Authors: Seelan Muthayan and Ayanda Masina (BDO South Africa). Increase in the VAT rate The Minister of Finance in the budget speech announced an increase in the VAT rate to 15%. The much anticipated increase is the first increase in the VAT rate since 1993. The VAT rate will increase with effect 1 April 2018. The provisions of the VAT Act relating to the application of an increase in the tax rate will apply to transactions where the applicable tax rates overlap. To counter the effect of the increase in the VAT rate, relief will be granted in the form of the current zero rating of basic foodstuff and an above average increase in social grants. Electronic Services Amendment of the Regulations In 2014, National Treasury brought electronic services provided by foreign businesses/ non-residents to South African residents into the South African VAT net. This new activity/type of supply was Read More …
Tax News
BDO Expert Analysis of South African Budget 2018
Our Expert Analysis of Budget 2018 Our Tax and Financial Planning experts provide their insights into the 2018 Budget Speech. bdo-pocket-guide-2018
Budget 2018 No real Surprises!
Ferdie Schneider, National Tax Head and Tax partner at BDO South Africa. Yesterday, Minister Gigaba delivered his first budget speech for the 2018/19 fiscal year. The budget follows the December 2017 election of Cyril Ramaphosa as ANC president, and more recently his election as the fourth President of the democratic South Africa. This budget is believed by many to be one of the most important budgets in many years as it follows the end of the Zuma era, which was characterised by an underperforming economy, fraud, corruption, and political instability.
Major new tax burden introduced
Author: David Warneke (Partner and head of Tax Technical at BDO South Africa). The Taxation Laws Amendment Act of 2017 (Act 17 of 2017) which was promulgated on 18 December 2017 contains provisions, namely section 22B of the principal Income Tax Act and paragraph 43A of the Eighth Schedule to the Income Tax Act, that will result in a significant compliance burden for companies, even in cases in which they do not result in additional taxation. The provisions deal with disposals of shares in a company (say A) that are held by another company (say B) in circumstances in which B held a significant portion of the equity shares (which the Amendment Act defines as a qualifying interest) in A at any time within the 18 months preceding the disposal. Section 22B applies in situations in which the shares that are the subject of the provision are held as trading Read More …
Did the punishment fit the crime? The Tax Court reduces an understatement penalty imposed by SARS
Author: Louis Botha (Associate at Cliffe Dekker Hofmeyr). The imposition of understatement penalties in terms of Chapter 16 of the Tax Administration Act, No 28 of 2011 (TA Act) and the factors to consider when imposing such a penalty: An issue that our courts have not dealt with much. In this regard, the judgment of the Tax Court in XYZ CC v The Commissioner for the South African Revenue Service (Case No. 14055) (as yet unreported), handed down on 20 November 2017, sets out some helpful principles.
Consecutive asset-for-share transactions
Author: Ben Strauss (Director at Cliffe Dekker Hofmeyr). Section 42 of the Income Tax Act, No 58 of 1962 (Act) allows taxpayers to transfer assets to a company free of immediate tax consequences, provided certain requirements are met; there is a roll-over for tax purposes. However, certain anti-avoidance provisions may be triggered if the company that acquired the assets, disposes of the assets within 18 months of acquisition.
Residential property developers face cash flow crunch due to VAT on temporary letting of units
Author: Gerhard Badenhorst (Director at Cliffe Dekker Hofmeyr). Many residential property developers will kick off 2018 with a major cash flow challenge as a result of a substantial value added tax (VAT) liability which they may face in respect of the temporary letting of residential units which have been developed for resale.
Deductibility of legal expenses
Author: Gigi Nyanin (Associate at Cliffe Dekker Hofmeyr). For purposes of determining the taxable income derived by any person from carrying on a trade, s11(c) of the Income Tax Act, No. 58 of 1962 (Act) provides for the deduction of legal expenses which arise in the course of or by reason of a taxpayers ordinary trading operations. More specifically, any legal expenses actually incurred by a taxpayer in respect of any claim, dispute or action at law arising in the course of or by reason of the ordinary operations undertaken by the [taxpayer] in the carrying on of [its] trade will be deductible.
A win against SARS: late delivery of SARSs rule 31 Statement
Author: Mareli Treurnicht (Director at Cliffe Dekker Hofmeyr). On 17 October 2017 the Tax Court (Western Cape Division: Cape Town) delivered judgment in the matter between S Company v The Commissioner for the South African Revenue Service (SARS) under case number IT0122/2017. The judgment was handed down by Judge Cloete. This judgment is of great interest to any taxpayers currently involved in prolonged disputes with SARS, in particular where there are delays on the part of SARS.
Announcement of further revisions to the debt reduction rules in the Income Tax Act
Author: Jerome Brink (Associate at Cliffe Dekker Hofmeyr). The current s19 and paragraph 12A of the Eighth Schedule (Eighth Schedule) were introduced into the Income Tax Act, No 58 of 1962 (Act) with effect from years of assessment commencing on or after 1 January 2013. In essence, these provisions contain the debt reduction rules which attempt to create a uniform system that provides relief to persons under financial distress in certain circumstances. In simple terms, the relevant provisions set out the tax implications arising in respect of a debt that is reduced, cancelled, waived, or discharged by a creditor. The tax implications are dependent on what the debt originally funded, for instance trading stock, other deductible expenditure, allowance assets or capital assets.