Joint Media Release by the National Treasury and the South African Revenue Service PRETORIA – The 2014 Tax Statistics bulletin was released today. This is the seventh edition of the publication. The objective of releasing the country’s Tax Statistics is to publicise available, comprehensive tax revenue data that can assist policy makers and provide insights on economic indicators to researchers, analysts, the media and the public in general. The 2014 Tax Statistics Bulletin provides an overview of tax revenue collection and tax return information for the 2009/10 to 2013/14 fiscal years, and the 2010 to 2013 tax years respectively.
Tax News
Proposed modifications to the transfer pricing guidelines relating to low Value-adding intra-group services
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. In establishing an approach, reference is made to so-called low value-adding intra-group services where a simplified approach can be adopted. In such instance the mark-up selected by the taxpayer cannot be less than 2% of the cost nor should it be greater than 5% thereof.
Binding Private Ruling 181 – Ruling on withholding tax on interest and the application of a treaty
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.
OECD publishes first seven reports in its Base Erosion Profit Shifting (BEPS) project
Authors: David Gubbay, Ben Roberts , Adam Craggs and Nigel Brook – RPC Global On 16 September 2014 the Organisation for Economic Co-operation and Development (OECD) published its first set of reports and recommendations on the BEPS project. Seven of the 15 areas of the BEPS action plan are covered, addressing: the digital economy hybrid mismatches treaty abuse transfer pricing documentation and country-by-country reporting transfer pricing and intangibles harmful tax practices a possible multilateral instrument to implement BEPS
The assumption of rehabilitation liabilities as consideration given on the acquisition of mining property and capital assets
Author: Andre Vermeulen – ENSafrica During December 2013, SARS released a draft discussion paper in which it set out its application of the relevant tax law, in relation to the tax treatment of the purchaser and seller, with regard to the assumption of contingent liabilities as part settlement of the purchase price of assets acquired as part of a going concern. SARS states that the document was prepared in light of recent judgments delivered by local and foreign courts as well as numerous requests for clarity regarding the income tax treatment, of both the seller and the purchaser, in respect of the assumption of contingent liabilities as part settlement of the purchase price of assets disposed of and acquired.
Retirement Reform – Why you should not be afraid
Author: Cindy Wilson and David Crossley, Wealth and Advisory, BDO South Africa Johannesburg, South Africa- November. 06, 2014 A great deal of controversy has surrounded the Government’s proposed legislative changes to current Retirement Funds in 2015. Already a number of employees have taken extreme measures and have resigned from their employment in order to cash in their Provident Fund savings. These actions were taken under the mistaken belief that the Government would not allow members access to their benefits, once the law was implemented.
SARS guide on the new dispute resolution rules
The rules, promulgated on 11 July 2014 (new Rules), replaced the rules promulgated under s107A of the Income Tax Act, No 58 of 1962 (old Rules). The new Rules prescribe the procedures to be followed in respect of objections and appeals in respect of assessments or certain administrative decisions by SARS. The new Rules also deal with procedures to be followed in respect of alternative dispute resolution and various other issues relating to the Tax Court. In our Tax Alert dated 18 July 2014, it was noted that some of the most noteworthy departures from the old Rules were the following:
Minor delay in the introduction of the interest withholding tax
However, in terms of the revised draft Taxation Laws Amendment Bill, 2014 (TLAB), which was tabled in parliament on 15 October 2014 and is likely to be promulgated in its current form, a subtle amendment has been made to the effective date such that the interest withholding tax will only be effective from 1 March 2015. Taxpayers are unlikely to be too concerned that the interest withholding tax has been delayed by three months.
Increased compliance burden on the cards for PBOs
By David Warneke, Director: Tax, BDO South Africa Johannesburg, South Africa- In the first version of the Draft Taxation Laws Amendment Bill of 2014 that was released in July, it was proposed that Public Benefit Organisations (PBOs) that provide assets or funding to other PBOs would have to comply with a prescribed investment regime. In terms of current law such PBOs have to distribute, or incur the obligation to distribute at least 75 per cent of the donations received during the year of assessment for which section 18A receipts were issued, within 12 months of the end of the year of assessment (s18A(2A)(b)). The Commissioner is given the discretion to vary this requirement having regard to the public interest and the purpose for which the PBO wishes to accumulate the funds.
Overhaul of retirement reform loses momentum
The Treasury’s delay in implementing retirement reform has been met with dismay by some industry players, who view the proposed changes as crucial to improving SA’s low savings rate. Payroll providers and pension-fund administrators have invested millions in new systems to carry out the changes, which were to have taken effect in March next year. But the Treasury announced earlier this month the first phase of the reforms would be delayed until March 2016 or even March 2017.