Interpretation Note 74(the Note), issued by SARS on 6 August 2013, is a collation of fundamental principles regarding the deductibility of expenditure on repairs (and the recoupment of such expenditure) in terms of section 11(d) of the Income Tax Act 58 of 1962 (the Act) and the principles, as laid down in case law, regarding the distinctive features of a repair as contrasted with other categories of expenditure. The Note commences with the general observation that – “expenditure on repairs to an asset not comprising trading stock is likely to be of a capital nature, particularly when it is not incurred at regular intervals”.
Month: February 2014
Setting aside business rescue
An interesting judgment was handed down in the North Gauteng High Court on 3 October 2013 in the matter of Commissioner for the South African Revenue Service v Miles Plant Hire (Pty) Ltd (case no 23533/2013). Miles Plant Hire (Pty) Ltd (the taxpayer) was involved in a dispute with the South African Revenue Service (SARS) in terms of which an appeal was pending. The taxpayer adopted a resolution to file for business rescue. When SARS became aware of the resolution, it brought an application for the setting aside of the resolution, and for the taxpayer to be wound up in terms of section 177(1) of the Tax Administration Act, No. 28 of 2011 (the TAA).
Interest on debt instruments with equity features
On 4 July 2013, the draft Taxation Laws Amendment Bill (DTLAB) was issued by National Treasury in terms of which it was proposed that new anti-avoidance rules will be introduced into the Income Tax Act No. 58 of 1962 (the Act) in order to reduce the opportunity for the creation of equity instruments that are artificially disguised as debt instruments. The first set of proposed anti-avoidance rules focus on the features relating to the instrument itself and are contained in section 8F of the Act. The second set of proposed anti-avoidance rules focus on the nature of the yield of the instrument and are contained in section 8FA of the Act.
Cut taxes for the sake of job growth
Author: Yasmeen Suliman (KPMG) It is well known that the growth of the South African economy is languishing, and unemployment levels are dangerously high. Without real economic growth, it is unlikely that sufficient sustainable jobs will be created to reduce unemployment levels significantly. Tax collections are also under pressure; a depressed economy means lower tax collections. With a ballooning government deficit, the National Treasury has to collect more revenue to fund expenditure. One could almost label our situation as desperate – and, as everyone knows, desperate times call for drastic measures.
FAQ – Tax treatment of income of spouses
The South African Income Tax Act 58 of 1962 defines a “spouse” in relation to any person as a person who is a partner of such person in a marriage, customary relationship or union recognised as a marriage under the laws of South Africa or any religion. The definition also includes a same-sex or heterosexual relationship which the Commissioner is satisfied is intended to be permanent. Spouses married out of community of property are taxed separately on their individual incomes.
Malema trying to delay case – Sars lawyer
Pretoria – Julius Malema is seeking to delay a sequestration case brought against him by the SA Revenue Service (Sars), the High Court in Pretoria heard on Monday. Malema’s legal team brought an application asking for the matter to be postponed because he wanted to reverse an admission of liability, which he signed last year during negotiations with Sars.
Protecting your reputation: Deductibility of legal expenses
Authors: Nicole Paulsen and Danielle Botha (DLA Cliff Dekker Hofmeyer) The question of deductibility of legal expenses incurred to protect one’s reputation or the goodwill of a business seems to be a recent hot topic of conversation, especially when following the news. Interestingly, two international cases relating to the deductibility of legal expenses, both related to reducing reputational risk and challenging alleged unfounded allegations against the taxpayer, have recently been handed down in Australia and England, respectively.
On-charges and supplies subject to VAT
For a transaction in South Africa to attract Value-added Tax (VAT), there should be a supply of goods or services by a vendor in the course or furtherance of an enterprise. Consider the following scenario: A and B, both vendors for VAT purposes, have a business arrangement whereby, for example, B provides consulting and management services to A. It transpires, in the course of their business arrangement, that A requires the use of a rented vehicle. B agrees to arrange the vehicle. B enters into a rental agreement with C, also a VAT vendor, and the vehicle is made available for the benefit of A. C subsequently invoices B for R100 plus VAT of R14 and B pays C the R114.
Income Tax and VAT consequences of E-Tolls
Introduction The levying of tolls for the use of certain highways in Gauteng, the so called e-tolls, took effect on 3 December 2013. It is therefore appropriate to consider the income tax consequences arising from the payment of e-tolls in those cases where an employee is reimbursed for business travelling or is provided with a vehicle owned by their employer or where an employee receives a travelling allowance to finance the expenditure incurred whilst travelling on the employer’s business.
Customs bill gets escape clause to go back to old system
THE controversial Customs Control Bill adopted by Parliament’s finance committee on Wednesday includes a “fallback” provision allowing for a return to the current customs control system should the new one fail. A similar clause was included in the law that introduced value-added tax in 1991, allowing for a legal alternative to be implemented quickly if things do not work out as planned. The committee also adopted the Customs Duty Bill and the Customs and Excise Amendment Bill as part of a total revamp by the South African Revenue Service (SARS) of the customs system.