Author: Varusha Moodaley. Where fixed property is purchased by a VAT vendor from a non-vendor, transfer duty is payable thereon by the purchaser. The fixed property purchased from a non-vendor is regarded as second-hand goods in terms of the VAT, Act 89 of 1991 (VAT Act). To the extent that the property is purchased for the purpose of making taxable supplies, the purchasing VAT vendor is entitled to a notional input tax deduction equal to the tax fraction (15/115) of the lesser of the consideration in money paid by the vendor for the supply of the fixed property, or the open market value thereof.
Tax News
Tax treatment of losses incurred during lockdown
Authors: Aubrey Mazibuko, Emil Brincker and Louis Botha. There is little doubt that the national lockdown in response to the COVID-19 health crisis has had a negative financial impact on individuals and business alike. In our Tax & Exchange Control Alert of 28 May 2020, we discussed some of the practical day-to-day tax consequences that the lockdown may have on businesses. In this alert we take a look at the effect that the national lockdown may have on expenditure or losses incurred by individuals and businesses. We also the look at the tax consequences that may arise as a result of employers providing their employees with personal protective equipment. To this end we will consider two scenarios.
Tax disputes in the time of eFiling “Late” objections are not always late
Author: Esther van Schalkwyk , Tax Manager at BDO. While eFiling has played a crucial role in managing ones tax affairs remotely during the Covid-19 pandemic and lockdown, there are some discrepancies in the way SARS is handling disputes to tax assessments. In some instances, taxpayers whose objections are not late are prompted on eFiling to motivate why their late objection should be condoned. Whats more worrying is that we have seen such objections being disallowed for being late (despite a senior SARS official presumably having applied his/her mind). Such unlawful disallowances by SARS seem to occur mainly where taxpayers have exercised their right to request reasons for the assessment before objecting.
Covid-19: TERS – 5 important updates
Authors: Joon Chong,Dhevarsha Ramjettan,Johan Olivier,Shane Johnson,Bianca Viljoen,Zipho Tile. Since the launch of TERS, there has been (almost) daily changes introduced by the Unemployment Insurance Fund. Important amendments to TERS were gazetted on 8 April 2020. Following those amendments, the Minister of Employment & Labour signed off on further amendments and corrections on 16 and 20 April 2020, respectively. In addition to these changes, the UIF has also publicly released the method of calculation for TERS benefits. We highlight 5 important updates on TERS for employers below.
Covid-19: How to manage ‘place of effective management’ tax risk during lockdown
Authors: Anne Bennett, Donald Fisher-Jeffes and Neo Penn from Webber Wentzel. Covid-19 is only anticipated to peak in South Africa (SA) in September 2020, with international air travel only being permitted once the current lockdown restrictions are reduced to Level 1. This may result in some chief executive officers, or other senior executives/board members of foreign companies being unable to travel from SA to attend board meetings or conduct business in the country where the company is tax resident. Could this put the foreign company at risk of becoming South African tax resident?
Estimating the tax effects of the sale of a business in the hands of a seller
Author: Craig Miller from Webber Wentzel. Tax practitioners are often asked to calculate the indicative effects of the prospective sale of a business (assuming no roll-over relief applies) for the seller. Invariably, the tax practitioner will be informed by the private equity or corporate finance practitioner that enterprise value (EV) is the estimated fair value of the operations of the business. However, this may give rise to a misunderstanding. A tax practitioner is likely to be confused by reference to the “business” (a term only appearing three times in the Income Tax Act) and will not always understand how this value is calculated.
SARS and the fiscus may benefit when executives have to pay back
Author: Craig Miller, a Director at Webber Wentzel. On occasions when company executives have to pay back a portion of their remuneration, the fiscus may unjustifiably benefit at the expense of employers from the tax previously paid on these amounts. This situation could be made fairer by adding a simple provision to the Income Tax Act. Company executives may sometimes have to pay back some of their remuneration to their former employers. This could arise either from current economic volatility impacting incentive arrangements, or the various corporate financial scandals which have engulfed SA over the last few years.
The Covid-19 Loan Guarantee Scheme And Debt Relief For Bank Customers
South African banks have approved just over R7 billion in loans for 4 800 qualifying small businesses, since the Covid-19 Loan Guarantee Scheme was launched in mid-May. This amount is expected to grow as the number of applications for loans continues to increase. As at 06 June 2020: Banks have received 29 700 applications for Covid-19 loans 5 200 applications were rejected because they did not meet the eligibility criteria for the loans, as set out by the National Treasury and the South Africa Reserve Bank (SARB) 5 400 applications were declined because they did not meet bank risk criteria 14 100 applications are in the process of being assessed 200 loans were approved, but not taken up by the applicants.
South Africa Supplementary Budget Tax Overview 2020
Tax Overview: The Minister of Finance, Tito Mboweni, delivered the supplementary budget speech today as a result of the significant effects that the current COVID-19 pandemic has had on our economy. Whilst there were no tax increases announced, it is very clear that if no action is taken to increase revenue and cut expenditure, the effect on the economy will be devastating.
SA Budget 2020/21 – Clarifying rollover relief for unbundling transactions involving non-resident shareholders
Author: Jerome Brink. Generally, as a matter of tax parity within South Africas corporate tax system, the distribution of an asset (including shares) by a company to its shareholders should have the same tax impact as a company sale of the asset followed by a distribution of after-tax cash proceeds. However, section 46 of the Act makes provision for rollover relief where shares of a resident company (referred to as an unbundled company) that are held by another resident company (referred to as an unbundling company) are distributed to the shareholders of that unbundling company in accordance with the effective interest of those shareholders.