Tax implications in relation to the assumption of contingent liabilities in part settlement of the purchase price of assets acquired as part of a going concern. The South African Revenue Service (SARS) released a detailed discussion paper, on 4 December 2013, presenting SARS’ initial views regarding the tax implications for the seller and purchaser in relation to the assumption of contingent liabilities (specifically “free-standing contingent liabilities”) in part settlement of the purchase price of assets acquired as part of a going concern. Such liabilities would include, for example, provisions for bonuses, leave pay, warranties etc.
Author: Nyasha Musviba
New Withholding Tax on Cross-Border Services
Author: Graeme Palmer (Commercial Department of Garlicke & Bousfield Inc) The Income Tax Act, 1962 was recently amended to provide for a new withholding tax on cross-border service fees. According to the new law, a withholding tax of 15% must be levied on the amount of any service fee that is paid by any person to or for the benefit of any foreign person to the extent that the amount is regarded as having been received by or accrued to the foreign person from a source within South Africa. A foreign person is any person who is not a resident.
The Davis Tax Committee – Where Are We At, and What Lies Ahead?
It was, in part, this question which lay behind the appointment of a tax review committee in South Africa on 17 July 2013. At a recent dialogue facilitated by professional services firm Deloitte, Judge Dennis Davis, the Chairman of the Davis Tax Committee, for the first time revealed some of the background to the committee’s work and progress to date. As National Leader for Taxation Services at Deloitte, Nazrien Kader pointed out, “it has been nearly two decades since the Katz Commission undertook such a review in South Africa and global and local developments since have brought the applicability of our tax system under the spotlight.”
VAT – Supply of services for contingent consideration
The recent Taxation Laws Amendment Act_ 2013 (TLAA), proposed a new section dealing with time of supply rules for contingent services. The proposed section 9(4)(b) of the Value Added Tax Act, No 89 of 1991 (the VAT Act) provides that “where services are supplied under an agreement and the consideration for such services supplied in whole or part is not determined at the time that such services are rendered or performed,
International Tax – South African executives on foreign boards
Introduction South African companies are increasingly looking to global expansion to build their capabilities and expand their operations into foreign jurisdictions. Where South Africans serve on the boards of foreign companies and render services to foreign entities, they typically do so in terms of split employment contracts in respect of their services rendered within and outside of South Africa. In addition to the remuneration, they may also receive directors’ fees for services rendered to the boards. Their employment contracts with the foreign company and the requirement
Employee Tax – Employment tax incentive
The Employment Tax Incentive Act, 2013 (the ETIA) was published in the Gazette on 18 December 2013 and gives effect to the proposals to subsidise the cost of hiring younger workers as first announced by Government in 2010. According to the Media Statement on the Draft Employment Tax Incentive Bill, this new incentive is aimed at encouraging employers to hire young and less experienced work seekers, as stated in the National Development Plan. The ETIA represents the first phase of the incentive and after a review of the effectiveness of the incentive, a second phase which could include additional policy features and possible refinement may be implemented after two years. In this article we discuss the legislative provisions of the first phase of the employment tax incentive.
Contributed tax capital
The concept of contributed tax capital (CTC) was introduced into the Income Tax Act, No 58 of 1962 (the Act) with effect from 1 January 2011. Despite the concept forming part of our law for a number of years now, the question still often arises – what is contributed tax capital? The relevance of the concept of CTC is that it is one of the main exclusions from the definition of a dividend. A dividend is defined as any amount transferred or applied by a company that is a resident for the benefit of any person in respect of a share but does not include any amount transferred/applied that “results in a reduction of contributed tax capital
Tax consequencies of carrying on business through an agent
A decision in the Tax Court in the Western Cape (Case No. 13002) related to the question whether a company was carrying on farming. The company (Company A) had acquired a piece of land on which there were substantial plantations. Company A itself did not wish to exploit the plantations commercially, but wished to ensure their preservation. It therefore entered into an arrangement with a second company (Company B), in terms of which Company B had the right to exploit the timber, but was obliged to maintain the rotation by planting trees to replace those that were cut. Company B was entitled to all proceeds from the exploitation and was obliged to meet its own costs and to keep the plantations insured against fire.
Taxation of Issue of shares as consideration
In order for the ownership of assets to pass from a seller to a buyer it is necessary that the parties agree three essential elements: price, terms and structure. These three elements are interdependent in any transaction. For instance, after agreeing the price of a transaction, i.e. the number of rands or rand value of the consideration the seller will receive, the parties will need to agree the terms such as whether the price will be paid by means of cash, debt and/or shares as well as the timing of these payments.
UK capital gains tax ‘is bad news for SA’
SOUTH Africans with property in the UK will in future be liable for capital gains tax there once they sell their property, following an announcement last month that the tax will be introduced in the UK from April next year. The South African economy is likely to lose revenue because of the step, as the UK would in future be getting the tax instead of South Africa, Michael Honiball, partner in the tax department of law firm Webber Wentzel, said on Tuesday. South Africa’s domestic laws,