From time to time, our courts are called upon to remind public officials that compliance with the requirements of provisions in legislation is necessary to enable them to enforce the powers entrusted to them. The requirements are in place to enable the public to understand the reasons for the administrative action and to determine whether the action is compliant with the law.
Category: Income Tax
Crowdfunding and tax – two’s company, three’s a crowd
Authors: Michael Reifarth and Yani van der Merwe (ENSafrica). There has been a rapid expansion of the crowdfunding industry during the last couple of years where businesses and entrepreneurs use crowdfunding platforms to promote their business ideas and to obtain funding from the public to finance their ventures. Although there are advantages and disadvantages to a crowdfunding arrangement in comparison to traditional funding arrangements, one constant factor applicable to both alternatives is that the transactions between the recipient and the provider of funding will, at all times, be subject to the provisions of the Income Tax Act, No. 58 of 1962 (the “Act”). In this article, we briefly consider some of the possible South African tax implications that may arise pursuant to the utilisation of the various types of crowdfunding that have lately been gaining traction in South Africa.
In vino veritas: an important case for the wine farming industry
The South African wine industry is internationally renowned for the quality of wine it produces. From a tax perspective, a specific tax dispensation applies to income derived by a person from “pastoral, agricultural or other farming operations” as contemplated in s26(1) of the Income Tax Act, No 58 of 1962 (Act). To the extent that a person’s taxable income is derived from such operations, the First Schedule to the Act will apply. We previously discussed s26(1) and the First Schedule in our Alert of 8 April 2016: The Kluh-ed up taxpayer wins – a decision on s26 of the Income Tax Act.
Tax relief to revive flagging SA shipping industry
Author: David Warneke, Tax Partner, BDO South Africa. From 1 April 2014[1], South African (SA) resident companies engaged in international shipping have enjoyed a far better income tax dispensation than before. If you are involved in this industry, make sure your company is enjoying the benefits described below. Prior to this date, international shipping income derived by such companies was generally subject to SA tax at the rate of 28%, the rate applicable to other types of companies. The only particular incentive for such companies was related to tax depreciation on the cost of their ships. SA had a wholly uncompetitive tax dispensation for such companies, whereas in order to attract such companies, many other jurisdictions have either introduced a ‘tonnage tax’ – tax based on the tonnage of the ship rather than profits of the shipping company – or exempted such income from tax altogether.
Cross Border Interest Paid by a South African Resident: Tax Issues that Arise
Author: Siyasanga Madikazi (Tax Trainee), BDO South Africa. Cross border transactions, as well as growth in international trade between companies within the same group, has increased significantly in recent years. This often results in debts between resident and non-resident companies and numerous complexities from a South African tax perspective. Interest payments by residents to non-residents are generally subject to interest withholding tax (WHT) at 15%. Whether WHT applies depends on whether a Double Tax Agreement (DTA) between South Africa and the country of residence of the recipient exists to give South Africa the rights to tax. It also depends on whether the interest is subject to South African income tax (as opposed to interest WHT) in the hands of the non-resident recipient.
Brief window of opportunity for South Africans named in the Panama Papers
A number of South African individuals, trusts and companies feature in the recent data leak involving clients of Panamanian law firm Mossack Fonseca. Although the publication of the data by the International Consortium of Investigative Journalists does not allege any violation of tax laws or exchange control regulations by those identified in it, the South African Revenue Service (“SARS”) and the South African Reserve Bank (“SARB”) have indicated that they will be investigating the tax and exchange control affairs of these South Africans. As a result, those named in the leak should consider urgent steps to address any potential tax or exchange control transgressions.
Update on the taxation of South African dividends to the Netherlands
Author: Stephan Spamer and Howmera Parak (ENSafrica). In 2014 and 2015, ENSafrica published two articles on the “most favoured nation clause” contained in article 10(10) of the protocol (“2008 Netherlands Protocol”) issued under the Netherlands/South Africa (“SA”) double tax agreement (“Netherlands/SA DTA”). In the 2014 article, ENSafrica highlighted the view that has been expressed in the market that article 10(10) of the 2008 Netherlands Protocol gives rise to a complete exemption from dividends tax in SA
The use of electronic or digital signatures in tax matters
Author: Carmen Gers and Jadyne Devnarain (ENSafrica). With tax litigation becoming more prevalent in recent years, taxpayers are now faced with new issues. One such issue is: when and to what extent will documents bearing an electronic signature be acceptable under the relevant tax legislation?
Home is where the mine is
Author: Ntebaleng Sekabate (Tax Associate at ENSafrica). On 15 April 2016, the Minister of Mineral Resources published the draft Reviewed Broad Based Black-Economic Empowerment Charter for the South African Mining and Minerals Industry 2016 (“the draft reviewed Mining Charter”) for public comment, addressing among other issues, the targets to be met by the mining industry in respect of the housing and living conditions of mine workers.
Criticism on SARS’s approach to the interpretation of legislation
Author: Mareli Treurnicht (Senior Associate at Cliffe Dekker Hofmeyr). On 29 April 2016 the High Court of South Africa (Gauteng Division, Pretoria) handed down judgment in an application brought by Julius Malema (Applicant) against the Commissioner for the South African Revenue Service (SARS). The matter concerned a compromise agreement concluded between them in terms of s205 of the Tax Administration Act, No 28 of 2011 (TAA).