The South African Revenue Service recently released Binding Private Ruling No 237 (Ruling), which dealt with the reinstatement of a deregistered company in the context of the transfer of immovable properties in terms of an amalgamation transaction. A company (Company) had previously sold its business as a going concern to another company (Applicant) in terms of an “amalgamation transaction” as defined in s44 of the Income Tax Act, No 58 of 1962 (Act). The assets of the business included certain immovable properties.
Author: Nyasha Musviba
High Court (Gauteng Division, Pretoria) decision on whether SARS is no longer bound by a compromise agreement in the circumstances under consideration
This case dealt with whether the South African Revenue Service (“SARS”) was no longer bound to a compromise agreement entered into between the taxpayer and SARS in terms of the Tax Administration Act (the “Admin Act”) as a result of alleged non-disclosures and misstatements made by the taxpayer, who expressly warranted the truth of the facts furnished by him. The taxpayer had been assessed to pay income tax, with interest, in the aggregate amount of R18 192 295.36 by May 2014 in respect of the 2005 to 2011 tax years. The taxpayer objected to the assessments and alleged that the amounts in question constituted donations or dividends in respect of which he declared he could not be assessed to tax. The taxpayer addressed four requests for a compromise to SARS. The taxpayer and SARS finally concluded a compromise agreement on 21 May 2014. By 1 December 2014, the taxpayer had Read More …
Supreme Court of Appeal decision on whether grapes delivered to a co-operative winery, pressed and pooled, constitute produce held and not disposed of for purposes of the First Schedule to the Income Tax Act
https://www.ensafrica.com/news/Tax-in-Brief?Id=2302&STitle=Tax%20in%20BriefThe taxpayer derived a portion of his taxable income from wine farming. In particular, he received payments from a co-operative winery (the “co-op”) in respect of grapes which he delivered to the co-op for the purpose of being made into wine. The South African Revenue Service (“SARS”) assessed the taxpayer on the basis that the grapes that he had already delivered to the co-op constituted “produce held and not disposed of at the end of the year of assessment” in terms of paragraph 3 of the First Schedule (“First Schedule”) to the Income Tax Act. The Tax Court’s decision was in favour of SARS, whereafter the taxpayer took the matter on appeal to the Supreme Court of Appeal (“SCA”). The issues on appeal to the SCA were as follows: whether the income received by the taxpayer, which is generated by the sale of wine, constitutes income “derived from agricultural or Read More …
Cape Town Tax Court judgment on whether a fast food delivery service is liable to account for output VAT on driver’s petrol money
The taxpayer carried on a fast food delivery business, in terms of which customers wishing to order food from a number of fast food restaurants could place their orders with the taxpayer. The taxpayer would then relay the orders to the relevant restaurants and would arrange for the collection of the food and for its delivery to the customers in exchange for a commission. The actual collection and delivery services were purportedly not performed by the taxpayer or its employees, but by drivers who acted as independent contractors to the taxpayer. The drivers were remunerated by way of a delivery fee, which appeared on the tax invoice presented to the customer as “driver’s petrol money”. In terms of the tax invoices, value-added tax (“VAT”) was charged in respect of the food order, but not in respect of the driver’s petrol money.
High Court (Eastern Cape Division, Port Elizabeth) decision on SARS’ information gathering powers in terms of section 46 of the Tax Administration Act
In this case, the taxpayer refused to submit a so-called lifestyle questionnaire (“questionnaire”) to the South African Revenue Service (“SARS”), which was served to him in terms of section 46(1) of the Tax Administration Act (the “Admin Act”). The information sought in terms of the questionnaire related to the taxpayer and his spouse’s personal particulars and circumstances, personal and private investments and assets, properties owned by them, income received during the period under review and expenses. After receiving the questionnaire, the taxpayer sought to make his compliance with the information request conditional upon SARS furnishing him with certain information, including the following: in terms of which sections of which law the taxpayer was obliged to submit the relevant material; if this is for the administration of any tax law, the relevant subsection of that definition in section 3(2) of the Admin Act must be quoted, and supported by the Read More …
Recent Binding Private Rulings, Binding Class Rulings and Binding General Rulings
SARS has recently released, inter alia, the following binding private rulings (“BPR”), binding class ruling (“BCR”) and binding general ruling (“BGR”): BPR 230: Disposal of an asset in terms of an asset-for-share transaction within 18 months of its acquisition in terms of an intra-group transaction This ruling determines the income tax consequences under section 45(5) of the Income Tax Act in respect of the disposal of an asset in terms of an asset-for-share transaction as contemplated in section 42, within 18 months of the acquisition of that asset in terms of an intra-group transaction contemplated in section 45. Find a copy of the ruling here.
the draft reviewed Mining Charter: Employee share ownership plans and the ownership element – playing the waiting game?
One of the key elements addressed in the Draft Reviewed Broad Based Black-Economic Empowerment (“BBBEE”) Charter for the South African Mining and Minerals Industry, 2016 (the “draft reviewed Mining Charter”) is the issue of ownership. The Department of Mineral Resources (“DMR”) seeks to achieve the ownership requirement through broad-based employee share option plans (“ESOPs”), which are likely to have an impact on both mining companies and their employees from a tax perspective. The DMR published the draft reviewed Mining Charter in April, following an assessment of compliance by mining companies with the Amended Mining Charter of 2010. According to the preamble of the draft reviewed Mining Charter, this assessment revealed the following regarding the ownership element of the Mining Charter:
New ITR14 requires country-by-country reporting in company tax returns
Authors: Lavina Daya and Scott Salusbury. In October 2015, the Organisation for Economic Cooperation and Development (“OECD”) published its final reports on the Base Erosion and Profit Shifting (“BEPS”) project, including the final report on BEPS Action 13, Transfer Pricing and Country-by-Country Reporting (“Action 13 Report”). The Action 13 Report recommended a three-tiered approach to transfer pricing documentation, requiring a global master file and local file to be submitted by multinational enterprises (“MNEs”) to local tax authorities and a country-by-country (“CbC”) report to be submitted by the “ultimate parent entity” of an MNE in the jurisdiction in which it is tax resident. The CbC report will contain information to provide the tax authorities with an overview of the global allocation of income, business activities and taxes paid within the MNE. The tax authorities of various jurisdictions will share CbC reports through automatic exchange of information mechanisms, such as the Multilateral Competent Read More …
Africa tax in brief
Author: Celia Becker. ANGOLA: Securities Code Regulations enacted The Securities Code Regulation (Regulation No. 6/16) (the “Regulation“) was approved by the Council of Administration of the Capital Market Commission and gazetted on 7 June 2016. The Regulation contains the organisation rules and administrative requirements for open companies and other issuers of securities admitted to trading in regulated markets. CAMEROON: Tax amnesty on property tax announced On 21 June 2016, Cameroon’s National Treasury published a notice on its website introducing tax amnesty on property tax. According to the notice, provided that payments of property tax are made before 31 December 2016, no penalties will be levied.
Venture capital companies – summary of the latest tax rulings
Author: Mansoor Parker and Anuschka Wischnewski (ENSafrica). Introduction The venture capital company (“VCC”) regime was introduced in 2009, with an aim to encourage investors, by way of substantial tax benefits, to invest in small South African trading companies. VCCs are private investment companies, although they need not be, as the Income Tax Act does not prevent VCCs from listing their shares on the Johannesburg Stock Exchange. The past two years have seen a phenomenal increase in the number of VCCs. There are now 36 South African Revenue Service (“SARS”) approved VCCs, of which 29 were approved in the past two years.