The ability to enter into loans over listed shares is an important part of the financial industry as it offers sellers of listed shares the ability to comply with their obligations to deliver shares under a short sale contract. This ability could ensure that the sale of listed shares do not result in failed trades, provided the relevant shares can be sourced and borrowed prior to the seller having to deliver the shares. The intended change by the JSE limited to move to from a T+ 5 to a T + 3 settlement date in order to align with its settlement period with the international norm, reinforces the importance of the share lending industry. As a result of the shorter settlement period, the ability to borrow shares to settle trades will be paramount to ensure as little failed trades as possible.
Tax News
Tax consequences of foreign companies rendering services in South Africa
Where a foreign company renders professional services to a South African company, it is important that the foreign entity considers whether, as a result of rendering such services, the foreign company will create a permanent establishment in South Africa. The reason why this becomes important is that where a foreign company creates a permanent establishment in South Africa, South Africa will under the provisions of a Double Taxation Agreement (“DTA”) concluded with another country, be entitled to subject that foreign entity to tax on the profit attributable to that permanent establishment created in South Africa. In the case of X LLC, case number 13276 heard in February 2015, as yet unreported, the Tax Court had to determine whether X had created a permanent establishment in South Africa, and as a result thereof, was liable to tax in South Africa. The case involved a corporation incorporated in the United States of Read More …
South Africans already pay three carbon taxes, so why is government imposing another one?
With no real focus on behaviour change, CO2 Tax is just another taxation scheme to make up for the national budget deficit Taxes now make up one-third of the retail price of fuel after Finance Minister Nene raised the levy by 80.5 cents ($0.07) a litre (0.26 gallon) in the 2015/2016 Budget. He also increased electricity levies by 2 cents to 5.5 cents per kilowatt-hour to help curb power demand and will phase these out when the carbon tax is implemented – or so he says.
SARS signed a Memorandum of Understanding (MOU) with the Mauritius Revenue Authority (MRA)
On 22nd May 2015 SARS signed a Memorandum of Understanding (MOU) with the Mauritius Revenue Authority (MRA). David Warneke, Tax Director at BDO South Africa, explains that the background to the MOU is that a new Double Taxation Agreement (DTA) between South Africa and Mauritius was signed in Maputo on the 17th of May 2013. This new DTA has now been ratified by both countries and is expected to enter into force with effect from 1 January 2016.
Take advantage of tax-free savings now
Author: Douglas Gaul, tax manager Grant Thornton Johannesburg Following much anticipation, tax-free savings accounts (TFSA) were introduced on 1 March 2015 as a way to encourage South Africans to save. Natural persons, as well as the deceased or insolvent estates of a natural person, can invest in certain approved tax-free investment vehicles.
Venture Capital Investments – are you missing an excellent opportunity?
Author: David Honeyball, partner Grant Thornton Cape Small business development continues to be a focus area for economic development for South Africans desperate for faster economic growth. Therefore, the introduction of Section 12J of the Income Tax Act, which was introduced on 1 July 2009, created a welcome pooling mechanism allowing investors to channel funds into small businesses and junior mining companies. The intention of the legislation is that by pooling funds, a Venture Capital Company (VCC) can provide equity and management services to the investee. As incentive, the VCC shareholders enjoy a 100% upfront tax deduction of the value of their investment (shares) and with no recoupment if the shares are sold within 5 years.
Has your tax return prescribed? SARS’ powers reach to infinity and beyond
Author: Hylton Cameron, associate director Grant Thornton Johannesburg In the recent case of Ackermans Ltd v CSARS the issue of prescribed tax returns was re-visted in the Pretoria High Court. In terms of the Income Tax Act, SARS is entitled to raise additional assessments for three years from the date of final assessment. However if there is a misrepresentation of a material fact in the original return, the three prescription period does not apply.
Cross-border technical services income – Double tax agreements should be considered to reduce double tax burdens
Author: Bruce Russell, tax consultant Grant Thornton Cape South African resident taxpayers performing advisory or other technical services within South Africa to clients abroad, may be subject to foreign withholding taxes. To reduce the risk of this income being subjected to double taxation, it is necessary to consider the source of this income. The source of services income South African courts have interpreted the concept of source in applying the Income Tax Act. Source in this context is not a legal concept, but rather something a reasonable man would regard as the real source of income.
Interpretation of written agreements
Shakawa Hunting & Game Lodge (Pty) Ltd v Askari Adventures CC (44/2014) [2015] ZASCA 62 (17 April 2015) is a recent judgment by the Supreme Court of Appeal concerning the interpretation of a written agreement. The court (per Mpati P) said that what the parties and their witnesses ex post facto think or believe regarding the meaning to be attached to the clauses of the agreement, and thus what their intention was, is of no assistance in the exercise. The court referred to its earlier judgment in Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593; [2012] ZASCA 13 (SCA) where Wallis JA said the following with regard to the construction of a document:
Shuttleworth’s exit charge was valid and did not constitute a tax
In an about-turn the Constitutional Court handed down judgment in the Shuttleworth matter on 18 June 2015. Not only was it found that Shuttleworth’s exit charge constituted a regulatory charge as opposed to a tax, but it was also found that the Exchange Control Regulations were not unconstitutional. Should one consider the history of the matter, Shuttleworth made application to the South African Reserve Bank (Reserve Bank) to transfer approximately R2,5 billion out of South Africa. This approval was granted subject to an exit charge of 10% being imposed on the capital that was exported. The payment of this exit charge was challenged by Shuttleworth: