A recent, much publicised decision in the Western Cape High Court declared certain provisions in the Magistrates’ Court Act (MCA) relating to the issuing of emolument attachment orders (EAO) to be invalid and unconstitutional. In the matter of University of Stellenbosch Legal Aid Clinic and Others v Minister of Justice and Correctional Services and Others (Case No. 16703/14) [2015] ZAWCHC 99 application was made to have EAOs issued against a number of clients of the applicant declared invalid. An EAO permits the attachment of a debtor’s earnings and obliges the debtor’s employer (garnishee) to pay a specified amount out of the debtor’s earnings to the creditor or the creditor’s attorney until the debt and legal costs have been fully paid.
Category: Court Cases
Deductability of business trade losses
Where an accident or other mishap results in a taxpayer incurring an involuntary loss, a question can arise as to whether that loss is deductible for income tax purposes in terms of the general deduction formula laid down in section 11(a) of the Income Tax Act of 1962 (the Act) as having been incurred in the production of income. In Port Elizabeth Electric Tramway Co Ltd v CIR [1936] 8 SATC 13, Watermeyer J expressed the underlying principle by saying that – “all expenses attached to the performance of a business operation bona fide performed for the purpose of earning income are deductible whether such expenses are necessary for its performance or attached to it by chance or are bona fide incurred for the more efficient performance of such operation provided they are so closely connected with it that they may be regarded as part of the cost of performing it.”
The duty to exhaust internal remedies before applying to the High Court for a review
The duty to exhaust internal remedies before applying to the High Court for a review of a SARS decision in terms of the Promotion of Administrative Justice Act One of the most significant developments in South Africa’s fiscal law since its birth, some hundred years ago, has been the coming into existence of a constitutional right (as distinct from a very limited antecedent common law right) to administrative justice. This is one of the rights enshrined in the Constitutional Bill of Rights. It finds detailed expression in the Promotion of Administrative Justice Act 3 of 2000 (‘PAJA’).
Victory for taxpayer in motor vehicle salary sacrifice scheme
In Anglo Platinum Management Services v SARS,(1) the Supreme Court of Appeal (SCA) recently ruled in favour of the taxpayer in respect of a motor vehicle salary sacrifice scheme. The judgment underlines the importance of employers and employees properly agreeing, understanding and implementing any remuneration structures that contain a salary sacrifice component. Background A ‘salary sacrifice’ or ‘salary substitution’ arrangement is essentially the substitution of a cash component of an employee’s overall cost-to-company remuneration package for a non-cash benefit, generally resulting in a lower amount subject to the deduction of employees’ tax.
The Valuation of Assets by Taxpayers – Lessons from Stepney Investments
Author: Esther van Schalkwyk, Tax Consultant at BDO South Africa. The Supreme Court of Appeal (SCA) recently handed down judgment in CSARS v Stepney Investments (Pty) Ltd in which it confirmed that valuations are not to be taken lightly by taxpayers. Stepney disposed of a pre-valuation date asset of 4.37% of the shares it held in Emanzini Leisure Resorts (Pty) Ltd. Stepney elected to use the market value of the shares on the valuation date as the method of determining the value as at 1 October 2001.
Victory for taxpayer in motor vehicle salary sacrifice scheme
Author: Ruaan van Eeden (Cliffe Dekker Hofmeyr). In the recently reported case of Anglo Platinum Management Services v SARS [2015] ZASCA 180 (Anglo), the judgment of which was delivered on 30 November 2015, the Supreme Court of Appeal (SCA) ruled in favour of the taxpayer in respect of a motor vehicle salary sacrifice scheme. The judgment stresses the importance of employers and employees properly agreeing to, understanding and correctly implementing remuneration structures that contain a salary sacrifice component.
Proposed amendments to the rules of prescription – does this leave a taxpayer with any certainty?
Authors: Robert Gad and Taryn Solomon (ENSafrica). A fundamental reason for the existence of the rules of prescription in our tax law is to provide a taxpayer with certainty as regards its tax position. It is therefore important that such rules are clear and not subject to unfettered discretions. In disputes with the Commissioner for South African Revenue Service (“the Commissioner” or “SARS”), prescription is a powerful defence available to compliant taxpayers, allowing them to bring finality to their tax assessments.
FORMER SARS OFFICIAL ARRESTED FOR R5-MILLION VAT FRAUD
Pretoria, 27 November 2015 – A chartered accountant and former SARS employee was arrested for alleged VAT fraud of more than R5-million at her place of work in Centurion earlier today. The fraud happened over a nine year period. The female suspect is a director of a closed corporation (cc) that provides consultancy and bookkeeping services. She is alleged to have submitted false VAT invoices and bank statements to SARS between 2007 and 2015 to substantiate VAT refund claims amounting to R5, 1 million. The investigation commenced after SARS’ risk engines identified the taxpayer for an audit due to the unusual refund trend that emerged over the years. Upon requesting supporting documentation, SARS’s investigators established through third party verification that fictional invoices had been submitted to SARS. They also found that bank statements that were submitted to substantiate refund claims were not authentic.
The importance of tax litigation strategy
Recently, the Kwazulu-Natal High Court had to consider whether it could adjudicate on papers put before it by SARS in motion proceedings, or, whether the matter ought to be referred for oral evidence given the fact that the taxpayer had raised material dispute of facts to the SARS’ allegations. What is of interest in this case is not what the Court ultimately decided, but rather its reasons for doing so. Within those reasons lie valuable lessons to be learnt when SARS or a taxpayer engages in litigation.
Calculating a capital gain: current case law
Capital Gains Tax (CGT) is payable on the disposal of capital assets that were in the seller’s possession on, or were acquired after, 1 October 2001. In the recent Supreme Court of Appeal (“SCA”) judgement of The Commissioner for the South African Revenue Service v Stepney Investments (Pty) Ltd, the SCA considered the various valuation methods available in determining the value of a capital gain, namely the discount cash flow method (“DCF”) and the net asset value method (“NAV”).