Author: NASHIRA DAVIDS and PHILANI NOMBEMBE MODEL CITIZEN: International swimwear model Candice van der Merwe arrives at the Cape Town High Court with SARS aiming to haul her and her father before an inquiry for tax fraud Picture: Swimwear model Candice van der Merwe’s life has been “devastated” by the “draconian” South African taxman. Yesterday the Cape Town High Court ordered that she could be hauled before a SARS tax inquiry. Her father, Cape Town businessman Gary van der Merwe, has been involved in tax fraud litigation amounting to millions of rands for almost a decade. The 21-year-old model claimed late last year that an unknown Arab admirer gave $15.3-million (about R168.3-million) after she caught his eye at a private Seychelles resort.
Category: GAAR
Surbonation agreements: The Section 8F trap on debt instrument
Author: David Warneke (BDO SA) Section 8F of the Income Tax Act, dealing with hybrid debt instruments was substituted by the Taxation Laws Amendment Act of 2013. In its substituted form the provision is considerably broader in scope than its predecessor. In particular it appears that certain subordination agreements may render the subordinated debt subject to reclassification as hybrid debt with potentially costly consequences. The new treatment applies to amounts incurred on or after 1 April 2014. In terms of section 8F if a debt instrument falls into classification as a hybrid then the effect is that interest incurred in respect of the hybrid debt instrument:
Ruling on the definition of 'listed shares' for purposes of the foreign dividend exemption
Author: Heinrich Louw (Cliff Dekker Hofmeyer) The South African Revenue Service (SARS) released Binding Class Ruling No 42 on 7 February 2014. The factual circumstances in respect of which the ruling was made are as follow: Company Y is a company incorporated and resident in foreign country Y. Company X is a company incorporated and resident in country X. Company X is also a wholly-owned subsidiary of Company Y. Company X is to be listed on the JSE Limited. Its business is investment in foreign debt instruments, on which it will receive interest returns.
Tax deductions – Expenditure on repairs
Interpretation Note 74(the Note), issued by SARS on 6 August 2013, is a collation of fundamental principles regarding the deductibility of expenditure on repairs (and the recoupment of such expenditure) in terms of section 11(d) of the Income Tax Act 58 of 1962 (the Act) and the principles, as laid down in case law, regarding the distinctive features of a repair as contrasted with other categories of expenditure. The Note commences with the general observation that – “expenditure on repairs to an asset not comprising trading stock is likely to be of a capital nature, particularly when it is not incurred at regular intervals”.
Interest on debt instruments with equity features
On 4 July 2013, the draft Taxation Laws Amendment Bill (DTLAB) was issued by National Treasury in terms of which it was proposed that new anti-avoidance rules will be introduced into the Income Tax Act No. 58 of 1962 (the Act) in order to reduce the opportunity for the creation of equity instruments that are artificially disguised as debt instruments. The first set of proposed anti-avoidance rules focus on the features relating to the instrument itself and are contained in section 8F of the Act. The second set of proposed anti-avoidance rules focus on the nature of the yield of the instrument and are contained in section 8FA of the Act.
Sars guns for Krejcir manager
Money Point business manager Ivan Savov, accused of fraud and money laundering, appears in the Johannesburg Commercial Crimes Court. Picture: Werner Beukes/SAPA Johannesburg – Czech businessman Radovan Krejcir’s Money Point business manager Ivan Savov has been accused of fraud by Sars, the Johannesburg Specialised Commercial Crime Court heard on Tuesday.The SA Revenue Service’s allegations are separate from those of fraud and money laundering Savov is already facing with three co-accused.Prosecutor Richard Chabalala said: “After the matter against (Savov), Sars opened three other dockets of fraud, alleging Savov and
Firms seeking tax benefits face legal repercussions
THE tax consequences of decisions made in the boardroom have been highlighted in some recent court cases, where judgments were made against parties who had entered into transactions that were motivated by the potential tax benefits it would bring rather than the profits they would generate. A judgment laid down in the case of ABC vs the South African Revenue Service (SARS) heard in the Western Cape Tax Court last year reiterated the importance of paying attention to the details of a transaction as reflected in the financial statements, including related taxes. ABC acquired land with a forest on it and carried on forestry activities on the land. It then sold the land together with the forest for a specific amount, of which R144.7m related to the forest. The question before the court was whether the R144.7m should be included in ABC’s gross income.
On South African tax compliance, tax morality and taxpayers’ freedom to do tax planning – Canada, Ireland and South Africa are not worlds apart
The upcoming Budget Speech comes against the backdrop of a depressing South African growth rate, stubbornly high unemployment, a depreciating Rand (with more US tapering still to come), continued strikes in the mining sector, deadly service delivery protests and declining tax revenues. On a more positive note: In November 2013 Minister Gordhan pointed to the continued growth in tax compliance by South Africans and said: “… the ability to collect tax revenue …to finance the provision of public services and socioeconomic infrastructure has been a cornerstone of our democracy these 20 years.”
Amalgamation transactions following asset-for-share transactions
The South African Revenue Service (SARS) recently released Binding Private Ruling 159 (Ruling), which deals with the disposal of assets, being shares, in terms of an amalgamation transaction immediately after having acquired those shares in terms of an asset-for-share transaction. The facts were that companies A and B are controlled by various shareholders (individuals and family trusts). The shareholders wanted to hold their investments through a single company and not through both companies A and B.
Sars takes on South African billionaire
Pretoria – South African billionaire Mark Krok’s local assets, worth R298m, were placed under curatorship by the North Guateng High Court in Pretoria on Friday. The SA Revenue Service (Sars) obtained a final preservation order against the businessman. Judge Hans Fabricius confirmed a provisional preservation order granted in February last year against Krok’s South African assets. The assets include a large portfolio of shares in JSE-listed companies such as African Bank, BHP Billiton, Bidvest, First Rand, MTN, Vodacom, Sasol, SABMiller, and Tsogo Sun. They also include a plot in Plettenberg Bay, a R40m property in Clifton and a Jeep Sahara.