Author: Magda Snyckers (Tax Director at ENSafrica). Is the current international tax focus on base erosion and profit shifting (“BEPS”) relevant for tax-exempt pension funds? In particular, should the trustees and/or administrators of pension funds take note of the finalisation by the Organisation for Economic Co-operation and Development (“OECD”) of the 15 point action plan to address BEPS?
Author: Nyasha Musviba
The use of electronic or digital signatures in tax matters
Author: Carmen Gers and Jadyne Devnarain (ENSafrica). With tax litigation becoming more prevalent in recent years, taxpayers are now faced with new issues. One such issue is: when and to what extent will documents bearing an electronic signature be acceptable under the relevant tax legislation?
Home is where the mine is
Author: Ntebaleng Sekabate (Tax Associate at ENSafrica). On 15 April 2016, the Minister of Mineral Resources published the draft Reviewed Broad Based Black-Economic Empowerment Charter for the South African Mining and Minerals Industry 2016 (“the draft reviewed Mining Charter”) for public comment, addressing among other issues, the targets to be met by the mining industry in respect of the housing and living conditions of mine workers.
Transfer pricing – Consequence of year end adjustments
As all multinational groups of companies should be aware transfer pricing is a significant tax issue when operating cross border in multiple tax jurisdictions. Transfer pricing legislation exists in most established tax regimes and is becoming more and more prevalent in countries previously considered less tax sophisticated. In the context of South Africa, transfer pricing legislation has been present in the Income Tax Act, 1962 (the Act) for a number of years and was significantly revised in 2012 to better align with the Transfer Pricing Guidelines issued by The Organisation for Economic Cooperation and Development (OECD).
Transfer pricing – Arm’s length principle
Using South Africa as our departure point, section 31 of the Income Tax Act, 1962 (the Act) provides that the tax payable in respect of international transactions is to be based on the arm’s length principle. In brief, section 31 of the Act provides that: where any transaction, operation, scheme, agreement or understanding (hereinafter, transaction) which constitutes an ‘affected transaction’ has been concluded between connected persons; and such transaction contains a term or condition which differs from any term or condition that would have existed had the parties to the transaction been independent vis-à-vis one another and transacting at arm’s length; and the term or condition results in a tax benefit for a party to the transaction; then the tax payable by the benefitting party must be calculated as if the transaction had been concluded between independent parties transacting at arm’s length.
SARS’ constitutional obligations and taxpayers’ rights
Given media coverage of the various Constitutional Court challenges involving government institutions and the Presidency; the perceived power struggle between the Commissioner for the South African Revenue Service (SARS) and the Minister of Finance; as well as SARS’ continued pressure to collect revenue in difficult economic times that see corporate taxpayers endure declining revenues and increasing costs; it is useful to remind taxpayers and their shareholders of their constitutional rights and SARS’ constitutional obligations when it performs its functions in administering various taxation statutes. This topic is very complex and, accordingly, what follows is a very broad overview of these issues. Taxpayers and their shareholders are encouraged to obtain specialised legal advice or assistance when confronted with potential investigations or audits by SARS.
Tax Administration – Correction of errors in assessments
The Tax Administration Laws Amendment Act of 2015, which was promulgated on 8 January 2016, amended section 93(1)(d) of the TAA and in future SARS will not be permitted to entertain so-called ‘requests for correction’ of tax assessments, except if SARS is satisfied that there is a (currently undefined) ‘readily apparent’ undisputed error in the assessment. It is likely that taxpayers will be severely discriminated against by this amendment. What is ‘readily apparent’ to one person may not be so to another. The number of cases in which SARS is likely to grant requests for corrections is likely to drop dramatically and a lack of consistency in interpretation between SARS’ assessors may be taken as a given.
International Tax – Reportable arrangement: non-resident service providers
The South African Revenue Service (SARS) published a Public Notice, Notice No. 140 in the Government Gazette (No 39650) on 3 February 2016, in terms of section 35(2) and 36(4) the Tax Administration Act, 2011 (TAA). Among other things, the notice lists an additional reportable arrangement that was not included in previous notices. The following arrangement is now a reportable arrangement: An arrangement for the rendering of consultancy, construction, engineering, installation, logistical, managerial, supervisory, technical or training services to a person that is a:
All in one: another ruling regarding an amalgamation transaction
Author: Dries Hoek and Louis Botha (Cleffe Dekker Hofmeyr). In our Tax and Exchange Control Alert of 20 May 2016, we discussed Binding Private Ruling 231 (Overruled: SARS expresses an interesting view on be an amalgamation transaction), in which the South African Revenue Service (SARS) ruled on whether the roll-over relief provisions in s44 of the Income Tax Act, No 58 of 1962 (Act) could be applied. In this article, we discuss Binding Private Ruling 232 (Ruling),
SARS rules again on the capitalisation of loan accounts
Author: Ben Strauss (Director at Cliffe Dekker Hofmeyr). The South African Revenue Service (SARS) has now issued a number of rulings on the matter of the “conversion” of debt to equity. We have discussed previous rulings on this topic in our Tax Alerts of 15 January 2016 and 9 October 2015. On 31 May 2016 SARS issued Binding Private Ruling 236 (Ruling) which again deals with the issue.