Author: Stephen Meintjes (BDlive). Note how quickly the reaction to white racism connects to land! Writing in Business Day on January 20, author Thando Mgqolozana repeated his earlier controversial tweet: “We can’t deal with one Penny Sparrow at a time. We have to go for the whole thing at once. Decolonisation. Get land. Forcefully.” He is not alone in his stance, which shows that the deeply ingrained emotions around land could indeed upend the historic achievements of our constitutional democracy by unleashing a race war and turning our country into a rubble heap like Syria. The tragedy of this would be that we would have failed to understand our famous Constitution.
Tax News
Is tax advice given by an accountant covered by legal professional privilege?
Author: PwC South Africa. Does SARS have the power, in investigating a taxpayer’s affairs or in the context of a disputed tax assessment, to demand that it be allowed to scrutinise documents generated by his professional advisers that record tax advice that was sought and given? This depends on whether those documents are privileged in the legal sense of the word, for neither SARS, nor a court, nor any other person, has the right (unless a court order determines otherwise) to be given sight of another person’s documents that are covered by legal professional privilege.
Remuneration structuring or salary sacrifice – SCA endorses taxpayer scheme
Ever since the Margo Commission recommended that there should be a uniform system for the determination of the value of benefits of employment, and the enactment of the Seventh Schedule to the Income Tax Act, there has been a tension between SARS and employers over the legitimacy of structured remuneration packages. There are few reported cases of instances in which employers have resisted a challenge by SARS. In the recent judgment of Cachalia JA, in the matter of Anglo Platinum Management Services (Pty) Ltd v C:SARS [2015] ZASCA 180 (30 November 2015), the employer’s remuneration practices were found to be legitimate.
Proposed extension of existing prescription periods
Author: Mareli Treurnicht (International Law Office). Introduction Section 99 of the Tax Administration Act (28/2011) prescribes the period of limitations for issuance of assessments. It states that, among other circumstances, the South African Revenue Service (SARS) may not make an assessment in terms of Chapter 8 of the Tax Administration Act: three years after the date of an original assessment by SARS; in the case of self-assessment for which a return is required, five years after the date of an original self-assessment by the taxpayer or, if no return is received, an assessment by SARS; or in the case of a self-assessment for which no return is required, five years after: the date of the last tax payment for the tax period; or the effective date, if no payment was made in respect of the tax period.
SARS targets tax dodgers
Author: Lyse Comins (IOL). SARS must shift focus to small businesses and clamp down on rampant tax dodgers in Durban, tax experts said in reaction to the taxman’s announcement of a blitz on cash stores countrywide on Wednesday. The South African Revenue Service (SARS) Commissioner, Tom Moyane, announced the launch of random, on-site inspections of cash businesses and called on taxpayers to voluntarily disclose any unpaid taxes or face penalties or criminal prosecution.
The fine tax line during retrenchments
Author: Amanda Visser (IOL). The different tax treatment of lump sum withdrawals following retrenchment seems at odds with efforts to give relief in difficult times. In March 2011 the Income Tax Act was changed, treating severance benefits similar to lump sum payments from pension or provident funds. However, it appears as if policy is not taking heed of the dire employment situation in the country.
REITs – a recent ruling about ‘qualifying distributions’
Author: Ben Strauss (Director at CDH). Real estate investment trusts (REITs) are subject to a special tax regime in South Africa. Put simply, a REIT may deduct for income tax purposes distributions made to its shareholders. As a REIT by its nature distributes most of its net income to its investors, the REIT itself usually pays little or no income tax; instead, the shareholder pays income tax on the distributions received from the REIT.
Is the OECD’s base erosion and profit shifting action plan on transfer pricing flexing the arm’s length principle’s muscles; or proposing a different pricing standard under the guise thereof?
Using South Africa as our departure point, s31 of the Income Tax Act, No 58 of 1962 (Act) provides that the tax payable in respect of international transactions is to be based on the arm’s length principle. In brief, s31 of the Act provides that: where any transaction, operation, scheme, agreement or understanding (hereinafter, transaction) constitutes an ‘affected transaction’ has been concluded between connected persons; and such transaction contains a term or condition which differs from any term or condition that would have existed had the parties to the transaction been independent vis-à-vis one another and transacting at arm’s length; and the term or condition results in a tax benefit for a party to the transaction; then the tax payable by the benefitting party must be calculated as if the transaction had been concluded between independent parties transacting at arm’s length.
Disposals by incentive trusts
Generally, where an employer establishes a trust to hold certain shares for future distribution to its employees as part of a share incentive scheme, the scheme is structured in such a manner that there are no capital gains or losses for the trust upon distribution. In this regard, reliance is usually placed on paragraph 11(2)(j) of the Eighth Schedule of the Income Tax Act of 1962 (the Act), which provides that: “(2) There is no disposal of an asset: … (j) which constitutes an equity instrument contemplated in section 8C, which has not yet vested as contemplated in that section…”
Retroactive application of double tax agreement
On 16 October 2015, a Protocol amending the double tax agreement (DTA) between South Africa and Cyprus was published in the Gazette. In normal circumstances, the promulgation of a protocol does not cause much excitement. However, one of the articles in the Protocol raises unusual issues. Article IV of the Protocol contains two paragraphs: The first paragraph provides that each of the states shall notify the other of the completion of the procedures required by its domestic law to bring the Protocol into effect, and that the Protocol shall come into effect on the date of receipt of the later of these notifications. The operative date in that respect was 18 September 2015.