Basis of taxation South African residents are taxed on their worldwide income. Non-South African residents are taxed on their South African sourced income. A company will be a South African resident if it is incorporated in South Africa or if it has its place of effective management in South Africa. An individual will be a South African resident if he or she is ordinarily resident here or is physically present here for a specified number of days over a five year period. Any person who is deemed to be a resident of another state through the application of a double tax agreement will not be treated as a South African resident.
Author: Nyasha Musviba
SARS extends list of non-resident persons having to file an income tax return
On 25 June 2014 SARS issued its annual notice (‘Notice’) to specify which persons must file income tax returns for the 2014 year of assessment. The Notice was issued in terms of section 66 of the Income Tax Act (the ‘Act’), read together with section 25 of the Tax Administration Act. The 2014 year of assessment generally runs from 1 March 2013 to 28 February 2014.
New binding private ruling on plant used in the production of renewable energy
SARS released BPR 172 on 25 June 2014. The ruling deals with the question of whether various items used in the production of solar energy qualify for the section 12B allowance. By way of background, section 12B(1)(h) read with section 12B(2) of the Income Tax Act allows a deduction on a 50:30:20 basis over three years of any ‘machinery, plant, implement, utensil or article owned by the taxpayer … and which was or is brought into use for the first time by that taxpayer for the purpose of his or her trade to be used by that taxpayer in the generation of electricity from:
SARS issues new binding private relating to debt SARS issued Binding Private Ruling 173 on 2 July
SARS issued Binding Private Ruling BPR 173 on 2 July. The ruling purports to deal with a thorny issue which has been the cause of uncertainty but unfortunately raises more questions than answers. The issue is whether the debt reduction provisions of the Income Tax Act, namely section 19 or paragraph 12A of the Eighth Schedule, would be invoked where a company issues shares and utilises the proceeds from the share issue to repay debt.
Should the South African Revenue Service adopt a Taxpayer Bill of Rights?
Author: Beric John Croome A Taxpayers’ Charter setting out the rights and obligations of taxpayers in South Africa was published for the first time during 1997. That Charter contained a statement of intent insofar as taxpayers’ rights in South Africa is concerned. On 19 October 2005 the SARS Client Service Charter was released setting out the levels of service that taxpayers could expect in their dealings with the South African Revenue Service (‘SARS’). Currently, neither the Taxpayers’ Charter nor the SARS’ Service Charter Standards can be located on the SARS website and it would appear to be a matter of ‘out of sight out of mind’.
Pay now argue later
Possession, as they say, is nine tenths of the law. Generally in commercial litigation where, for example, a claim for an outstanding amount is brought against a party, such party is not required to make payment to the claimant until a court has adjudicated on the matter. However, when it comes to matters of tax, the Tax Administration Act, No. 28 of 2011 (‘TAA’) requires taxpayers to first make payment to SARS on assessment and then to pursue their various remedies against SARS.
Bribe tycoon Hathurani hit with R1.2bn tax bill
Author: Loni Prinsloo (BDLive) The SA Revenue Service (SARS) has swooped on Edrees Hathurani, the controversial cash-and-carry tycoon at the centre of a bribery scandal involving the regulator, the Financial Services Board (FSB). On Friday morning, SARS officials served a court order on Hathurani’s Africa Cash ‘n Carry, a warehouse-style business in southern Johannesburg which sells 15 000 products from cosmetics to electronics, effectively freezing its assets.
Rules on amalgamation transaction
Author: Heinrich Louw (DLACliffeDekkerHofmeyr) The South African Revenue Service (SARS) released Binding Private Ruling 171 (Ruling) on 9 June 2014. The facts were as follows. Two individuals, A and B,were each the sole members of close corporations C and D, respectively. C and D each held half of the issued share capital of a company E. It appears that C and D also each had a loan claim against company E, while A and B each had a loan claim against C and D, respectively.
VAT considerations between developers and owners of land
Author: Carmen Moss-Holdstock (DLACliffeDekkerHofmeyr) Where a registered vendor for Value-added Tax (VAT) purposes disposes of vacant subdivided land or developed properties in the course and furtherance of conducting an enterprise as a property developer, such disposal would ordinarily constitute a taxable supply subject to VAT at the standard rate of 14%. Such property developer would further be entitled to a deduction of input tax incurred on the acquisition of goods and services in the course of making the taxable supplies.
New tax dispute resolution rules brings about some welcome and unwelcome changes
Author: TaxTalk The wait is finally over! After three draft documents for public comment, numerous workshops and internal discussions, the new Dispute Resolution Rules (‘the new Rules’) issued in terms of section 103 of the Tax Administration Act (No. 28 of 2011) (‘the TAA’) has today been promulgated into law under Government Notice 550 published in Government Gazette No. 37819. It should be noted that the new Rules replace the Rules issued in terms of section 107A of the Income Tax Act (‘the old Rules’) with immediate effect. Although the new Rules are a lot more comprehensive than the old Rules, the South African Institute of Tax Professionals’ (‘the SAIT’) technical department warns the public of some common pitfalls and welcome changes.