Section 25BA prior to 1 January 2014 Prior to the amendments contained in the Taxation Laws Amendment Act No. 31 of 2013 (the TLAA), a Collective Investment Scheme (CIS) was taxed on a semi-flow through regime in terms of section 25BA of the Income Tax Act No. 58 of 1962 (the Act).
Category: Income Tax
Limited available to PPP receiving exempt income from government
The DTLAB introduces section 12NA, which aims to regulate the tax treatment of allowances available to public private partnerships (PPP) receiving exempt contributions from the government in terms of section 10(1)(zI). The proposed section will limit the allowable deduction to the amount of expenditure actually incurred in effecting improvements to land or buildings owned by government, reduced by the aggregate exempt contributions received from government. This limit is intended to address an ostensible “double dipping” in the context of PPPs.
Apportionment of audit fees
Apportionment of audit fees – Commissioner for the South African Revenue Service v Mobile Telephone Network Holdings (Pty) Ltd This appeal considered the deductibility of statutory audit fees incurred by a holding company that derived income comprising interest and dividends. The audit fees incurred in relation to exempt income, in the form of dividends, were held to be non-deductible for income tax purposes and the court had to decide the relevant method of apportionment.
2014 draft Taxation Laws Amendment Bill
By Webber Wentzel No surprises in the “first batch” 2014 draft Taxation Laws Amendment Bill What National Treasury have dubbed the “first batch” of the draft Taxation Laws Amendment Bill (TLAB) proposes two main sets of amendments, namely changes to the tax treatment of the risk businesses of long-term insurers, and clarification of the fringe benefit valuation rules with regards to defined benefit funds in terms of the suite of reforms to retirement savings coming into effect on 1 March 2015.
Litigation with SARS – levelling the playing field
New rules governing the procedures to be followed in respect of objections and appeals, which are now prescribed in terms of section 103 of the Tax Administration Act, were published in the Government Gazette on 11 July 2014. One of the frustrations experienced by taxpayers involved in litigation with SARS is the fact that SARS frequently fails to deliver documents or decisions within the time limits prescribed in the rules governing the conduct of disputes.
Not all hybrids are cost effective!
Author: Webber Wentzel The provisions of section 8F became effective on 1 April 2014. In terms of this section any interest incurred on or after that date in respect of a “hybrid debt instrument” will be deemed to be a dividend in specie declared and paid on the last day of assessment by the company; and is not deductible for income tax.
Tax implications of expenditure funded by government grants
By Christel du Preez, Senior Tax Manager, Grant Thornton Johannesburg Section 12P was introduced into the Act to deal with government grants received by taxpayers and applies to years of assessment commencing on or 1 January 2013. As a result, taxpayers are now facing potentially complex rules that could have an adverse effect on their tax planning efforts.
Datakor case is still alive for new debt reduction rules
By Barry Visser, Associate Director: Tax, Grant Thornton Johannesburg Old debt reduction rules The matter of CIR v Datakor Engineering (Pty) Ltd 1998 (4) SA 1060 (SCA) related to a company (Datakor) that entered into an arrangement whereby Datakor’s creditors relinquished their claims against it in exchange for preference shares in the company. It was held that the discharge of a contractual obligation, to pay a debt, through the issue of shares, amounted to a compromise. The court concluded that the compromise benefited the company as it was absolved from its obligation to settle the debt.
The tax implications of statutory mergers
Author: Justine Krige (DLACliffeDekkerHofmeyr) 1. Concept of a Statutory Merger The purpose of this note is to discuss aspects of the relationship between the provisions of the Companies Act, No 71 of 2008 (“Companies Act”) and the Income Tax Act, No 58 of 1962 (“ITA”) in relation to statutory mergers.
Contributed tax capital in a company context
Author: Emil Brincker (DLACliffeDekkerHofmeyr) The creation of contributed tax capital (CTC) and the return thereof by a company to its shareholders has been the subject matter of some misconception over the years. The CTC of a company is a notional amount that is created pursuant to the subscription of shares by holders of a specific class of shares as consideration for the issue of those shares by the company. To the extent that a