Author: Heinrich Louw of Cliffe Dekker Hofmeyer In terms of s9D of the Income Tax Act, No 58 of 1962 (Act), a South African tax resident can be taxed on the ‘net income’ of its controlled foreign companies (CFC). However, various exemptions exist in this regard. For example, in terms of the second proviso to the definition of ‘net income’ in s9D(2A) of the Act, the net income of a CFC will be deemed to be nil if the taxes payable by that CFC in foreign jurisdictions are at least equal to 75% of the tax that the CFC would have paid had it been a South African tax resident. This is often referred to as the high-tax exemption. In performing the calculation regard must be had to any international treaties for the avoidance of double taxation, and tax credits or rebates.
Tax News
OECD releases finalized proposals on key tax base erosion concerns
On September 16, 2014, the Organization for Economic Cooperation and Development (OECD) released its 2014 deliverables on the Base Erosion and Profit-Shifting (BEPS) project. The BEPS project, an ambitious and wide-ranging effort by the OECD’s Centre for Tax Policy and Administration (CPTA), is aimed at combating tax avoidance strategies in which global businesses minimize their overall tax burden by moving profits into taxpayer-friendly jurisdictions and exploiting differences in the tax laws and treaties of countries around the world. The OECD began its efforts in 2013 at the behest of the G-20 group of nations, which had come to understand that any serious effort to prevent these tax avoidance strategies would require centralized, coordinated planning and study.
The tinderbox of asset-for-share transactions
Author: Andrea Minnaar – Tax Director at ENSafrica The Income Tax Act No. 58 of 1962 (“the Act”) contains a number of provisions in terms of which assets may be transferred from one taxpayer to another on a tax-free basis, with the tax in relation to such an asset being deferred until the transferee eventually disposes of the asset. One such provision is contained in section 42, dealing with “asset-for-share transactions”.
Share lending arrangements – more tax changes!
Author: Magda Snyckers – Tax Director at ENSafrica The securities lending industry has seen many changes to the taxation of share lending arrangements in South Africa during the last couple of years. In particular, since the introduction of dividends tax on 1 April 2012, the provisions in the Income Tax Act (“the Act“) which relate to the income tax and dividends tax treatment of dividends received by borrowers of JSE listed shares and payments made by such borrowers have been regularly amended, often with retrospective effect. The Draft Taxation Laws Amendment Bill which was released on 17 July 2014 (“2014 Draft Bill”) is no exception, and again contains changes to the dividends tax provisions relating to payments made by such borrowers.
Proposed amendments to the Tax Administration Act
Author: Toinette Beckert – Tax Associate at ENSafrica The draft Tax Administration Laws Amendment Bill 2014 (“DTLAB 2014”) was published for public comment by National Treasury on 17 July 2014 and proposes a number of amendments to the Tax Administration Act No. 28 of 2011 (“the TAA”). In this article, we deal with some of the most pertinent proposals set out in the DTLAB 2014.
Interest withholding tax – are you ready for 1 January 2015?
In just over 3 months’ time, the interest withholding tax (“IWT”) will come into effect – more than four years after the initial release of legislation governing the IWT provisions. The provisions appear to be fairly straightforward and the parties likely to be affected by the IWT should by now be prepared for the impact which the IWT will have. However, there are aspects of the law which might not have been fully considered to date. A few of these aspects are explored below.
President Zuma announces appointment of new SARS Commissioner
The President of the Republic of South Africa, Mr Jacob Zuma, has in terms of section 6 of the South African Revenue Services Act, 1997, appointed Mr Thomas (Tom) Swabihi Moyane as a Commissioner of the South African Revenue Services. Mr Moyane’s appointment is with effect from 27 September 2014.
Merger and takeover law – impact on private companies
By Basil Mashabane Impact on private companies This is a follow-up to the article ‘Mergers and takeovers under the new Companies Act’ (2011 (Sept) DR 30) where I discussed the fact that South African mergers and acquisitions are experiencing a paradigm shift following the enactment and implementation of the new Companies Act 71 of 2008 (the Act) on 1 May 2011, replacing the old order.
Concerns raised on interest deduction limitation rules
Interest deduction limitation provisions have been enacted in terms of s23N of the Income Tax Act, No 58 of 1962 (Act), which apply to so called ‘reorganisation and acquisition transactions’. These provisions have been in effect since 1 April 2014. The purpose of these provisions (as the heading suggests) is to limit interest deductions in respect of certain debt arrangements that National Treasury consider as being susceptible to excessive gearing.
Salary Sacrifices – tax case IT 12984
In the recent case of ABC Limited v The Commissioner for the South African Revenue Service (case number 12984, as yet unreported), the Tax Court had to determine whether the Appellant had entered into an effective salary sacrifice scheme with its employees in respect of motor vehicle benefits. If there truly was a salary sacrifice, only the taxable value of such benefit in accordance with the provisions of the Seventh Schedule to the Income Tax Act, No 58 of 1962 (Act) will have accrued to the employee, otherwise the amount expended by the Appellant to provide the benefit will have accrued.