CIR v Sunnyside Centre (Pty) Ltd 1997(1) SA 68 (A) clearly stated that South African taxpayers must sleep in the (contractual) beds they make: “When a scheme works, no tears are shed for the Commissioner. That is because a taxpayer is entitled to order his affairs so as to pay the minimum of tax. When he arranges them so as to attract more than the minimum he has to grin and bear it.”
Category: Court Cases
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.”
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.
VAT – Tax Invoice
South Africa operates a value-added tax (VAT) system whereby the VAT charged by suppliers is subtracted from the VAT charged to customers to calculate the VAT payable or refundable. This system was established to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his economic activities.
Tax Administration Act – Suspension of payment of tax
Any taxpayer who wishes to object to or appeal against an assessment issued by the South African Revenue Service (SARS) must be aware that their obligation to pay any tax under that assessment is not automatically suspended by virtue of the submission of the objection or appeal itself. Any taxpayer who wishes for an objection or appeal to first be concluded before paying the tax due under an assessment would have to lodge a separate request for suspension of payment of tax in terms of section 164 of the Tax Administration Act No. 28 of 2011 (the TAA).
Tax in quantification of damages – Barclay v Road Accident Fund [2012] (3) SA 94 (WCC)
The decision of the Cape High Court in Barclay v Road Accident Fund [2012] (3) SA 94 (WCC) concerns the question whether, in quantifying damages for loss of earning capacity, the amount to be awarded to the claimant should be reduced to take account of the income tax that would have been payable if the claimant had received the amount by way of ordinary earnings, rather than as a lump-sum award of damages.
Ringo’s R1.5m ‘tax fraud’
Afro soul musician Ringo Madlingozi could face up to 15 years in jail or a hefty fine if he is found guilty of tax fraud and theft, said a tax lawyer on Sunday. Madlingozi allegedly hasn’t been paying his employees’ Pay As You Earn (PAYE) to SARS, but has been deducting it from their salaries since 1999. He reportedly owes SARS R1.5m in PAYE and R421693 in VAT. A charge sheet, which The New Age has seen, shows that the star has been hit with more than 40 charges of theft by SARS. He appeared in the Johannesburg Magistrate’s Court on Wednesday and is expected to be back in court on 9 January 2014.
Employment Tax Bill is signed into law
The long-awaited Employment Tax Incentive Bill, to create jobs and provide relevant skills for young, unemployed South Africans has been signed into law. Employers will receive a tax incentive to employ young workers in special economic zones for a maximum of two years, under certain conditions. The law takes effect on January 1. Employers will be able to claim the incentive on a sliding scale for any employee between 18 and 29 who was hired on or after October 1 this year and is receiving a monthly salary that is above the relevant minimum wage and less than R6000 a month.
Taxpayer – choose your weapon carefully
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:
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.