Judgment was handed down in the matter between Lifman and others v The Commissioner for the South African Revenue Service and others (case no 5961/15, as yet unreported) on 17 June 2015 in the Western Cape Division of the High Court. The applicants were Mark Lifman and a number of close corporations of which he was the sole member. During an enquiry in terms of s50 of the Tax Administration Act, No 28 of 2011 (TAA), conducted by the South African Revenue Service (SARS) into the affairs of the applicants, it came to light that the applicants owed SARS tax of approximately R13 million.
Tax News
Binding Private Ruling – Exemption from donations tax and the net value of an estate
On 1 July 2015, the South African Revenue Service (SARS) released Binding Private Ruling 197 (BPR 197) dealing with the donations tax consequences arising from the onward or subsequent donation of funds received by way of a donation from a foreign source. BPR 197 further deals with the estate duty consequences that will apply in the event of the foreign sourced funds being retained or used to acquire property that is located and remains outside South Africa.
Binding Private Ruling – Debt reduction by way of set-off
The South African Revenue Service (SARS) published Binding Private Ruling No. 193 (BPR 193) on 15 June 2015, which deals with the repayment of a shareholder loan by way of set-off with an outstanding loan under a subscription agreement. The applicable provisions in the Income Tax Act, No 58 of 1962 (Act) are s19 of the Act and paragraphs 12A and 20(3)(b) of the Eighth Schedule to the Act. The applicant in the transaction to which BPR 193 applies is a company incorporated in and resident of South Africa (Applicant). The second party to the transaction is the holding company of the Applicant and a non-resident for South African tax purposes (Holdco).
Capitalisation of shareholder loans and set-off
The South African Revenue Service (SARS) published Binding Private Ruling 193 (Ruling) on 15 June 2015, which dealt with the partial capitalisation of a shareholder loan. The applicant was tax resident and incorporated in South Africa, and was held by a non-resident holding company. The holding company had previously extended a shareholder loan to the applicant, and at the time of the Ruling an amount of capital and interest remained outstanding.
Binding Private Ruling – Awards from foreign trusts
The South African Revenue Service (SARS) published Binding Private Ruling No 197 (Ruling) on 1 July 2015. The Ruling deals with the receipt of funds from a foreign trust, and the subsequent donation and investment thereof. The applicant was an individual resident in South Africa. The applicant was also a beneficiary of a foreign trust. The foreign trust only held funds sourced from outside South Africa. The trustees of the foreign trust resolved to award a specified amount of the foreign trust funds to the applicant, after which the applicant would be removed as a beneficiary.
The valuation of a usufruct for tax purposes
Author: Alexa Muller – Tax Associate at ENSafrica The value of a usufruct is often needed to be calculated for purposes of taxes, for example: for purposes of estate duty should a testator/testatrix bequeath a usufruct over property to an heir; for purposes of donations, tax should a usufructuary renounce his/her usufructuary rights; or for purposes of capital gains tax, should a property in respect of which a usufruct is registered be disposed of.
Cancellation of contracts in the 21st century
Author: Douglas Molepo – Dispute Resolution Director at ENSafrica Can parties cancel or amend written agreements by email if their written agreement prohibits amendments or cancellation unless in writing and signed by the parties? In the recent case of Spring Forest Trading v Wildberry (case no 725/13), the Supreme Court of Appeal (SCA) answered this question with a firm “yes”, meaning that parties should carefully consider the wording of their contracts before signing on the dotted line.
Voluntary VAT registration: when to raise your hand & recent regulations
Author: Varusha Moodaley – Tax Associate at ENSafrica A person is obliged to register as a value-added tax (“VAT”) vendor where such person makes taxable supplies (comprising of standard and zero-rated supplies) in excess of R1 million in a consecutive period of 12 months. A person may however, voluntarily register for VAT where the person has already made taxable supplies exceeding R50 000 in a 12 month period, or where the person carries on an enterprise and has not yet exceeded the R50 000 threshold, but reasonably expects that the R50 000 threshold will be exceeded within 12 months from the date of registration.
SARS incorrectly treating objections as invalid
Author: Mmangaliso Nzimande – Tax Director at ENSafrica In terms of section 104 of the Tax Administration Act No. 28 of 2011 (“the TAA”), a taxpayer who is aggrieved by an assessment made in respect of that taxpayer may object to the assessment. Furthermore, in terms of section 106 of the TAA, SARS must consider a valid objection in the manner and within the period prescribed under the TAA and the rules promulgated under section 103 of the TAA, prescribing the procedures to be followed in lodging an objection and appeal against an assessment or decision subject to objection and appeal (“the Rules”).
Exchange Control Appeal Won Against Shuttleworth
Author: By Ferdie Schneider, Head of Tax, BDO The Constitutional Court delivered judgement on 18 June 2015 against Mark Shuttleworth in favour of the South African Reserve Bank (SARB) and the Minister of Finance. Mark Shuttleworth emigrated to the Isle of Man in 2001 to invest outside South Africa and applied to SARB to transfer approximately R2.5 billion. SARB imposed an exit charge of 10% on the capital and Shuttleworth paid approximately R250 million although he challenged the constitutionality of imposition.