Many employees receive a cell phone allowance in some form or other as part of their employment remuneration package. Despite these employment benefits being relatively common, some employers and employees still run into unexpected tax consequences. Esther van Schalkwyk, Senior Tax Consultant at BDO South Africa unpacks some of the important aspects of cell phone allowances and highlights the value of proper tax planning. “Cell phone allowances or the use of employer-provided cell phones
Tax News
Tax relief to revive flagging SA shipping industry
Author: David Warneke, Tax Partner, BDO South Africa. From 1 April 2014[1], South African (SA) resident companies engaged in international shipping have enjoyed a far better income tax dispensation than before. If you are involved in this industry, make sure your company is enjoying the benefits described below. Prior to this date, international shipping income derived by such companies was generally subject to SA tax at the rate of 28%, the rate applicable to other types of companies. The only particular incentive for such companies was related to tax depreciation on the cost of their ships. SA had a wholly uncompetitive tax dispensation for such companies, whereas in order to attract such companies, many other jurisdictions have either introduced a ‘tonnage tax’ – tax based on the tonnage of the ship rather than profits of the shipping company – or exempted such income from tax altogether.
Cross Border Interest Paid by a South African Resident: Tax Issues that Arise
Author: Siyasanga Madikazi (Tax Trainee), BDO South Africa. Cross border transactions, as well as growth in international trade between companies within the same group, has increased significantly in recent years. This often results in debts between resident and non-resident companies and numerous complexities from a South African tax perspective. Interest payments by residents to non-residents are generally subject to interest withholding tax (WHT) at 15%. Whether WHT applies depends on whether a Double Tax Agreement (DTA) between South Africa and the country of residence of the recipient exists to give South Africa the rights to tax. It also depends on whether the interest is subject to South African income tax (as opposed to interest WHT) in the hands of the non-resident recipient.
Reportable Arrangements – Foreign Services
Author: Khutjisho Ramosebudi (Tax Trainee), BDO South Africa. SARS Public Notice 140 (3 February 2016) contains a new list of Reportable Arrangements (RAs) in terms of the Tax Administration Act (TAA). The RA regime acts as an early warning for SARS in respect of various types of arrangements that could pose a risk to the fiscus. RAs do not necessarily allow SARS to act, for example, by disregarding or re-characterising steps in or parts to the arrangement in terms of the general anti-avoidance provisions in the Income Tax Act.
“Exceptional circumstances” when objecting to an assessment
Author: Keelen Snyders, BDO South Africa. A recent tax case highlighted the importance of taxpayers gaining an understanding of the objection process for income tax assessments issued by SARS. The case, which was contested between ABC (Pty) Ltd and the Commissioner, was concerned with the onus on the taxpayer to prove “exceptional circumstances” when objecting to an assessment issued by SARS. In terms of the Tax Administration Act (TAA), a taxpayer may object to an income tax assessment within 30 business days of the date of the assessment. If a taxpayer wishes to object after expiry of this period, a senior SARS official may extend the period by 21 business days provided SARS is satisfied that “reasonable grounds” exist for late submission.
Brief window of opportunity for South Africans named in the Panama Papers
A number of South African individuals, trusts and companies feature in the recent data leak involving clients of Panamanian law firm Mossack Fonseca. Although the publication of the data by the International Consortium of Investigative Journalists does not allege any violation of tax laws or exchange control regulations by those identified in it, the South African Revenue Service (“SARS”) and the South African Reserve Bank (“SARB”) have indicated that they will be investigating the tax and exchange control affairs of these South Africans. As a result, those named in the leak should consider urgent steps to address any potential tax or exchange control transgressions.
Update on the taxation of South African dividends to the Netherlands
Author: Stephan Spamer and Howmera Parak (ENSafrica). In 2014 and 2015, ENSafrica published two articles on the “most favoured nation clause” contained in article 10(10) of the protocol (“2008 Netherlands Protocol”) issued under the Netherlands/South Africa (“SA”) double tax agreement (“Netherlands/SA DTA”). In the 2014 article, ENSafrica highlighted the view that has been expressed in the market that article 10(10) of the 2008 Netherlands Protocol gives rise to a complete exemption from dividends tax in SA
Value Added Tax on private equity transactions
Author: Seelan Moonsamy (Tax Manager at ENSafrica). The judgment of the Supreme Court of Appeal (“SCA”), which established certain guidelines and principles regarding the claiming of input tax for value added tax (“VAT”) purposes in the Commissioner for South African Revenue Services v De Beers Consolidated Mines Ltd (503/11) (1 June 2012) case may have far-reaching consequences for the private equity and venture capital industry.
Africa tax in brief
DEMOCRATIC REPUBLIC OF THE CONGO (DRC): Refund of input VAT credit suspended In terms of the DRC value added tax (“VAT”) legislation, export businesses, companies ceasing their activities, oil and mining companies (during the exploration phase) and companies making significant investments are entitled to request input VAT credit refunds. However, on 18 April 2016, the government announced the suspension of the refund of input VAT credits for all taxpayers in an attempt to bolster its decreasing tax revenues resulting from the decrease in commodity prices.
Can a controlled foreign company have more than one foreign business establishment?
In terms of the South African controlled foreign company (“CFC“) legislation contained in section 9D of the Income Tax Act, 58 of 1962 (the “Act“), where South African residents directly or indirectly hold more than 50% of the total participation rights (essentially, the right to participate in the benefits of the rights attaching to a share) in a foreign company, a proportional amount of the “net income” of that foreign company (as a CFC) will be included in the income of those residents. In determining the “net income” of the CFC, section 9D(9)(b) of the Act exempts, inter alia, any amount which is attributable to any foreign business establishment (“FBE”) of that CFC.