In an about-turn the Constitutional Court handed down judgment in the Shuttleworth matter on 18 June 2015. Not only was it found that Shuttleworth’s exit charge constituted a regulatory charge as opposed to a tax, but it was also found that the Exchange Control Regulations were not unconstitutional. Should one consider the history of the matter, Shuttleworth made application to the South African Reserve Bank (Reserve Bank) to transfer approximately R2,5 billion out of South Africa. This approval was granted subject to an exit charge of 10% being imposed on the capital that was exported. The payment of this exit charge was challenged by Shuttleworth:
Category: Court Cases
VAT clauses in sale agreements relating to immovable property
Parties to sale agreements of immovable property should take great care when drafting the value-added tax (VAT) clauses. Consider the recent case of Lezmin 2358 CC v Tomeridian Properties CC and others [2015] JOL 33210 [GJ]. The facts of the case are complex. Put simply, the seller sold commercial immovable property to the buyer. The sale agreement, which went through a few permutations, stated that:
VAT – Input tax and tax invoices
An attack by SARS backfired in an appeal in the Western Cape High Court when the Court delivered its judgment in South Atlantic Jazz Festival (Pty) Ltd v Commissioner for the South African Revenue Service [2015] ZAWCHC 8 (judgment delivered on 6 February 2015). The facts The appellant, a registered VAT vendor, had, for a number of years, been the organiser of an international jazz festival. In order to finance and facilitate the holding of the festival, it sought sponsorships from large enterprises. The enterprises undertook to provide cash, goods or services to an agreed value, in consideration for which they were given preferential advertising and branding rights. In the matter before the Court, the enterprises concerned were South African Airways, the City of Cape Town, Telkom and the South African Broadcasting Corporation.
Invalid assessments are subject to objection and appeal
Judgment was delivered by the Supreme Court of Appeal (SCA) in the case of Medox Limited v Commissioner for the South African Revenue Service on 27 May 2015. While under provisional liquidation, Medox Limited (Taxpayer) incurred an assessed loss during its 1996 year of assessment. The Taxpayer failed to submit a return for the 1997 year of assessment. In its returns for the 1998 and subsequent tax years, it neglected to carry forward the assessed loss from 1996.
In trusts we trust
As parties to litigation, creditors often find themselves in a predicament where the individual they have a claim against has assets of insignificant value. The same individual may, however, be a trustee of a discretionary trust owning substantial assets. Faced with this difficulty, creditors are left with little choice but to ask a court to ‘go behind the trust’ in an attempt to find assets to execute judgment against. Allegations of a trust being a debtor’s ‘alter ego’ or ‘a sham’ often find their way into pleadings and the terms are frequently used interchangeably. To date, our courts have mostly shied away from declaring assets registered in a trust to be regarded as assets falling within the personal estate of one of the trust’s trustees. The recent judgment of Van Zyl and Another Nno V Kaye No and Others 2014 (4) Sa 452 (WCC) confirms this reluctance.
Interpretation of on demand guarantees
In the past, our courts have called payment guarantees issued by banks in commercial deals ‘the life blood of commerce’ which should not lightly be subjected to judicial interference. The Supreme Court of Appeal recently confirmed this principle in the case of the State Bank of India and Another v Denel SOC Limited and Others (947/13) [2014] ZASCA 212 but also emphasised that a demand made pursuant to a payment guarantee (which is independent of the underlying contract and is similar to an irrevocable letter of credit), must comply strictly with the terms and requirements set out in such guarantee. In the case, the Supreme Court of Appeal was asked to set aside an interdict granted by the South Gauteng High Court prohibiting Absa Bank from honouring its undertaking to pay on eight counter guarantees issued by Absa Bank in favour of the State Bank of India and the Bank Read More …
Court addresses the deductibility of research and development tax incentives
In an attempt to encourage research and development in South Africa, s11D of the Income Tax Act, No 58 of 1962 (Act) was introduced to provide a research and development tax incentive which seeks to encourage and incentivise private sector investment in the research and development of scientific or technological activities. This particular tax incentive ensures that research and development activities are conducted within South Africa with the ultimate goal of indirectly stimulating the economy. Under the provisions of s11D of the Act, two types of tax deductions are allowable. First, the 150% deduction of expenditure incurred directly for research and development purposes and secondly, an accelerated depreciation deduction for capital expenditure incurred on any building or part thereof, machinery, plant, implement, utensil or article used for research and development purposes.
Procedures governing objections and appeals
Author: Dr Beric Croome (Tax Executive at ENSAfrica) A taxpayer who receives an assessment from the Commissioner of the South African Revenue Service with which they do not agree, is entitled to lodge an objection against that assessment, and Chapter 9 of the Tax Administration Act, No. 28 of 2011 (“TAA”) regulates procedures relating thereto. Taxpayers also need to be mindful of the rules governing objection and appeal promulgated under section 103 of the TAA, which sets out in greater detail the steps to be followed in the objection and appeal process.
Tax Administration – Interpreting statutory provisions
SARS has investigated, and in many cases raised assessments in respect of, share incentive schemes where the employee had accepted an offer to purchase shares at a fixed price prior to 26 October 2004, subject to delivery and payment taking place at a future date. The law relating to these schemes (known as deferred delivery schemes or DDS schemes) was amended with effect from that date. The Supreme Court of Appeal has now delivered its judgment in the matter of C: SARS v Bosch [2014] ZASCA 171 (19 November 2014) and provided clear guidance on the application of the Income Tax Act No. 58 of 1962 (the Act) in relation to deferred delivery share incentive schemes, where the employee had exercised the right to acquire the shares prior to 26 October 2004.
Has your tax return prescribed? SARS’ powers reach to infinity and beyond
Author: Hylton Cameron (Grant Thornton Johannesburg) In the recent case of Ackermans Ltd v CSARS the issue of prescribed tax returns was re-visited in Pretoria in the High Court. In terms of the Income Tax Act, SARS is entitled to raise additional assessments for three years from the date of final assessment. However if there is a misrepresentation of a material fact in the original return, the three prescription period does not apply. In this case however, SARS only raised additional assessments some seven to thirteen years after the original assessments, sparking concern about SARS’ almost infinite reach to reassess tax returns.