Tax News

By Joon Chong, Tax Partner at Webber Wentzel. The latest move by SARS to require the withholding of PAYE from annuity payments at an “Effective Tax Rate” as required in directives issued to payers of annuities may help some annuitants to plan their finances but may disadvantage others SARS issued IRP3e tax directives in terms of paragraph 2(2B) of the Fourth Schedule to the Income Tax Act to all payers of annuities in early February 2022 (i.e., to licensed insurers and retirement funds, collectively “administrators”). The directives required the administrators to withhold PAYE on the annuities paid at the “Effective Tax Rate” or “Fixed PAYE Rate” prescribed by SARS on the annuitants. Starting from 1 March or 1 April 2022, annuitants will find that PAYE will be withheld on the annuities they receive at the Fixed PAYE Rate – unless they opt out. How SARS calculates the Fixed PAYE Rate Read More …

By Duncan McAllister, Consultant at Webber Wentzel. Valuing a usufruct for estate duty purposes may incur a greater tax liability than disposing of it while the usufructuary is alive and paying donations tax, transfer duty and CGT When a usufruct ceases, it can have serious estate duty consequences for a deceased usufructuary. For this reason, amongst others, most planners nowadays shun the usufruct and use an inter vivos trust for estate planning. This article explores one of the options open to an aged usufructuary staring down the barrel of the estate duty gun. At the heart of the problem is s 5(1)(b) of the Estate Duty Act 45 of 1955. It states that a usufruct ceasing on a person’s death should be valued by capitalizing the right of enjoyment at 12% a year over the life of the person who becomes entitled to the right of enjoyment, or if the right is Read More …

In the recent judgment of Purveyors South Africa Mine Services (Pty) Ltd vs Commissioner for the South African Revenue Services (135/2021) [2021] ZASCA 170 (7 December 2021), the Supreme Court of Appeal (SCA) considered an appeal brought by the taxpayer (the appellant) in respect of the findings of the High Court in a judgment which upheld the rejection by the South African Revenue Service (SARS) of the voluntary disclosure programme application submitted by the appellant. Share Facts On 12 January 2015, the appellant entered into a dry lease agreement with its holding company (a company incorporated and tax resident in the United States of America (US)) in respect of an aircraft that was registered in the US. The aircraft was subsequently imported into South Africa and was used to transport goods and personnel from South Africa to other countries situated in Africa. As a consequence of the importation of the Read More …

In October 2021, the CDH Tax & Exchange Control team discussed the landmark judgment handed down by the Supreme Court of Appeal (SCA) on 15 October 2021, in Commissioner for the South African Revenue Service v Spur Group (Pty) Ltd (Case no 320/20) [2021] ZASCA 145 (15 October 2021). In that case, the SCA held that a capital contribution made by an employer taxpayer to a trust established for purposes of an employee share incentive scheme, was not deductible for income tax purposes. Share The judgment raised the question whether such capital contributions would henceforth always be considered non-deductible or rather whether it was a case of considering the merits and specific facts and circumstances of each case. Many taxpayers would thus have been relieved when reading SARS Binding Class Ruling 78 issued on 24 January 2022 (BCR 78) which, amongst others, determined the income tax consequences of an employee Read More …

In October 2021, the CDH Tax & Exchange Control team discussed the landmark judgment handed down by the Supreme Court of Appeal (SCA) on 15 October 2021, in Commissioner for the South African Revenue Service v Spur Group (Pty) Ltd (Case no 320/20) [2021] ZASCA 145 (15 October 2021). In that case, the SCA held that a capital contribution made by an employer taxpayer to a trust established for purposes of an employee share incentive scheme, was not deductible for income tax purposes. Share The judgment raised the question whether such capital contributions would henceforth always be considered non-deductible or rather whether it was a case of considering the merits and specific facts and circumstances of each case. Many taxpayers would thus have been relieved when reading SARS Binding Class Ruling 78 issued on 24 January 2022 (BCR 78) which, amongst others, determined the income tax consequences of an employee Read More …

By Duncan McAllister (Consultant) from Webber Wentzel. Parties wishing to cancel a contract should try to do so within the same year of assessment as it was entered into, to avoid adverse cash-flow consequences The Taxation Laws Amendment Act 25 of 2015 introduced a number of amendments to address the cancellation of contracts, which came into effect on 1 January 2016. The principle underlying these amendments is that prior year assessments cannot be reopened to take account of subsequent events. In Caltex Oil (SA) Ltd v SIR, Botha JA stated the following:[1] ‘What is clear, I think, is that events which may have an effect upon a taxpayer’s liability to normal tax are relevant only in determining his tax liability in respect of the fiscal year in which they occur and cannot be relied upon to redetermine such liability in respect of a fiscal year in the past.’ The taxpayer in New Adventure Read More …

By Wesley Grimm, Senior Associate & Rudi Katzke, Partner at Webber Wentzel. National Treasury is asking for public comment by 7 February 2022 on its proposals to impose a specific excise tax on both the non-nicotine and nicotine solutions in e-cigarettes National Treasury published a draft discussion paper in December 2021 on the proposed taxation of electronic nicotine delivery systems (ENDS) and electronic non-nicotine delivery systems (ENNDS), commonly known as e-cigarettes. According to National Treasury, e-cigarettes are battery powered devices that do not burn or use tobacco leaves but vaporise e-liquid solutions which a user inhale. In its discussion paper, National Treasury acknowledges that there is uncertainty about the actual health-related risks of e-cigarettes. Consequently, it wishes to engage with stakeholders on its fiscal policy recommendations for the taxation of e-cigarettes, as countries like the Philippines, Kenya and Russia are doing. National Treasury proposes to introduce a specific excise tax Read More …

By Duncan McAllister, Consultant at Webber Wentzel Although personal rights are clearly assets for CGT purposes, they add a layer of complexity which has not been clarified in recent court decisions Personal rights play an important role in the determination of capital gains and losses. They may comprise assets in their own right for CGT purposes and play a role in establishing proceeds and base cost. Unfortunately, they impose a layer of complexity on the Eighth Schedule which cannot be avoided. What is it? A personal right (jus in personam) is a right in or against a particular person or group of persons. Personal rights are of two types:  jus in personam ad rem acquirendam, a right to claim delivery of a thing; and jus in personam ad faciendum, a right to claim performance or an act. Put differently, a personal right is a right against another person for performance Read More …

On 31 January 2022, SARS hosted a public workshop to discuss the draft Voluntary Disclosure Programme Guide and uncertainties about the Voluntary Disclosure Programme process. As part of its ongoing efforts to reform its Voluntary Disclosure Programme (VDP), the South African Revenue Service (SARS) hosted another workshop with interested stakeholders, primarily to discuss comments on its draft VDP Guide. The draft VDP Guide explains SARS’ understanding of the VDP process and provides general guidance to taxpayers wishing to make use of the VDP to voluntarily disclose and regularise tax defaults. Two of the main agenda items discussed at the workshop were: the impact of prescription on the VDP process; and the meaning of “audit” and “voluntary” for purposes of the VDP. Regarding the impact of prescription, and the associated document retention timeframes, as set out in the Tax Administration Act, 2011 (TAA), SARS was firm that taxpayers wishing to regularise Read More …