Author: Hanneke Farrand (ENSafrica) The Davis Tax Committee’s First Interim Report on Estate Duty (“DTC Report”) was released for public comment on 13 July 2015. In essence, the DTC Report proposes that “a highly progressive tax that patches loopholes, helps provide equality of opportunity and reduces the concentration of wealth, must be implemented”. The DTC Report was released in draft and is, therefore, open to comment. Following from this, it is clear that the recommendations in the DTC Report will not necessarily find their way into draft tax legislation. South Africa has well established rules and case law dealing with the taxation of trusts. The South African Revenue Service (“SARS”) recently introduced new tax returns for trusts that require far more detailed disclosures by taxpayers in accordance with these principles.
Tax News
Proposed amendment to anti-avoidance rule in respect of asset-for-share transactions
Author: Heinrich Louw (DLA Cliffe Dekker Hofmeyr) Section 42 of the Income Tax Act, No 58 of 1962 (Act) provides for tax roll-over relief in respect of asset-for-share transactions as defined. Such a transaction generally entails the disposal by a person of an asset to a company, and the issue by that company of new shares to the person as consideration. One of the requirements is that the nature of the asset must be retained. In other words, if the person held the asset as trading stock, the company must acquire it as trading stock, and if the person held it as a capital asset, the company must acquire it as a capital asset. If the person held the assets as a capital asset, the company may acquire it as a capital asset if the person (where the person is a company) and the company do not form part of Read More …
Permanent establishment – a South African perspective
In cases where South Africa has concluded an agreement with another country for the avoidance of double taxation, a critical issue is the circumstances under which the business profits of a person who is a resident of that country may be taxed in the Republic. The right to tax is linked to whether the activities of that person give rise to a permanent establishment (PE). Where a permanent establishment is found to have been created, South Africa may tax the income attributable to that permanent establishment. Every double-taxation agreement (DTA) contains an article in which the term “permanent establishment” is defined. The definition commences with a basic statement of principle:
Supreme Court of Appeal unconvinced by van der Merwe story
The Supreme Court of Appeal was approached to set aside a preservation order that had been granted in the Cape High Court. The appellant’s conduct in prosecuting the appeal was dilatory and the Court showed its displeasure. Non-compliance with legal processes and time limits in an appeal came to the fore in the recent litigation between SARS and Ms Candice-Jean van der Merwe. The latest judgment in this litigious saga involved an application by Ms van der Merwe to the Supreme Court of Appeal for condonation (a pardoning by the court) of her failure to timeously proceed with her appeal against a preservation order that had earlier been granted in favour of SARS by the Cape High Court in respect of certain of her assets.
‘Tax havens will chase out non-compliant taxpayers’ – As global efforts to close loopholes intensify.
Author: Ingé Lamprecht (Moneyweb) JOHANNESBURG – South Africans with unauthorised funds abroad better get their affairs in order because tighter regulation in tax havens will soon become a reality, a tax expert has warned. Speaking at a recent seminar hosted by The Wealth Corporation, Tony Davey, director at boutique consulting firm Tony Davey and Associates, said South Africans with offshore funds (foreign inheritances, foreign earnings pre-1998 or “schlep” funds like unspent travel allowances) that weren’t externalised in line with the R10 million offshore investment allowance or R1 million foreign discretionary allowance permitted by the South African Reserve Bank (Sarb) may soon bear the brunt of closer scrutiny.
Tax-free savings: Give it time
Author: Maarten Mittner (Financial Mail) The recently introduced tax-free savings accounts have received their share of criticism. However, industry experts say the benefits exceed the negative aspects, especially for younger investors. Individuals can choose from different types of investment funds from various financial service providers. One of the major criticisms of the products has been that the tax-free investment amount set for individuals is too low. A maximum of R30 000/year and up to R500 000 over a lifetime in capital gains, dividends, interest earned or on withdrawals from these accounts is nontaxable.
The Global Forum releases new compliance ratings on tax transparency
Author: OECD The Global Forum on Transparency and Exchange of Information for Tax Purposes published new peer review reports today for 12 countries or jurisdictions, moving further ahead with its goal to implement global standards on transparency and exchange of information for tax purposes. Phase 1 reports on , , , , , and assessed their legal and regulatory frameworks for transparency and exchange of information on request. These countries were assessed to have legal frameworks in place to enable them to move to the next stage of the review process, which will assess exchange of information practices.
Earning commission? This is what you can deduct
Author: Petro van Deventer (Unikone) In our previous article regarding income tax and deductions for individuals, the basic principles were discussed. This article focuses on individuals earning commission or other perks / benefits, as well as a fixed salary. We explain by example: John is a sales representative who earns an annual basic salary of R50 000. During the tax year he also earned commission income of R250 000, giving him a total taxable income of R300 000 for the year. John’s employer does not provide him with office space and he works from home. John travels extensively to see clients, using his car with a cost price of R150 000.
New High Court ruling – SARS vs Taxpayer (taxpayer found not guilty of various tax acts)
Author: Oddette Boshoff (Unikone) In a recent (as yet unreported) High Court case, the Court overturned the previously guilty ruling of the Regional Court and ruled in favour of a taxpayer against SARS. The taxpayer was initially charged and found guilty in the Regional Court on fraud as well as several transgressions of various tax acts.
Construction and interpretation of tax legislation: then and now
The principle relating to the construction and interpretation of fiscal legislation are in general those relating to the construction and interpretation of statutes. As early as 1926 Judge Stratford held in Farrar’s Estate v CIR that ‘[the] governing rule on interpretationis to endeavour to ascertain the intention of the law-maker from a study of the provisions of the enactment in question‘. In regard to tax legislation, Income Tax Acts in particular, the language imposing the tax must receive a strict construction. Judge Rowlett held in Cape Brandy Syndicate v I.R. Comrs that ‘…in a taxing Act one has to look at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used’.