The Value-Added Tax (VAT) rules relating to the exportation of goods are rather complex and intricate. Many vendors do not always appreciate the issues that arise in circumstances where goods are exported, either by the vendor or the purchaser of the goods. The South African VAT system is essentially destination based, which means that the supply of goods or services are to be taxed in the country where such goods or services are consumed. In other words, where goods are exported from South Africa, the goods will be consumed outside of South Africa, and the supply of such goods should therefore not attract VAT in South Africa.
Tax News
Tax Administration – SARS's power to recover tax
The Tax Administration Act No. 28 of 2011 (TAA) came into effect on 1 October 2012 (save for certain provisions that are still to come into force). This important piece of legislation seeks to incorporate into one Act all those administrative provisions (except for customs and excise) that are generic to all tax Acts and that were previously duplicated across all the different tax Acts. Significantly, the TAA provides the South African Revenue Service (SARS) with substantial powers in relation to important administrative aspects of tax, such as the collection of information and the imposition and recovery of tax.
Tax Administration – SARS Preservation orders
A Cape Town based businessman has been the subject of investigation by SARS into alleged VAT fraud, and has been issued with an assessment for R291 million. An unexplained gift to the daughter of the tax debtor When his daughter, a swimwear model, received – out of the blue and without explanation – an eye-wateringly large gift of $15.3 million (equivalent to some R143 million) from an unnamed Arab admirer plus two luxury cars worth R2.75 million, SARS suspected that this money and these assets were intended for her father and had been ostensibly channelled to her so as to avoid their being seized by SARS to fund the payment of her father’s tax debt.
Tax Administration – Understatement penalties before 1 October 2012
The promulgation of the Tax Administration Act No. 28 of 2011 (the TAA), which came into effect on 1 October 2012, brought into effect a basis for the imposition of penalties in respect of “understatements”. An understatement arises where a return is not submitted, amounts are omitted from or deductions are erroneously claimed in a return submitted to SARS. The understatement penalty is a percentage-based penalty applied to the “shortfall”. The shortfall is defined in the following terms in section 222(3):
Tax Administration – Reasonable care required for SARS to waive tax penalties
Judgment was handed down in the case of Harding v Revenue and Customs Commissioners [2013] UKUT 575 (TCC) in the Upper Tribunal (Tax and Chancery Chamber) on 15 November 2013. The case revolved around the question of whether an omission by a taxpayer of a severance payment in his tax return amounted to a ‘careless mistake’ in terms of the United Kingdom Finance Act, 2007 (UK Finance Act). Background The Appellant held a senior position in a company forming part of a leading accounting practice. He entered into a compromise agreement with his employer whereby his contract of employment was terminated and he received approximately £110,000.00 in severance payments (payment).
Tax deductions of Audit Fees
On 7th March 2014 the Supreme Court of Appeal delivered judgment in the case of Commissioner for the South African Revenue Service v Mobile Telephone Networks Holdings (Pty) Ltd, [2014] 76 SATC 205 which dealt with the deductibility of audit fees incurred for a dual or mixed purpose and the apportionment thereof for tax purposes in the light of section 11(a) of the Income Tax Act No. 58 of 1962 (the Act ), as amended read with sections 23(f) and 23(g) of the Act.
OECD releases first BEPS recommendations to G20 in accordance with Action Plan
As a part of the OECD/G20 project to combat base erosion and profit shifting (“BEPS”), the OECD released the first set of reports and recommendations on September 16, 2014. These reports address seven of the actions described in the 15-point action plan to address BEPS published in July 2013 (the “Action Plan”) and consist of the following items: Recommendations for domestic rules to neutralize hybrid mismatch arrangements and recommended changes to the OECD Model Tax Convention to deal with transparent entities (Action 2, the “Hybrids Report”);
The BEPS Project – OECD keeps tax reform pot boiling
The OECD led Base Erosion and Profit Shifting (BEPS) Project is aimed at updating corporate tax systems around the world to reduce the tax minimisation opportunities created by the global economy. If the Project is successful, all countries will be required to make significant changes to their domestic tax law and treaty networks with the aim of ensuring that multi-national businesses are paying their “fair share” of the income tax burden.
Coming Soon – changes to the dispute forms and process
All saved or pending income tax dispute forms, Notice of Objection (NOO) or Notice of Appeal (NOA), will be deleted from eFiling after 31 October 2014. The dispute forms and process will be changed in November 2014. Taxpayers, who haven’t submitted their forms (NOO or NOA), by 31 October 2014, will need to manually transfer the information to the updated NOO or NOA, which will be available in November 2014. Top Tip: The deadline for submitting a dispute is 30 business days: Objection – from the date of the assessment Appeal – from the date the objection wasn’t allowed or wasn’t allowed in full.
Recent developments regarding tax free savings accounts
Author: David Warneke, BDO South Africa Johannesburg, South Africa- Oct. 8, 2014 – A proposed section 12T to be inserted into the Income Tax Act will allow individuals to save up to R30 000 per annum, tax free. It appears that this concession will also apply to minor children. In order to encourage savings, in the 2013 Budget speech the Minister of Finance proposed the introduction of tax free savings accounts. The idea was that individuals could invest up to R30 000 per annum into such accounts, with an overall lifetime ceiling of R500 000. Returns generated in the account would be tax free, whether by way of income or capital gains. The individual could withdraw the amount invested at any stage on a tax free basis.