Author: Oddette Boshoff (Unikone) In a recent (as yet unreported) High Court case, the Court overturned the previously guilty ruling of the Regional Court and ruled in favour of a taxpayer against SARS. The taxpayer was initially charged and found guilty in the Regional Court on fraud as well as several transgressions of various tax acts.
Category: Income Tax
Construction and interpretation of tax legislation: then and now
The principle relating to the construction and interpretation of fiscal legislation are in general those relating to the construction and interpretation of statutes. As early as 1926 Judge Stratford held in Farrar’s Estate v CIR that ‘[the] governing rule on interpretationis to endeavour to ascertain the intention of the law-maker from a study of the provisions of the enactment in question‘. In regard to tax legislation, Income Tax Acts in particular, the language imposing the tax must receive a strict construction. Judge Rowlett held in Cape Brandy Syndicate v I.R. Comrs that ‘…in a taxing Act one has to look at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used’.
A “how to guide” for SARS objections and appeals
Author: Anton Lockem of Shepstone & Wylie Attorneys As a taxpayer, if you receive an assessment from the Commissioner of the South African Revenue Services (“SARS”) that you disagree with, you can lodge an objection in line with the Tax Administration Act, No. 28 of 2011 (“the Act”). Under section 96(2) of the Act, the Commissioner has to supply the taxpayer with the grounds of the assessment. It is often the case that the taxpayer needs to demand that the Commissioner comply with this statutory obligation, as there have been many cases where grounds have not been supplied. Thetaxpayer is required to submit a request for grounds within 30 days of receiving an assessment. Once grounds have been supplied, the taxpayer has 30 days to submit an objection to the assessment. Taxpayers need to submit the correct documentation for their objection in order for it to be valid: For personal income tax payers a notice of objection or form NOO is required via efiling; For corporate Read More …
The tax function must transform to become a strategic business asset: PwC report
Never before has tax been more important to governments, taxpayers and other stakeholders. Increased global compliance requirements, together with a greater need for robust controls to manage tax risks and a desire to use data analytics to assist in business wide decision making processes are all impacting tax functions and their investment decisions. To remain relevant to the business, tax functions will need to manage these growing external pressures and operational challenges by charting a course for continuous transformation that is immediate, holistic and practical.
Distribution of a debit loan account in anticipation of deregistration of a company
The South African Revenue Service (SARS) published Binding Private Ruling No. 198 on 7 July 2015 (Ruling). The Ruling deals with the distribution by a South African resident company (Subsidiary) of its loan account to its South African holding company (Holding Company) in anticipation of the Subsidiary’s deregistration. The applicable provisions in the Income Tax Act, No 58 of 1962 (Act) are s10(1)(k), s47, s64D and s64FA(1)(b). The relevant facts relating to the Ruling are as follows:
Binding Private Ruling – Debt reduction by way of set-off
The South African Revenue Service (SARS) published Binding Private Ruling No. 193 (BPR 193) on 15 June 2015, which deals with the repayment of a shareholder loan by way of set-off with an outstanding loan under a subscription agreement. The applicable provisions in the Income Tax Act, No 58 of 1962 (Act) are s19 of the Act and paragraphs 12A and 20(3)(b) of the Eighth Schedule to the Act. The applicant in the transaction to which BPR 193 applies is a company incorporated in and resident of South Africa (Applicant). The second party to the transaction is the holding company of the Applicant and a non-resident for South African tax purposes (Holdco).
The valuation of a usufruct for tax purposes
Author: Alexa Muller – Tax Associate at ENSafrica The value of a usufruct is often needed to be calculated for purposes of taxes, for example: for purposes of estate duty should a testator/testatrix bequeath a usufruct over property to an heir; for purposes of donations, tax should a usufructuary renounce his/her usufructuary rights; or for purposes of capital gains tax, should a property in respect of which a usufruct is registered be disposed of.
Which taxes apply to share loans?
The ability to enter into loans over listed shares is an important part of the financial industry as it offers sellers of listed shares the ability to comply with their obligations to deliver shares under a short sale contract. This ability could ensure that the sale of listed shares do not result in failed trades, provided the relevant shares can be sourced and borrowed prior to the seller having to deliver the shares. The intended change by the JSE limited to move to from a T+ 5 to a T + 3 settlement date in order to align with its settlement period with the international norm, reinforces the importance of the share lending industry. As a result of the shorter settlement period, the ability to borrow shares to settle trades will be paramount to ensure as little failed trades as possible.
Venture Capital Investments – are you missing an excellent opportunity?
Author: David Honeyball, partner Grant Thornton Cape Small business development continues to be a focus area for economic development for South Africans desperate for faster economic growth. Therefore, the introduction of Section 12J of the Income Tax Act, which was introduced on 1 July 2009, created a welcome pooling mechanism allowing investors to channel funds into small businesses and junior mining companies. The intention of the legislation is that by pooling funds, a Venture Capital Company (VCC) can provide equity and management services to the investee. As incentive, the VCC shareholders enjoy a 100% upfront tax deduction of the value of their investment (shares) and with no recoupment if the shares are sold within 5 years.
Shuttleworth’s exit charge was valid and did not constitute a tax
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: