By Doné Howell, Tax Partner Grant Thornton Johannesburg “Social responsibility is an ethical theory that an entity, be it an organisation or individual, has an obligation to act to benefit society at large.” When your moral compass and sense of social responsibility lead you to acts of benevolence, you could, in addition to the sense of wellbeing that comes from helping others, also qualify for a reduction in your tax bill. In recognition of the valuable role these donations from individuals and businesses play in these tougher economic times, government has legislated further concessions to allow greater tax relief in respect such donations.
Author: Nyasha Musviba
Interest on loans from foreign persons
By Mike Betts, Tax Partner Grant Thornton Cape From 1 January 2015, the interest paid or due to non-residents from a source within South Africa (SA) will be subject to a 15% withholding tax, according to sections 50A to 50H of the Income Tax Act (‘the Act’). These provisions do not affect interest paid by, amongst others, any sphere of government, or any SA bank and will most likely affect loans from foreign shareholders and from other group companies located beyond the borders of SA.
Import VAT – New Rules
By Basil Dikobe, Tax Manager, Grant Thornton Johannesburg The requirements for claiming VAT when importing goods to South Africa have always been contentious and the affected VAT vendors are often unsure about the documentary evidence they need to retain to survive a SARS VAT audit. Even SARS offices interpret or enforce the provisions of the VAT Act differently. For example, some allow the clearing agent’s invoice as proof of import and others accept payment to the clearing agent as proof that VAT has been paid. Even the timing for claiming the input tax deduction has been disputed. These uncertainties have resulted in many VAT vendors receiving significant assessments, penalties and interest charges from SARS.
Latest Research and Development tax allowance still missing the mark
By Barry Visser, Associate Director Grant Thornton Johannesburg Recent Research and Development (R&D) legislative amendments substantially changed the nature of the R&D allowance contained in section 11D of the Income Tax Act. However, despite the significant changes, this allowance still seems to fail to encourage many companies to undertake R&D. We highlight the most significant barriers and provide suggestions to benefit from the allowance.
Determining the base cost of the repayment of an interest-free loan acquired for less than face value
Author: Okkie Kellerman and Esther Geldenhuys of ENSafrica Introduction The Eighth Schedule to the Income Tax Act, 58 of 1962 (“the Act”) creates a tax liability known as capital gains tax which applies generally where an asset is disposed of. A loan is regarded as an “asset” in terms of the definition in paragraph 1 of the Eighth Schedule as it is an incorporeal asset whereby the lender acquires a right to claim payment from the borrower. Where part of a loan is repaid it constitutes part of an asset disposed of and it will be necessary to allocate a part of the base cost of the loan to the part of the loan repaid in order to determine the capital gain or capital loss in respect of the disposal of that part.
Developments in the taxation of collective investment schemes
Author: Toinette Beckert by ENSafrica Section 25BA prior to 1 January 2014 Prior to the recent amendments in the Taxation Laws Amendment Act No. 31 of 2013 (“the TLAA”), a collective investment scheme (“CIS”) was taxed on a semi-flow through regime in terms of section 25BA of the Income Tax Act No. 58 of 1962 (“the Act”). Accordingly, amounts (other than amounts of a capital nature) received by or accrued to a portfolio of a CIS (other than a portfolio of a CIS in property) were deemed to have directly accrued to a person to the extent that the amounts were distributed by the CIS to such person not later than 12 months after its accrual to the CIS and if that person was entitled to the distribution by virtue of holding a participatory interest in the CIS.
Amendments relating to dividend exemptions in the context of incentive schemes
Author: Andrea Minnaar of ENSafrica Recent amendments were made to both the local dividend income tax exemption in section 10(1)(k)(i) of the Income Tax Act, 1962 (“the Act”) as well the foreign dividend income tax exemption in section 10B of the Act, in terms of the Taxation Laws Amendment Act, No. 31 of 2013. In terms of these amendments, the local and foreign dividend income tax exemptions will not be available to any dividend or foreign dividend:
Unreported tax case judgment with case number: SARS 4/2013
Author: Caroline Rogers and Megan McCormack of ENSafrica In an unreported decision, Jen-Chih Huang and 13 others v Commissioner of SARS and others with case number: SARS 4/2013 and dated 18 November 2013 (“the Unreported Judgement”), Tuchten J of the North Gauteng High Court handed down an important judgment in relation to information and documentation obtained by the South African Revenue Service (“SARS”) in terms of Part D of the Tax Administration Act No. 28 of 2011 (“the TAA”).
International taxation controversy: the coming storm
Author: Cym H. Lowell and William Zhang There is a revolution underway in the world of international taxation. The current essential treaty and substantive taxation rules were developed shortly after the end of World War I using England and India—denominated “imperial” and “colony” countries, respectively—as a model. The purpose of these treaty and substantive rules was to repatriate income from the colony country to the imperial country to facilitate repayment of war debts. As a result, the model treaties that formed the basis of the current Organisation for Economic Co-operation and Development (OECD) and United Nations models essentially allowed source countries to tax only a limited share of the overall (combined) income, and allocated the residual income to the “residence” country (England, or the imperial country).
Amendments relating to dividend exemptions in the context of incentive schemes
Author: Andrea Minnaar (ENS) Recent amendments were made to both the local dividend income tax exemption in section 10(1)(k)(i) of the Income Tax Act, 1962 (“the Act”) as well the foreign dividend income tax exemption in section 10B of the Act, in terms of the Taxation Laws Amendment Act, No. 31 of 2013. In terms of these amendments, the local and foreign dividend income tax exemptions will not be available to any dividend or foreign dividend: