Author: Ben Strauss. In terms of section 12J of the Income Tax Act 58 of 1962 (Act), put simply, a person who invests in an approved venture capital company may claim an immediate income tax deduction equal to the amount invested (subject to limitations). A venture capital company will only be approved as such if, among other requirements, the sole object of the company is the management of investments in companies that are qualifying companies.
Tax News
VAT apportionment: An unintended penalty?
Author: Gerhard Badenhorst. The stated policy of the South African Revenue Service (SARS) not to make value-added tax (VAT) apportionment rulings effective retrospectively to prior financial years has been questioned on several occasions. The matter was recently considered by the Tax Court in the case of Taxpayer v Commissioner for the South African Revenue Service (VAT2063) [2019] ZATC2 (15November2019) where the Tax Court found in favour of SARS.
Tax clearance certificates and tax compliance status: Changes on the tax and exchange control fronts
Author: Louis Botha. Recently, the South African Revenue Service (SARS) announced that it would no longer be issuing printed tax clearance certificates (TCCs). The announcement was not unexpected as SARS had already indicated in 2015 when the tax compliance status (TCS) system was implemented, that it would cease issuing printed TCCs at a future date.
Who is liable when a payment is made in terms of an invoice that has been intercepted and altered?
Author: Roxanne Webster and Merrick Steenkamp. Gone are the days of receiving physical invoices. Most, if not all, invoices are now sent electronically. While this may be faster and seemingly more secure, there are still some risks involved. What happens if either the creditors or the debtors email accounts are hacked? What if the banking details on the invoice are changed without either partys knowledge and payment is made? Who is liable in such a scenario?
Another ruling on income tax allowances for future expenditure
Author: Ben Strauss. Under section 24C of the Income Tax Act 58 of 1962, if a taxpayer receives income under a contract in a tax year, and if the income will be used to finance expenditure to be incurred by the taxpayer in future in the performance of its obligations under that contract then the taxpayer may qualify for an allowance.
Amendments to the regulation of primary and secondary listings on the JSE
Authors: Colin du Toit,Madelein Burger,Elodie Maume from Webber Wentzel. On 5 November, the JSE Limited (JSE) announced amendments to its Listings Requirements to strengthen the regulation of primary listings and secondary listings. The amendments follow an extensive consultation process with the market and the public that kicked off in September 2018 after the JSE released a consultation paper (Paper) on “possible regulatory responses to recent events surrounding listed issuers and trading in their shares” (click hereto read the e-alert on the Paper).Following the consultations, the JSE published draft amendments in April 2019 for formal comment (clickherefor the e-alert on the draft amendments).
The end of NRV for closing stock (or not?)
Author: Joon Chong, a Partner at Webber Wentzel. The Supreme Court of Appeal (SCA) has for the second time in CSARS v Atlas Copco South Africa (Pty) Ltd, confirmed that the net realisable value (NRV) method is not a suitable method to value closing stock for income tax purposes. The SCA referred with approval to its earlier decision of CSARS v Volkswagen South Africa (Pty) Ltd and held that the NRV method is forward looking, taking into account estimated costs which would still need to be incurred before the stock is sold. The Income Tax Act 58 of 1962 (Act), and calculation of taxable income, is backward looking. The reduction from the cost price of the closing stock should only be allowed in two circumstances: (i) when an event that caused the value of the trading stock to diminish occurred in the tax year; and (ii) when the taxpayer knows Read More …
When should revenue for gift cards be taxable?
Author: Joon Chong, Tax Partner at Webber Wentzel. The recent Tax Court (Cape Town) judgement of IT 24510 confirmed that amounts received by a retailer for the sale of gift cards were not “received or accrued” for purposes of the gross income definition. The taxpayer had not included proceeds from the sale of gift cards as gross income in the year the gift cards were sold, which resulted in the additional income tax assessment and dispute. The court held that the taxpayer had correctly accounted for the value of the cards as gross income on the earlier of the year when the cards were redeemed, or expired. Based on the court’s reasoning, it is submitted that there are strong grounds to argue that there is also no liability to account for value-added tax on the same basis, i.e. not when the cards are sold but when they are redeemed or Read More …
Unforeseen preference share amendments
Author: Brian Dennehy, Khurshid Fazel and Joon Chong, at Webber Wentzel. The 2019 Taxation Laws Amendment Bill (TLAB) was tabled with the Medium Term Budget Policy Statement on 30 October 2019. The TLAB contains a significant amendment to the definition of “hybrid equity instrument” in section8E of the Income Tax Act, which will deem any distributions made within 3 years of the date of issue of a preference share to be treated as normal income and fully taxable in the holder’s hands.
The capitalisation of interest and section 8F
The provisions of section 8F of the Income Tax Act, 58 of 1962 (the Act) regulate hybrid debt instruments. Broadly speaking, from the time that an interest-bearing debt qualifies as a hybrid debt instrument, the interest incurred in respect thereof will be deemed to be a dividend in specie that is declared by the company which incurred such amount (i.e. the borrower) to the person to whom that amount accrued (i.e. the lender). Furthermore, the borrower is denied a tax deduction in respect of such interest.