Author: Linda Ensor (BDlive). The government has once again caved in to trade union pressure by agreeing to a two-year delay in the introduction of the compulsory annuitisation of two-thirds of provident fund savings on retirement. This is the second time that the Treasury has unsuccessfully tried to implement the provision and then backtracked in the face of strong opposition from the Congress of South African Trade Unions (Cosatu). The proposed postponement was tabled by Finance Minister Pravin Gordhan at an urgent meeting on Monday with the social partners of the National Economic Development and Labour Council.
Tax News
Africa tax in brief
Author: Celia Becker (ENSafrica). KENYA: Amnesty granted to landlords In terms of the new section 123C, introduced into the Income Tax Act by Finance Act 2015 (the “Act”), the Kenya Revenue Authority (“KRA”) has granted a tax amnesty to landlords with effect from 1st January 2016. The Act provides amnesty for persons who shall willingly declare their 2014 and 2015 rent, pay the implied principal tax and file returns (original or amended) between 1 July 2015 and 30 June 2016. For the two years (2014 and 2015), penalties and interest shall be waived, as well as the principal, interest and penalties for 2013 and prior years.
Settlors beware: control over the assets of a trust
The establishment of an offshore discretionary trust (“the Trust”) by a South African tax resident person (“Settlor”) gives rise to various South African tax considerations. In terms of current law (which may or may not be impacted upon by the various proposals set out in the Davis Tax Committee’s First Interim Report on Estate Duty), the following taxes may typically be triggered by the Settlor in respect of the disposal of assets to the Trust in settlement thereof: capital gains tax at a maximum effective rate of approximately 13.65% of the capital gain realised; donations tax at a rate of 20% of the amount or the market value of the assets donated; and any income derived by the Trust in respect of any donation made by the Settlor may be attributed to the Settlor and accordingly subject to South African income tax in his/her hands.
Mandatory transfer pricing documentation
Author: Okkie Kellerman (ENSafrica). On 15 December 2015, SARS issued a draft Public Notice that sets out the additional record-keeping requirements for transfer pricing transactions. It proposes extensive and comprehensive documentation requirements that must now be kept by taxpayers with a consolidated South African turnover of R1 billion or more. Although this provides South African taxpayers with clarity on the information that must be retained for transfer pricing purposes, these requirements are fairly onerous and will increase the compliance burden of these taxpayers, resulting in additional costs.
Tax administration: SARS’ constitutional obligations and taxpayers’ rights
Author: Andries Myburgh (Tax Director at ENSafrica). Given recent media coverage of the various Constitutional Court challenges involving government institutions and the Presidency; the perceived power struggle between the Commissioner for the South African Revenue Service (“SARS”) and the Minister of Finance; as well as SARS’ continued pressure to collect revenue in difficult economic times that see corporate taxpayers endure declining revenues and increasing costs; it is useful to remind taxpayers and their shareholders of their constitutional rights and SARS’ constitutional obligations when it performs its functions in administering various taxation legislation. This topic is very complex and, accordingly, what follows is a very broad overview of these issues. Taxpayers and their shareholders are encouraged to obtain specialised legal advice or assistance when confronted with potential investigations or audits by SARS.
Radebe: Zuma heard of Cosatu objections after he signed tax bill
Author: Liesl Peyper (News24). Cape Town – When President Jacob Zuma signed the Taxation Laws Amendment Act late last year he wasn’t aware of Cosatu’s objections with regard to the proposed annuitisation of provident fund benefits. “The concerns were only brought to the President’s attention after he had signed the bill,” said Minister in the Presidency Jeff Radebe. At a post-cabinet briefing on Thursday morning Radebe had to field a barrage of questions from journalists about the postponement of the provident fund rules in the legislation.
Government backtracks on new tax changes
Author: Liesl Peyper (News 24). Cape Town – For the second year in a row President Jacob Zuma’s government has been forced to backpedal on provisions in the Tax Amendment Act that compel South Africans to put two-thirds of their provident fund savings in a retirement annuity. The provision meant that retirees would be allowed to take only one-third in cash, while they are currently entitled to the full amount. Business Day reported that Finance Minister Pravin Gordhan tabled a proposed postponement at a meeting on Monday with the representatives of the National Economic Development and Labour Council.
New reportable arrangement: non-resident service providers
The South African Revenue Service (SARS) published notice No 140 in the Government Gazette (No 39650) on 3 February 2016, in terms of s35(2) of the Tax Administration Act, No 28 of 2011 (TAA). Among other things, the notice lists an additional reportable arrangement that was not included in previous notices. The following arrangement is now a reportable arrangement: An arrangement for the rendering of consultancy, construction, engineering, installation, logistical, managerial, supervisory, technical or training services to a:
Wealthy earners’ retirement dilemma
Author: Ingé Lamprecht (Moneyweb). Tax deductible contributions to retirement funds to be capped at R350 000 from March 1. JOHANNESBURG – The tax harmonisation of retirement funds will also see the introduction of a cap of R350 000 per annum on deductible contributions to pension funds, provident funds and retirement annuities on March 1. This means that a number of high net worth individuals (HNWIs) who previously contributed in excess of R350 000 to retirement vehicles and who were able to deduct the full contribution from their taxable income, will now see the deductible portion of their contribution capped at R350 000. As a result, their take-home pay will reduce.
Extent of tax fraud unknown – SARS
Author: Amanda Visser (IOL). The South African Revenue Service (SARS) still does not know the full extent of tax evasion, despite its work probing foreign bank accounts held by South African residents. It has been a year since SARS confirmed some account holders had been using their offshore accounts to evade their tax obligations, both locally and internationally. SARS received the damming information through international exchange of information agreements with foreign financial institutions.