The Pretoria Tax Court made an interesting ruling in Income Tax Case No 1866 75 SATC 268.Section 32(1) of the Value-Added Tax Act, No 89 of 1991 (VAT Act) states that the following decisions of the South African Revenue Service (SARS) are subject to objection and appeal, namely:
Author: Nyasha Musviba
Capital Gains Tax: Trusts vs Individuals
Author: Rigard Sevenster (Fiduciary Specialist at Glacier by Sanlam.) Many financial planners, and the general public at large, have expressed concern regarding when and to what extent they or their trust is liable for capital gains tax (CGT). Knowing the different tax treatments will assist in choosing how to structure your estate and trust more effectively. In this article we highlight some of the most important differences in CGT from either a trust or an individual’s perspective.
Income protection policies: tax deduction for premiums to be abolished from 1 March 2015
Employees earning remuneration are generally prohibited from claiming tax deductions for any expenditure other than those items listed in section 23(m) of the Income Tax Act (58 of 1962). This is in contrast to persons carrying on a trade independently of an employer.
Transfer Pricing – Income Tax Act 58 of 1962 Section 31 further analysis
The provisions of Section 31 of the Income Tax Act No. 58 1962 (the Act) have been revised. Section 31 was introduced in 1995 to grant the Commissioner power to adjust tax calculations where a taxpayer was involved in cross-border transactions not at arm’s length. The old section 31 provided that the Commissioner could adjust the consideration in respect of the transaction to reflect an arm’s length price for the goods or services. This meant that taxpayers were not obliged to make the adjustments on their tax returns for transactions even if such transactions were not conducted on an arm’s length basis. Taxpayers could therefore file tax returns with excessive deductions, and then sit and wait and hope for the best – which would be that the Commissioner did not pick up these excessive deductions.
Tax Administration Act – Understatement penalty regime
The draft Taxation Administration Laws Amendment Bill, 2013 (TALAB) was released by the South African Revenue Services (SARS) on 5 July 2013 for public comment. The TALAB proposes, amongst other things, that several amendments be made to the Tax Administration Act, No 28 of 2011 (the TAA) in respect of understatement penalties.
Taxpayer's rights on SARS audits
The Tax Administration Act, Act 28 of 2011 (the TAA) came into effect on 1 October 2012. Its promulgation brought with it many changes to not only taxpayers’ rights and obligations but the reciprocal rights and obligations on the part of the South African Revenue Service (SARS) in its continuous business of revenue collection. Some of the amendments and repeals of sections previously contained in the Income Tax Act No. 58 of 1962 (the Act) have seen a welcome improvement in taxpayers’ rights. One of these improvements is contained in section 42 of the TAA.
Definition of foreign dividend
The South African Revenue Service (SARS) issued Binding Class Ruling 41 (Ruling) on 24 July 2013 regarding the question of whether a dividend distributed by a foreign company will constitute a ‘foreign dividend’ as defined in section 1 of the Income Tax Act No. 58 of 1962 (the Act).
Sale of shares – capital v revenue
Background ITC 13003 [2013] involved the disposal of shares by a taxpayer and whether the proceeds realised constituted gross income and were of a revenue nature. The taxpayer happened to be a Special Purpose Vehicle and it was argued that the proceeds of the sale of shares were of a capital nature. There were also additional costs incurred which were closely associated with the acquisition of the shares in question. These costs incurred were the so-called ’equity-kicker’ and ‘indemnity costs’.
Employee Tax – ligation cannot be contractually varied
The decision of the Johannesburg Labour Court in Naidoo v The Careways Group (Pty) Ltd [2013] ZALCJHB 96, in which judgment was handed down on 29 May 2013, affirms a clear principle – the obligation of an employer to deduct employees’ tax in respect of remuneration cannot be varied by an agreement between these two parties. The rationale is beyond doubt – the obligation to deduct tax is laid down in the Income Tax Act (the Act) and overrides any contract to the contrary.
Receipt of foreign assets and the subsequent donation thereof to a non-resident trust
Binding Private Ruling 157 dealt with the income tax consequences arising from, and the attribution rules applicable to a distribution of foreign assets made by non-resident discretionary trusts to a beneficiary who is a resident of South Africa, and the subsequent donation by the beneficiary of such assets to another non-resident trust.