The South African Revenue Service (SARS) will host the tax experts and heads of tax administrations from BRICS member countries, namely Brazil, Russia, India China and South Africa, in Sandton next week. This will take place at the Hilton Hotel in Sandton from 18 to 21 June 2018. The BRICS Tax meetings follow on BRICS Customs meetings held in April this year, which contributed to creating an enabling framework for BRICS Customs cooperation.
Tax News
Is it time to lower South Africas income tax rates?
Author: David Warneke, Head of Income Tax Technical, BDO South Africa. A fundamental question posed by commentators around the 2018 National Budget was whether an increase in personal or corporate income tax rates, or both, would be announced. The consensus, which proved to be correct, was that such increases were unlikely. The main reasons given were that personal and corporate income tax rates are already high by international standards. Personal income tax rates, mainly due to the introduction of the 45% maximum marginal rate in the 2017/2018 income tax year of assessment for taxable income above R1.5 million, and also since relatively high marginal rates are reached at low taxable income levels, by global standards. Corporate income tax rates, as the rates in most of our main trading partners are lower than ours and globally rates are decreasing.
Reducing the cost of transfer pricing compliance for MNEs
Author: Okkie Kellerman (ENS Africa). Many countries have become more focused on combating tax avoidance. As such, transfer pricing compliance has become much more burdensome due to substantial documentation requirements and multiple filing deadlines. Multinationals (MNEs) have to take action to control their transfer pricing risks, but the cost of doing so could substantially increase.
Controlled foreign companies: look before you leap
Authors: Carmen Gers and Simone Krupanandham (ENS Africa). Section 9D of the Income Tax Act, 1962 (the Act) is aimed at South African residents who directly or indirectly hold more than 50% of the total participation (broadly speaking shares) or voting rights in a foreign company. A foreign company in this context is classified as a controlled foreign company (CFC). In terms of section 9D, the net income of the CFC is included in the relevant residents income in proportion to the residents effective participation rights in that CFC, thus resulting in the resident being subject to tax on such notional income imputed to it.
Revised debt reduction rules
The debt reduction provisions contained in section 19 of the Income Tax Act, 1962 (the Act) and paragraph 12A of the Eighth Schedule to the Act have been amended with effect from 1 January 2018 and are applicable to years of assessment commencing on or after that date. As a result of the changes, the ambit of these provisions has widened significantly, as discussed below, and the additional circumstances to the rules find application are worth noting.
Time is running out for transfer pricing documentation compliance
In terms of the South African Income Tax Act, 1962 (the Act),transfer pricing adjustments are made in circumstances where multinational entities transact at prices that do not reflect prices expected to be charged if parties to the transaction were independent persons dealing at arms length. Base Erosion and Profit Shifting (BEPS) refers to tax planning strategies that shift profits from high tax jurisdictions like South Africa to locations where little or no corporate tax is being paid.
Overlap in treatment of dividend
Author: Joon Chong, Partner in the Tax Practice at Webber Wentzel. Section 1 of the Income Tax Act (ITA) defines a “dividend” to be any amount transferred by a resident company for the benefit of any person in respect of any share in that company whether by way of a distribution or consideration for a share repurchase but does not exclude a reduction of contributed tax capital of the company. The section 31 transfer pricing rules in the ITA require transactions between resident and non-resident connected parties (affected transactions) to be carried out on an arm’s length basis. To the extent that this is not done, section 31(2) requires a taxpayer to calculate its taxable income to account for any adjustments necessary, as if any affected transaction has been entered into on an arm’s length basis. This is the primary adjustment to taxable income.
Notification of commencement of audit
By Yashika Govind, Senior Associate and Nirvasha Singh, Partner at Webber Wentzel. The obligation of SARS to collect tax and taxpayers’ rights are often at odds with each other. In an attempt to address this issue, the Budget 2018 (Budget) proposes to reconcile the taxpayers’ constitutional rights with SARS’ constitutional obligations by including a provision in the Tax Administration Act 28 of 2011 (TAA) stipulating that SARS must inform the taxpayer at commencement of the audit when the information submitted in a tax return will be audited. The provision is intended to cover desk audits which involve inspection or enquiries, without necessarily meeting with the taxpayer or third parties in person.
SARS cuts the 2018 tax season by a month!
TAX SEASON 2018 FOR INDIVIDUALS This just in: SARS announced on their website that they have shortened the 2018 tax season for non-provisional tax payers (individual tax payers who earn a salary and who do not have additional income sources such as interest or rental income) by month to allow more time for finalising verifications and audits before year end. In the past, non-provisional tax payers, submitting their tax returns via efiling, had until the end of November to do so. This year, the tax season for non-provisional tax payers will close on the 31st of October 2018. The 2018 tax season for non-provisional tax payers will start on the 1st of July 2018 and end on the 31st of October 2018, for tax payers submitting their returns via e-filing. Tax payers who manually submit their tax returns will have until the 21st of September 2018 to do so. Provisional Read More …
Status of SARS interpretation notes
Ben Strauss (Director at Cliffe Dekker Hofmeyr). From time to time, the South African Revenue Service (SARS) issues interpretation notes. According to the SARS website (www.sars.gov.za), interpretation notes are intended to provide guidelines to stakeholders (both internal and external) on the interpretation and application of the provisions of the legislation administered by the Commissioner.