wear glasses or contact lenses does not in itself mean you have a physical impairment and can claim tax relief for related medical expenses. The medical expense section of your South African Revenue Service (SARS) tax return has a field for “any physical impairment expenses not recovered from your medical scheme”.
Proposed modifications to the transfer pricing guidelines relating to low value-adding intra-group services
Author: Emil Brincker (DLA Cliffe Dekker Hofmeyr) The Organisation for Economic Co-operation and Development (OECD) released a public discussion draft (DD) pertaining to the Base Erosion and Profit Shifting (BEPS) Action Plan 10 on 3 November 2014. The DD intends to reduce the scope for erosion of the tax base by means of the charging of excessive management fees and head office expenses.
Private Binding Ruling on withholding tax on interest and the application of a treaty
Author: Heinrich Louw (DLA Cliffe Dekker Hofmeyr) The South African Revenue Service (SARS) issued Binding Private Ruling No 181 (Ruling) on 4 November 2014, which deals with the application of a treaty for the avoidance of double taxation to withholding tax on interest. The applicants were three companies incorporated and tax resident in South Africa, who intend to construct wind farms in South Africa. The Danish Government, through a funding scheme, intends to provide funding to the applicants for purposes of constructing the wind farms. Once the projects are complete, interest will become payable by the Danish Government (via the funding scheme) in respect of the funding, the term being a period of 15 years.
Draft Responses by National Treasury on the Excessive Interest Limitation Rules
On 15 October 2014, National Treasury and SARS stated in a Response Document (‘Document’) presented to the Standing Committee on Finance (‘SCoF’) that the ‘excessive interest limitation rules’ are in line with international practice and measure up well in light of current discussions at the OECD. Sections 23M and 23N were introduced in the 2013 Taxation Laws Amendment Act as measures to limit the amount of interest that a company can deduct, which the Document describes as a more reasonable level since debt finance was used to create opportunities for base erosion in the past.
INVITING TECHNICAL TAX PROPOSALS FOR ANNEXURE C OF THE 2015 BUDGET REVIEW
I. Background The National Treasury invites taxpayers, tax practitioners and members of the public to submit any technical proposals to improve or correct current tax legislation, including the closing of loopholes and addressing of unintended anomalies. Proposals received will be considered for possible inclusion in Annexure C of the 2015 Budget Review, released as part of the 2015 Budget Review.
SARS Interpretation Note 80 – Income Tax treatment of stolen money
1. Purpose This Note provides guidance on – • the deductibility of expenditure and losses incurred in a taxpayer’s trade when money is stolen through embezzlement, fraud or theft, including expenditure incurred on legal and forensic services to investigate such losses; • the inclusion in income of amounts recovered or recouped in respect of such expenditure and losses previously allowed as a deduction; and • the taxation of stolen money in the hands of the thief and the non-deductibility of such amounts when repaid.