A Departure From ‘Adequate Reasons’ and Common Sense

Author: Daniel Areias & Johan Kotze (Bowman Gilfillan) All taxation , in one way or another, may impact upon fundamental human rights. However, to ensure that the imposition is not absolute, section 5 of the Promotion of Administrative Justice Act provides that every person, whose rights may have been materially and adversely affected by administrative action, may request written reasons for that action from the administrator responsible.

Transferee liable for tax debts of taxpayer

If a person (the transferor) transfers an asset to another person (the transferee) for no consideration or for consideration which is below the market value of the asset, tax consequences arise, including the following: The transferor may become liable for donations tax. If the transferor and the transferee are connected persons in relation to each other, then for capital gains tax purposes, the transferor is deemed to have transferred the asset to the transferee for proceeds equal to the market value. The Tax Administration Act (28/2011), which took effect on October 1 2012, adds another item to that list. Under Section 182(1) of the act, if the transferee receives an asset from a taxpayer which is a connected person in relation to the transferee without consideration or for consideration which is below the fair market value of the asset,

Year in Review – 2012 Tax Developments in South Africa

During 2012 a number of significant amendments were made to the tax legislation in South Africa. This report provides a brief description of certain of these amendments which may be of interest to foreign companies that conduct business in South Africa as well as those seeking investment opportunities in South Africa.

SARS : Basic Guide to Income Tax for PBO and Donations deductions

In South Africa, an organisation that has a non-profit motive or is established or registered as a non-profit organisation does not automatically qualify for preferential tax treatment. An organisation will only enjoy preferential tax treatment after it has applied for and been granted approval as a Public Benefit Organisation (PBO).

SARS and your bank account

On 29 February 2012, the South African Revenue Service (SARS) issued a notice in Government Gazette No 35090 (Notice No 173) relating to the liability of certain institutions, most notably banks, to furnish SARS with financial information about taxpayers. The notice was issued in terms of s69 of the Income Tax Act, No 58 of 1962, which section has been superseded by s26 of the Tax Administration Act, No 28 of 2011 (TAA).

Good intentions gone bad

Many taxpayers have over the years fallen into the trap of waiving a right in favor of a third party without considering the full extent of the tax consequences of their actions. Not only is it necessary for taxpayers to be aware of the potential donations tax implications, but it is also necessary to consider whether any capital gains tax (“CGT”) implications arise as a consequence of their actions.

"Adequate consideration" under Section 58(1) of the Income Tax Act

Generally, donations tax is triggered where a person makes a gratuitous disposal of property. Where BEE transactions are concerned, property (eg. shares) is often disposed of at a value below market value. In such cases there are usually good arguments to be made that the disposal is not gratuitous because some indirect commercial benefit will accrue to the person disposing of the property – it makes “