The Income Tax Act No. 58 of 1962 (the Act) contains a definition of a ‘group of companies’ in section 1 of the Act. However, a narrower definition of the term ‘group of companies’ is contained in section 41 of the Act, which applies to certain corporate tax roll-over rules and other provisions contained in the Act. It is important to identify which companies fall within the different definitions of a ‘group of companies’ in order to determine whether one qualifies for the applicable tax relief.
Author: Nyasha Musviba
Capital Gains Tax and The effects of inflation
The South African capital gains tax (CGT) regime does not provide for indexation: it does not take into account the effect that inflation may have on capital profits over time. Consider the following example: A company bought an asset on 1 January 2002 for R1 000. The company sold the asset on 1 January 2013. The inflation rate during that period was, for example, 6% compounded annually. The company realised a return of, for example, 10% compounded annually, that is, a return of 4% above inflation compounded annually. Accordingly, the company sold the asset for an amount of R2 853. The company realised a nominal profit of
CSARS v Mobile Telephone Networks Holdings (Pty) Ltd (966/12) [2014] ZASCA 4 (7 March 2014)
Introduction The Supreme Court of Appeal delivered its judgement for the case between Commissioner for the South African Revenue Service v Mobile Telephone Networks Holdings (Pty) Ltd (966/12) [2014] ZASCA 4 on the 7th of March 2014. This case concerns itself with the apportionment of audit fees incurred for a dual or mixed purpose in terms of section 11(a) read with section 23(f) and (g). Facts The group structure were as follows: the respondent,
GW van der Merwe & 12 Others v CSARS – HC 1984-14 WC – 17 February 2014
Introduction The Western Cape High Court recently delivered its judgement in the application lodged by the first applicant being GW van der Merwe and others, for an order that a temporary interdict be issued preventing the second respondent, Piet JJ Marais, from commencing an inquiry authorised by Davis J, in terms of a court order made by virtue of the provisions of Part C of Chapter 5 of the Tax Administration Act, No 28 of 2011, pending the final outcome of an application to declare the relevant provisions of the Tax Administration Act which authorises such enquiry unconstitutional and invalid. Further, the applicants requested an order to have the third applicant, Elle-Sarah Rossato, to allow them access to the court file in order to enable the aforesaid review application to be made.
Davis Committee considering VAT at 16%?
Author: Ingé Lamprecht| JOHANNESBURG – An increase in the standard value-added tax (VAT) rate of 14% by one or two percentage points could reduce the pressure on the fiscus and would bring South Africa more in line with a number of international jurisdictions around the world. However, it will be an extremely unpopular move with unions and other political groups, who argue that it will be to the detriment of the poor. The Tax Review Committee, headed by Judge Dennis Davis, is currently considering potential amendments to the VAT system, with a specific focus on efficiency and equity.
Tax experts cheer move to fix transfer pricing
Author: Amanda Visser (BDlive) The headache of fictional loans attracting fictional interest “forever and a day” — caused by transfer-pricing rules changing in 2012 — appears to have been relieved by the latest budget. Before the Treasury’s move this year, a secondary transfer pricing adjustment — which occurs in some transactions between a company and its foreign subsidiaries — had been treated as a deemed loan. The problem is that a company can almost never get a deemed loan off its books as it is not a loan requiring repayment. The loan attracts interest, which has a tax implication, and this was set to become a recurring problem for companies and tax practitioners.
South Africa’s VAT changes: The impact on e-commerce
Author: Bowman Gilfillan The buying and selling of services over the internet has become ubiquitous. This article provides an update on the efforts of the South African Revenue Service (‘SARS’) and National Treasury (‘Treasury’) to bring foreign e-commerce suppliers on to a level tax playing field, by requiring them to register under the Value-Added Tax Act 1991 (‘the VAT Act’). In South Africa, it is usually the case that an entity selling goods or services will (i) be charged VAT (normally at a standard rate of 14%) on its inputs by its suppliers, (ii) charge VAT on its outputs to its customers, and
Budget 2014 – 'Deemed loan' secondary transfer pricing adjustment to be scrapped
By David Warneke, BDO South Africa One of the tax proposals contained in the 2014 Budget review is the scrapping of the ‘deemed loan’ secondary transfer pricing adjustment contained in section 31(3) of the Income Tax Act, in favour of such an adjustment being treated as a dividend subject to the dividends tax or a ‘capital contribution depending on the facts and circumstances’. The scrapping of the deemed loan treatment is generally to be welcomed although scant detail regarding the proposal was provided in the Budget Review.
Budget 2014 – Income Tax and VAT highlights of the 2014 Budget
The 2014 Budget produced few surprises. There were no changes to the corporate or personal income tax rates, capital gains tax inclusion rates or the VAT rate. The robustness of revenue collections, almost in line with the 2013 forecast, probably played a part in enabling the Minister to keep rates steady. The most significant changes are: The introduction of tax-preferred savings accounts. The initial contribution limits are very low, at R30 000 per annum, with a lifetime contribution limit of R500 000. This was announced at last year’s budget.
SARS shortens time between date of assessment and 'second date'
In order to avoid interest on the late payment of assessed income tax, taxpayers have to pay outstanding tax by the ‘second date’ indicated on the income tax assessment. We are finding that SARS has shortened the number of days between the date of assessment and the second date in many cases, to only a few days. If your income tax calculation indicated that you will have to make a payment to SARS, please be aware that you may have to make the payment within a few days of submission of your return, in order to avoid interest.