Saving more and investing through a tax-free savings account is a very tax efficient way of ensuring maximum after-tax returns for your hard earned money, according to Francis Marais, research and investment analyst at Glacier by Sanlam. “Fortunately, in South Africa, we have a few tools to help with achieving maximum tax efficiency. Some are explicit tax savings vehicles, while some are less explicit, but worth keeping in mind,” said Marais.
Tax News
Navigating the Reit environment
Always be conscious of risk in your approach to the Real Estate Investment Trust (Reit) sector, according to Andrew Parsons, MD of Resolution Capital Australia. At a recent conference hosted by the SA Reit Association Parsons said key lessons to be learnt from the Australian Reit experience is that one ignores history at your own peril. “History may not repeat itself, but it does rhyme,” he cautioned. “Always be conscious of risk. We grew our platform in a measured way, building on our Australian operations and experience to what is a mature and stable real estate market. At the same time we accessing opportunities in new markets through relatively modest investments in smaller platforms, which can achieve scale and diversity in a measured way without undue risk,” explained Parsons.
Value Added Tax – VAT on Residential property
Historically, it was smaller investors who bought and let residential property. However, more recently, even listed Real Estate Investment Trusts (REITs) are building, buying and letting large portfolios of residential property. No doubt the investors are looking to satisfy the demand for residential property, and to realise better yields than may be achieved in commercial property. The value-added tax (VAT) rules on the building, buying, letting and selling of residential properties are not simple. It is worthwhile recapping some of the general principles that apply.
Tax Administration – Rules of prescription
A fundamental reason for the existence of the rules of prescription in our tax law is to provide a taxpayer with certainty as regards its tax position. It is therefore important that such rules are clear and not subject to unfettered discretions. In disputes with the Commissioner for South African Revenue Service (the Commissioner or SARS), prescription is a powerful defence available to compliant taxpayers, allowing them to bring finality to their tax assessments. For some time, amendments to the prescription provisions have been on the cards. SARS has motivated for such amendments due to the fact that it has been involved in protracted information entitlement disputes which it alleges are being used as a delaying tactic to force audits closer to the end of a prescription period. SARS also alleges that it has difficulty finalising certain audits within prescription periods due to their sheer complexity.
Employee Fringe Benefits on Motor vehicle salary sacrifice
In the recently reported case of Anglo Platinum Management Services v SARS [2015] ZASCA 180 (the Anglo case), the judgment of which was delivered on 30 November 2015, the Supreme Court of Appeal (SCA) ruled in favour of the taxpayer in respect of a motor vehicle salary sacrifice scheme. The judgment stresses the importance of employers and employees properly agreeing to, understanding and correctly implementing remuneration structures that contain a salary sacrifice component. Before dealing with the SCA judgment, it is useful to touch on the basic principles of a ‘salary sacrifice’ arrangement, or more eloquently put, a ‘salary substitution’ arrangement. I use the word ‘substitution’, as that is what it boils down to: it is the substitution of a cash component of an employee’s overall cost to company remuneration package, for a non-cash benefit, that generally results in a lower amount subject to the deduction of employees’ tax.
Carbon Tax Draft Bill published for comment
On Monday, 2 November 2015, the South African National Treasury published a Draft Carbon Tax Bill (the “Bill”) for public comment by 15 December 2015. At first glance, the Bill does not stray too far from the carbon tax design that Treasury has been proposing since 2010 in various discussion papers, national budget speeches and their associated explanatory memoranda and responses to stakeholder commentary on the design. Whilst the Bill does not change the essentials, it does progress certain of the detail while providing only a tantalising glimpse of some of the more interesting aspects of the design. While the proposed tax is vaunted as thecarbon tax, this is not the only or the first carbon tax imposed in South Africa. Emissions on new vehicles are subject to emissions taxation and approximately five years ago, the fossil fuel electricity levy was introduced. These are both taxes on greenhouse gas emissions, Read More …
Vendor beware: capital gains tax on instalment sales
Taxpayers should take great care when selling assets where the price is paid in instalments as the transaction may trigger some tricky capital gains tax (CGT) consequences. Consider the case of New Adventure Shelf 122 (Pty) Ltd vs The Commissioner of the South African Revenue Service (7007/2015) [2016] ZAWCHC 9 (17 February 2016). In this case the taxpayer acquired immovable property in 1999. In the taxpayer’s 2007 tax year it sold and transferred the property to a third party for a profit. The buyer had to pay the price of the property in instalments over more than one tax year.
Capital v Revenue: the taxpayer prevails – ommissioner for the South African Revenue Service v Capstone 556 (Pty) Ltd (20844/2014) [2016] ZASCA 2 (9 February 2016)
The question of whether an amount constitutes capital or revenue in a specific instance, is an issue that our courts have grappled with on many occasions. In Commissioner for the South African Revenue Service v Capstone 556 (Pty) Ltd (20844/2014) [2016] ZASCA 2 (9 February 2016), the Supreme Court of Appeal (SCA) had to deal with this very issue. The SCA had to decide two questions: whether the share sale of the taxpayer, Capstone, of approximately 17.5 million shares in JD Group Ltd (JDG), through which it made a profit of R400 million, constituted revenue or was capital in nature; and whether an indemnity settlement paid by the taxpayer after it had sold the shares, formed part of the base cost of the shares for purposes of capital gains tax (CGT).
OECD Proposed expansion of “permanent establishment” definition
Author: Annalie Pinch and Nicolette Smit. During October 2015, as part of the Organisation for Economic Co-operation and Development (“OECD”)/G20 Base Erosion and Profit Shifting (“BEPS”) Project, the OECD issued its final report in respect of Action 7 “Preventing the artificial avoidance of permanent establishment status” (“BEPS Report”). In terms of Article 7(1) of the OECD’s Model Tax Convention on Income and on Capital (“Model Tax Convention”), a Contracting State will only have taxing rights in respect of the business profits of a foreign enterprise which is a resident of another Contracting State if the enterprise has a “permanent establishment” (“PE”), as defined in Article 5, in that State to which such profits are attributable.
SARS MEDIA STATEMENT – Special Voluntary Disclosure Programme in respect of offshore assets and income
In the 2016 Budget Speech, the Minister of Finance announced a Special Voluntary Disclosure Programme to give opportunity for non-compliant taxpayers to voluntarily disclose offshore assets and income. With a new global standard for the automatic exchange of information between tax authorities providing SARS with additional information from 2017, time is now running out for taxpayers who still have undisclosed assets abroad. To encourage compliance, Government proposes a Special Voluntary Disclosure Programme for individuals and companies to regularise both their tax and exchange control affairs for a limited window period described below. The South African Revenue Service (SARS) and the South African Reserve Bank (SARB) are working jointly to ensure that applications for the Special Voluntary Disclosure Programme are assessed through one joint process for both tax non-compliance and exchange control contraventions.