Tax News

The power of the South African Revenue Service (SARS) to collect tax from a taxpayer by way of issuing a notice to a third party holding assets belonging to a taxpayer, such as a bank holding a taxpayer’s funds, is provided for in section 179(1) of the Tax Administration Act 28 of 2011 (TAA). SARS may only issue the notice if it complies with the requirement in section 179(5) of the TAA, which is that it must deliver to the tax debtor (the taxpayer) a final demand for payment which must be delivered at least 10 business days before the notice is issued. Importantly, the demand must contain the following: It must set out the recovery steps that SARS may take if the tax debt is not paid and the available debt relief mechanisms under the TAA, including in respect of recovery steps that may be taken under section 179. Read More …

It is not uncommon to sell a property that is utilised for both residential and commercial purposes (for example, a block of flats with shops on the ground floor and residential units above). It is a generally accepted practice that where a commercial property that is being let (thus, making it an enterprise), is sold as a going concern, then it will attract value-added tax (VAT) at the rate of 0%, provided that the transaction falls within the ambit of section 11(1)(e) of the Value-Added Tax Act 89 of 1991 (VAT Act). Section 11(1)(e) of the VAT Act provides that the supply of goods and services will be charged with VAT at the rate of 0% where: (i) the subject matter constitutes an “enterprise” as defined in the VAT Act; (ii) such enterprise is being disposed of as a going concern; (iii) it has been agreed in writing that at Read More …

In the recent Tax Court judgment of Taxpayer A v Commissioner for the South African Revenue Service (IT 25042) (14 July 2022), the court was tasked with determining whether the finance charges incurred by the taxpayer stood to be deducted in terms of section 24J of the Income Tax Act 58 of 1962 (ITA). Facts The taxpayer in this case was a company that conducted the business of property investment and property management, including the letting out of property for purposes of earning rental income and property management income. During the 2016 year of assessment (YOA), the taxpayer entered into various loan agreements in terms of which it borrowed funds for the purposes of facilitating property development and investment. It was in respect of these loans that the taxpayer contended that it had incurred finance charges. In its tax return for the 2016 YOA, the taxpayer claimed a deduction in Read More …

The South African Revenue Service’s (SARS) core function is the efficient and effective administration of tax Acts. This necessarily includes the collection of the proper amount of tax from various taxpayers. Part of the means at SARS’ disposal to ensure this is achieved, is requiring taxpayers to submit relevant information, augmented by data collected from third-party entities. A further mechanism at SARS’ disposal to ensure the information received is full and correct, are the investigatory powers granted to SARS under Chapter 5 of the Tax Administration Act 28 of 2011 (TAA). A familiar part of the tax administration process for corporate taxpayers is the preparation and submission of a corporate income tax supplementary declaration form titled IT14SD (IT14SD). In this form, companies selected for verification by SARS are required to reconcile income tax, Value-Added Tax (VAT), Pay-As-You-Earn (PAYE) and Customs declarations after the submission of their corporate income tax returns. Read More …

On appeal from a full bench of the High Court, the Supreme Court of Appeal (SCA) dispensed with a taxpayer’s request for default judgment against the South African Revenue Service (SARS) in the recent case of Commissioner, SARS v Candice-Jean van der Merwe [2022] ZASCA 106. Although the facts surrounding the SCA’s decision were unique to that case, it does beg a broader question regarding a taxpayer’s right to be provided with grounds for an assessment issued under section 95 of the Tax Administration Act 28 of 2011 (TAA). Facts The taxpayer in this case received a large sum of money from an overseas benefactor which she declared as a donation when filing her tax return for the 2014 tax year. SARS disagreed with this and included the amount received in the taxpayer’s gross income, thus subjecting her to normal tax. The dispute between SARS and the taxpayer was resolved Read More …

Value-added tax (VAT) is levied on the supply of goods or services by registered vendors, on the importation of goods and on the importation of services into South Africa. The VAT on supplies of goods and services must be paid by the supplier, whereas the importer of goods is responsible for the payment of the import VAT. VAT on imported services must be paid by the recipient. Persons who acquire services from foreign suppliers often omit to pay the VAT on these services. It is for this reason that the South African Revenue Service is focusing on imported services in its VAT audits. However, not all services rendered by foreign service suppliers comprise imported services. What are imported services? “Imported services” is defined in the Value-Added Tax Act 89 of 1991 (VAT Act) as services rendered by a supplier who is resident or carries on business outside the Republic, to Read More …

Value-added tax (VAT) is levied on the supply of goods or services by registered vendors, on the importation of goods and on the importation of services into South Africa. The VAT on supplies of goods and services must be paid by the supplier, whereas the importer of goods is responsible for the payment of the import VAT. VAT on imported services must be paid by the recipient. Persons who acquire services from foreign suppliers often omit to pay the VAT on these services. It is for this reason that the South African Revenue Service is focusing on imported services in its VAT audits. However, not all services rendered by foreign service suppliers comprise imported services. What are imported services? “Imported services” is defined in the Value-Added Tax Act 89 of 1991 (VAT Act) as services rendered by a supplier who is resident or carries on business outside the Republic, to Read More …

Share block schemes are defined in the Share Blocks Control Act 59 of 1980 (SBC Act) as “any scheme in terms of which a share, in any manner whatsoever, confers a right to or an interest in the use of immovable property”. In a nutshell, share block schemes can be described as an alternative form of property ownership and allow a single company – referred to as a ‘share block company’, to own a particular development. Individuals who become shareholders within the share block company are allowed to buy the right to use a specific unit or space within the development. Purchasers individually buy a grouping or block of shares which grants the holder specific rights. The share block company acquires ownership and title to the property by means of a registered title or by renting the land from the owner. These companies must specifically include the expression “share block” Read More …

Is the revenue authority obliged to comply with unlawful instructions from National Treasury? Recently, the High Court had to answer this question in Republic v Commissioner of Domestic Taxes & Ex-Parte London Distillers (K) Limited [2022] eKLR. Brief facts In a letter dated 15 September 2021, LDK applied to the Cabinet Secretary for National Treasury and Planning for the abandonment of KES 517,118,680 which LDK had collected as excise duty in the course of its business. National Treasury allowed the application and approved the abandonment of 80% of the outstanding principal excise duty and waived 100% of the penalties and interest. Subsequently, the KRA wrote to LDK acknowledging the outcome of the abandonment and demanding a sum of KES 80 million, being the 20% outstanding tax arrears. The KRA and LDK agreed on the settlement of the said amount in weekly instalments of KES 7,500,000 beginning on 2 February 2022. Read More …

Farming and agriculture form the lifeblood of any economy. It is no wonder that the Income Tax Act 58 of 1962 (Act) provides for a special set of beneficial rules applicable to farmers in South Africa. This special taxation regime is by and large set out in the First Schedule to the Act. Even though the South African Revenue Service (SARS) has already issued an interpretation note on “Game Farming”, namely Interpretation Note 69, SARS has previously not provided an extensive explanatory note or guide on the First Schedule. Farmers would therefore have welcomed the publishing of the SARS Draft Guide on the Taxation of Farming Operations on 22 September 2022 (Draft Guide). This article discusses some of the key guidance notes contained in the Draft Guide. Meaning of farming operations In order for the special tax regime in the First Schedule to apply there are a number of requirements Read More …