The removal of a few words in the latest version of the Taxation Laws Amendment Bill, 2015, appears to have rectified a loophole contained in an earlier version of the Bill that would have resulted in a notable reduction in an employee’s take-home pay if they belonged to a retirement fund.
Category: Income Tax
Tax Transparency – the Common Reporting Standard: Implications for South Africa
Globally, taxpayers are becoming more interdependent, and engage in cross-border financial activities with more regularity. With this, comes the need for enhanced co-operation and understanding across countries on issues such as tax administration and transparency, to curb tax evasion and ensure a fair allocation of taxes to tax jurisdictions. “The Common Reporting Standard (CRS) developed by the The Organisation for Economic Co-operation and Development (OECD), is a global standard for the automatic exchange of information relevant to tax. Over 50 jurisdictions have agreed to comply with the CSR, including South Africa, committing to exchange data in September 2017, and other jurisdictions will begin participating from 2018” states Ferdie Schneider, National Head of Tax at BDO South Africa.
SARS uses banks to collect debt
Author: Amanda Visser (IOL) Several financial institutions, including banks, have accused the South African Revenue Service (SARS) of not following its own processes when collecting outstanding tax debt; instead using them as its first port of call. Statistics by the Banking Association of South Africa indicate banks each receive between 4 000 and 8 000 appointments on a monthly basis to collect tax debt on SARS’s behalf. This has increased from an average of 150 per month in previous years. The administrative cost per appointment amounts to R200.
The deductibility of a taxpayer’s losses incurred as a result of an ‘inherent risk’ of his trade
Where an accident or other mishap results in a taxpayer’s 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 58 of 1962 as having been incurred in the production of income. In Port Elizabeth Electric Tramway Co v CIR 1936 CPD 241,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.’ (Emphasis added.) Particular risks are inherent Read More …
‘Interest’ for purposes of Withholding Tax on Interest (WTI)
Author: Lisa Brunton (Cliffe Dekker Hofmeyr). The Taxation Laws Amendment Bill 2015 (Bill) proposes the insertion of a definition for the term ‘interest’ in s50A of the Income Tax Act, No 58 of 1962 (Act) to clarify the meaning of interest for purposes of the WTI. ‘Interest’ is to be defined in s50A of the Act with reference to paragraphs (a) and (b) of the definition of ‘interest’ under s24J(1), meaning that for WTI purposes, ‘interest’ includes “the gross amount of any interest or related finance charges, discount or premium payable or receivable in terms of or in respect of a financial instrument;” or “the amount (or portion thereof) payable by the borrower to a lender in terms of a lending arrangement as represents compensation for any amount which the lender would, but for such lending arrangement, have been entitled”.
Assuming contingent liabilities in acquiring a going concern
Author: Erich Bell, Senior Tax Consultant at BDO South Africa SARS issued a draft interpretation note (DIN) in September 2015 on the tax implications of the assumption of contingent liabilities where a business is sold as a going concern. This article sheds some light on the assumption of contingent liabilities which specifically formed part of the purchase price relating to the acquisition of the business as a going concern.1 A purchaser can settle the purchase price for the acquisition of a business as a going concern by employing a combination of: cash consideration, assuming the seller’s debts, assuming the seller’s contingent liabilities, loan funding, or share issues.
Adjustment of energy savings tax incentive
Author: Nicole Paulsen In recent years, the South African energy landscape has undergone significant changes with the introduction of a number of private and public sector renewable energy projects. In order to ensure the commercial viability of the renewable energy projects, Government introduced an energy efficiency program which provides for qualifying tax allowances so as to assist and encourage taxpayers to reduce their energy footprint.
What is “interest” anyway? section 24J and interest deductions
Author: Morongoa Matlala Introduction Sections 11(a) and 23(g) of the Income Tax Act No. 58 of 1962 (“the Act”) are commonly referred to as the “general deduction formula”. As the name suggests, it is in terms of these sections of the Act that tax deductions in general are sought to be claimed by taxpayers. The Act does, however, contain provisions which are specially tailored for the deduction of specific expenditure. Section 24J of the Act (“section 24J”) is one such provision and allows taxpayers to claim a deduction specifically for interest expenditure.
The Mark Lifman judgment: the High Court refuses to interdict the enforcement by SARS of a judgment taken against the taxpayer
Mark Lifman has recently been the subject of many lurid newspaper stories, with City Press describing him as ‘one of South Africa’s biggest underworld bosses and one of Cape Town’s richest and most feared underworld figures’. It has been reported that he owes SARS some R388 million in tax. Not for the first time in history has a powerful underworld figure met his Waterloo when engaging with the tax authorities. A judgment of the Cape Town High Court delivered on 17 June 2015 (but not yet reported) recorded that Lifman and various close corporations of which he was the sole member owed an undisputed tax debt to SARS of over R13 million (some R3 million of which was owed by Lifman personally) that had accumulated over some ten years. Further tax debts (see para [6]) were still in issue.
The turnover tax system: Barriers to small businesses
Author: Leonard Willemse (Mazars) According to the Explanatory Memorandum on the Revenue Laws Amendment Bill, 2008 (EM) small businesses in South Africa are instrumental in the growth of the South African economy as it is a source of job creation and a counter to poverty. Research, however, indicates that small businesses face many obstacles, such as relatively high tax compliance costs relative to their turnover. This is due to the generally high fixed costs associated with systems necessary to comply with the requirements of the tax system. The reality is that many small businesses are outside the income tax net either because they generate small profits or because they are overwhelmed by the tax system itself.