Author: Hanneke Farrand and Jenny Klein Author page » Most employers are aware that a travel allowance may be granted to an employee where it is anticipated that the employee will be required to undertake business travel by virtue of the duties of his/her employment and that a travel allowance should not be merely used as a mechanism to reduce an employee’s employees’ tax (“PAYE”) liability.
Author: Nyasha Musviba
Venture capital companies: part 1 – overview
Author: Mansoor Parker of ENSafrica Introduction This is the first in a series of articles on venture capital companies, a tax-favoured investment vehicle regulated by section 12J of the Income Tax Act, 1962 (“ITA 1962”). The venture capital company (“VCC”) scheme, introduced in 2009, is a tax-based scheme designed to encourage individual and corporate investors to invest in a range of smaller, higher-risk trading companies by investing through the VCCs.
The liability of shareholders for the tax debts of a company
Dr Beric Croome and Warren Radloff of ENSafrica It has a long been a principle of company law that the debts of a company are not the debts of its shareholders. It may be a surprise to some that this principle does not apply to certain tax debts thanks to section 181 of the Tax Administration Act No.28 of 2011 (“section 181”). This section allows shareholders to be held jointly or individually liable for the tax debts of their company. At first glance it seems unfair to punish those who do not manage the day-to-day running of a company. The Fiscus has indicated that its intention is not to punish shareholders, but to discourage them from asset or dividend stripping the company. This article will consider the application of section 181, namely in what circumstances will a shareholder be held liable for the debts of a company?
Relief from transfer pricing for controlled foreign companies
Author: Arnaaz Camay of ENSafrica The current transfer pricing provisions contained in section 31 of the Income Tax Act, 58 of 1962 came into effect on 1 April 2012 and are applicable for years of assessment commencing on or after that date. In terms of section 31(2), where: any transaction, operation, scheme, agreement or understanding constitutes an “affected transaction” and
Repurchase of preference shares
The South African Revenue Service (SARS) recently released a binding class ruling (BCR 44) dealing with the tax consequences of the repurchase of certain non-redeemable, non-participating preference shares. Background The applicant was a public company listed on the Johannesburg Stock Exchange (JSE) which issued preference shares to certain persons.
VAT implications on waived or reduced debts and business rescue plans
By Anton Kriel, Tax Partner Grant Thornton Cape The VAT Input Claw Back In the ordinary course of business, creditors often reduce or write-off bad and irrecoverable debts. For the creditors, the VAT treatment is simple. If output VAT on the written-off debts was accounted for, the creditor is entitled to claim the VAT portion of the written-off debt as input VAT. However, for the debtor the solution is not as simple, and it could give rise to additional liability. In fact, the debtor may just be trading one creditor for another and the another being SARS.
Are audit fees tax deductible?
By Hylton Cameron, Associate Tax Director, Grant Thornton Johannesburg The Supreme Court of Appeals findings in the matter relating to the tax deductibility of audit fees between CSARS v MTN Holdings (Pty) Ltd (MTN) has highlighted the care companies must take in analysing expenses.
Employee share incentive schemes new anti-avoidance measures
By Douglas Gaul, Tax Manager Grant Thornton Johannesburg Prior to 1 March 2014, dividends received from equity shares that were acquired by an employee as part of a share incentive scheme, were exempt from income tax (with some exceptions), even if these shares were held by a share trust on behalf of the employees. This situation has changed, and share incentive schemes must be reviewed to determine whether they still achieve the outcomes they were originally setup to deliver.
Loans disguised under share schemes are no more it is time to restructure
By Hawa Bibi Hoosen, Senior Tax Consultant, Grant Thornton Durban The revised section 8E and newly introduced section 8EA of the South African Income Tax Act (the Actť) deems certain dividends and foreign dividends received in cash by any person on or after 1 January 2013, to be income, taxed in the hands of the shareholder. This has resulted in significant changes in the tax planning of companies and individuals alike.
A horse that looks like a cow is still a horse – Hybrid debt instrument taxed as dividends
By Donatella Callaway The new anti-avoidance rules in respect of hybrid debt instruments, which were introduced by the Taxation Laws Amendment Act 2013 (TLA), became effective on 1 April 2014. The provisions were introduced to reduce the opportunity to create equity instruments that are artificially disguised as debt instruments.