A securities lending arrangement entails a lender advancing shares to a borrower to enable such borrower to on-deliver the marketable security in terms of a sale or on-lending transaction. The borrower is obliged to deliver the equivalent marketable security (in kind, quality and quantity) to the lender within a specified period of the original advance and to compensate the lender for any distributions to which he would have been entitled to during such period.
Tax News
Withdrawal of rebate in respect of foreign taxes on income
By way of background, section 6quin of the Income Tax Act, which was introduced by Government in 2011, provides for a rebate in respect of foreign taxes withheld by a foreign government on income from a source within South Africa (SA). The rebate is limited to the lesser of – the amount of normal tax attributable to the amount received or accrued; or the amount of tax levied and withheld; or the amount of tax imposed.
Employee share incentive schemes revisited again
The taxation of employee share incentive schemes has been on National Treasury’s radar for a number of years now and this year is no different. The Minster announced in the Budget today that the interrelationship between the application of section 8C of the Income Tax Act, which includes the taxation of directors and employees on the vesting of equity instruments, the attribution of capital gains to beneficiaries, the income tax exemption of dividends and the employees’ tax provision related to the return of capital will be reviewed to remove anomalies.
Budget 2015 NewsSection 9c 'safe harbour' rules expanded
Section 9C of the Income Tax Act came into operation on 1 October 2007 and applies to the disposal of ‘qualifying shares’ on or after that date. Section 9C of Income Tax Act essentially contains a ‘safe harbour’ provision in terms of which the gains from the disposal of ‘qualifying shares’ will be deemed to be of a capital nature if the owner held such shares for a continuous period of 3 (three) years.
Foreign electronic services
In a recent report by the Davis Tax Committee, recommendations were made in order for South Africa to address various problems in relation to e-commerce transactions. With the continuous advancement of technology, it is becoming difficult to track (and tax), the sale of electronic goods and services.
Tax on proceeds received for the disposal of shares – how long is ‘for keeps’ these days?
Authors: Andrea Minnaar and Scott Salusbury When disposing of an asset, it is critical to determine whether the proceeds of the disposal are of a capital nature, since if they are, they will be taxed in terms of the capital gains tax regime at a much lower effective rate than if they were of a revenue nature. Certain shares, if held for a continuous period of three years prior to disposal, are deemed to yield capital proceeds in terms of section 9C of the Income Tax Act. In the case of shares which fall outside the provisions of section 9C we must turn to the case law, which over the years has become rather extensive in this area. The enquiry is essentially one into the intention of the taxpayer in acquiring, holding and disposing of the asset. If the taxpayer’s intention was such that they ‘entered into a scheme of Read More …
South African withholding taxes
Author: Magda Snyckers and Liesl Visser Over the past few years we have seen the introduction of various withholding taxes to the South African tax system. We set out below a high-level summary of the various withholding taxes that are levied in terms of the Income Tax Act 58 of 1962 (the “Act”), their rates and the withholding and reporting obligations. Apart from the dividends tax, these withholding taxes primarily apply to persons that constitute non-residents for South African tax purposes. However, tax residents should also take note since they could have a withholding obligation which may result in them having a secondary tax liability.
Waiver of an Intra-Group Loan that Funded the Acquisition of a Mining Operation
SARS recently released Binding Private Ruling 187 (‘BPR’) which deals with the waiver of a loan that funded the acquisition of a mining operation as a going concern under an intra-group transaction, as contemplated in section 45 of the Income Tax Act (the ‘Act’). Parties to the proposed transaction were a company incorporated in and a resident of South Africa (the ‘Applicant’), and a second company incorporated in and a resident of South Africa (the ‘Co-Applicant’).
Conversion of a PDO to a for-profit Company
In Binding Private Ruling 188 (‘BPR’) SARS recently dealt with the conversion of a tax exempt Public Benefit Organisation (‘PBO’) to a for-profit company. Parties to the proposed transaction were a company incorporated in a foreign country and limited by guarantee, which is registered in South Africa as an external company (the ‘Applicant’ or ‘Applicant PBO’) under section 23(1)(a) of the Companies Act, 2008, and a PBO under section 30 or the Income Tax Act (‘the Act’). Section 30 governs PBOs in the Act.
Deemed loans under transfer pricing seen as a dividend declared on 1 January 2015
South African taxpayers who made a transfer pricing adjustment in previous years of assessment will be required to pay dividend tax at the end of 28 February 2015. Under the old transfer pricing rules, a primary transfer pricing adjustment triggered a secondary adjustment in terms of a deemed loan in the hands of the relevant South African taxpayer; i.e. the amount “over paid” or “under charged” to the relevant non-resident connected person was deemed to be a loan to that foreign-connected person, on which arm’s length interest was deemed to have accrued to the South African resident. The new section 31 of the Income Tax Act, applicable from 1 January 2015, now provides that the deemed loan plus accrued interest – to the extent that these items were not “re-paid” by the non-resident before 1 January 2015 – must be deemed to be a dividend in specie that was declared and paid by Read More …