Ever since the Margo Commission recommended that there should be a uniform system for the determination of the value of benefits of employment, and the enactment of the Seventh Schedule to the Income Tax Act, there has been a tension between SARS and employers over the legitimacy of structured remuneration packages. There are few reported cases of instances in which employers have resisted a challenge by SARS. In the recent judgment of Cachalia JA, in the matter of Anglo Platinum Management Services (Pty) Ltd v C:SARS [2015] ZASCA 180 (30 November 2015), the employer’s remuneration practices were found to be legitimate.
Category: Income Tax
SARS targets tax dodgers
Author: Lyse Comins (IOL). SARS must shift focus to small businesses and clamp down on rampant tax dodgers in Durban, tax experts said in reaction to the taxman’s announcement of a blitz on cash stores countrywide on Wednesday. The South African Revenue Service (SARS) Commissioner, Tom Moyane, announced the launch of random, on-site inspections of cash businesses and called on taxpayers to voluntarily disclose any unpaid taxes or face penalties or criminal prosecution.
The fine tax line during retrenchments
Author: Amanda Visser (IOL). The different tax treatment of lump sum withdrawals following retrenchment seems at odds with efforts to give relief in difficult times. In March 2011 the Income Tax Act was changed, treating severance benefits similar to lump sum payments from pension or provident funds. However, it appears as if policy is not taking heed of the dire employment situation in the country.
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.”
SARS continues crack down on non-compliance in cash ‘n carry sector
South African Revenue Service (SARS) Commissioner, Tom Moyane, today announced the launch of random on-site inspections targeted at Cash & Carry businesses. This effort is part of the new focused approach, launched in December 2015, to combat non-compliance in several high-risk sectors, starting with the Cash & Carry sector. On-site inspectors will perform compliance checks to identify registration, filing non-compliance and thus flag any suspicious businesses.
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’).
Greater tax transparency for multi-nationals a step closer
Author: Amanda Visser (MoneyWeb). Additional record-keeping requirements published. The South African Revenue Service (Sars) has published additional record-keeping requirements for large multi-national companies which they will have to comply with in future. Many companies have already included some of the required information in their transfer pricing documentation and on their annual tax returns, but there seems to be uncertainty about the format in which it must be available to Sars.
Unilateral extension of prescription in certain specific tax matters
Author: Carmen Gers and Chris de Bruyn (ENSafrica). Section 99 of the Tax Administration Act, 28 of 2011 (“Tax Admin Act”), which regulates prescription in relation to tax assessments, provides that a three-year prescription period applies where the South African Revenue Service (“SARS”) has had a previous opportunity to assess a taxpayer (e.g. income tax) and a five-year prescription period applies in the case of self-assessment (e.g. value added tax and employees’ tax). In an ENSafrica article dated 19 August 2015, we addressed the proposed unilateral extension of prescription by SARS as was provided for in the draft Tax Administration Laws Amendment Bill (“Draft Bill”), a copy of which can be found here.
Interpretation of the term ‘substantially the whole’
Authors: Nicole Paulsen and Gigi Nyanin. The South African Revenue Service (SARS) released Binding General Ruling No. 20 (issue 2) (BGR 20) on 20 January 2016, which provides clarity on the interpretation of the term ‘substantially the whole’ as referred to in specific sections of the Income Tax Act, No 58 of 1962 (Act).
Exemption from Security Transfer Tax for collateral
Authors: Magda Snyckers and Kelle Gagné (ENSafrica). For years, the South African securities lending industry has been lobbying for an exemption from securities transfer tax (“STT”) for the outright transfer of listed equity securities as collateral. On 8 January 2016, the Taxation Laws Amendment Act 25 of 2015 was promulgated, which includes the long-awaited introduction to the Securities Transfer Tax Act 25 of 2007 (the “STT Act”) of such an exemption. This is very good news for the South African securities lending market and others, but parties will need to clear a few hurdles before availing themselves of the exemption.