Author: Amanda Visser (BDlive). The withdrawal of a withholding tax on service payments to foreigners, decried by many as unworkable, has been widely welcomed. The Treasury acknowledged that the tax had introduced “unforeseen issues, uncertainty on the application of domestic law and taxing rights under tax treaties”. The withholding tax was introduced into legislation in 2013 but its operation was postponed on several occasions. It was due to come into effect in January next year but will now be withdrawn from legislation.
Category: Income Tax
SARS looks to clear up misconceptions relating to tax exemption for foreign employment income
The South African Revenue Service (SARS) issued Draft Interpretation Note 16 (Issue 2) (Draft IN) for public comment recently. When compared to the current Interpretation Note 16 (IN16), the Draft IN indicates a marked shift, on certain aspects, in SARS’s interpretation of the tax exemption that applies to foreign employment income, under s10(1)(o)(ii) of the Income Tax Act, No 58 of 1962 (Act).
The intentional creation of hybrid debt instruments that result in interest being deemed to be dividends
Author: Emil Brincker Section 8F and s8FA of the Income Tax Act have been promulgated with a view to convert interest into dividends. These sections deal with a scenario where the debt instrument displays a number of equity characteristics, for instance if amounts are only payable if the assets of the issuer exceed its liabilities and/or where interest is not calculated with reference to the time value of money. Unfortunately a number of transactions have been implemented which make use of the intentional recharacterisation of the interest into dividends.
Budget 2016/17 – Provident fund transfer limitations
Following on from the two year suspension of retirement reforms only relating to the compulsory annuitisation of provident funds to 1 March 2018, the Minister tabled certain interim measures affecting the transfer of amounts out of a provident fund through an urgent Revenue Laws Amendment Bill (Bill). Apart from sterilising the compulsory annuitisation upon retirement for two years, it is proposed that any transfer to another retirement fund during the interim period, would result in any future contributions made by the employee, not being exempt from the compulsory annuitisation requirements. This proposal will surely place funds and members of those funds in limbo for two years.
Proposed amendment to the date on which the estimate for the second provisional tax payment must be submitted
By way of background, provisional tax is not a separate tax payable by certain persons, instead it is merely a method used to collect normal tax that will ultimately be payable for the year of assessment concerned, during the year. Otherwise stated, provisional tax is an advance payment of a taxpayer’s normal tax liability. A provisional taxpayer is generally required to make two provisional tax payments, six months into the year of assessment and at the end of the year of assessment, but has the option to make a third top-up payment after the end of the year of assessment. Provisional tax payments are calculated on estimated taxable income (which includes taxable capital gains) for the particular year of assessment.
Gordhan to target offshore funds
Author: Linda Ensor (BDlive) Finance Minister Pravin Gordhan is widely expected to announce a new foreign exchange control and tax amnesty in his budget on Wednesday in a bid to encourage taxpayers who have not disclosed billions of rand worth of offshore assets to declare them and pay the due tax. The move would help to reduce the government’s revenue shortfall, as well as broaden the tax base for future years. A new amnesty, along the lines of the previous one in 2003, is one of a raft of measures Mr Gordhan is expected to announce as the government tries to stave off a downgrade of SA’s sovereign credit rating to junk status.
SARS eases the compliance burden on certain generous taxpayers
On 2 September 2014, the South African Revenue Service (SARS) first issued Binding General Ruling 24 (Ruling). The Ruling dealt with some of the requirements that need to be met under s18A of the Income Tax Act, No 58 of 1962 (Act), in order to qualify for a deduction in terms of s37C(3) of the Act. However, due to the uncertainty that persisted regarding the application of these provisions, SARS reissued the Ruling on 15 February 2016.
Tax administration: SARS’ constitutional obligations and taxpayers’ rights
Author: Andries Myburgh (Tax Director at ENSafrica). Given recent media coverage of the various Constitutional Court challenges involving government institutions and the Presidency; the perceived power struggle between the Commissioner for the South African Revenue Service (“SARS”) and the Minister of Finance; as well as SARS’ continued pressure to collect revenue in difficult economic times that see corporate taxpayers endure declining revenues and increasing costs; it is useful to remind taxpayers and their shareholders of their constitutional rights and SARS’ constitutional obligations when it performs its functions in administering various taxation legislation. This topic is very complex and, accordingly, what follows is a very broad overview of these issues. Taxpayers and their shareholders are encouraged to obtain specialised legal advice or assistance when confronted with potential investigations or audits by SARS.
Extent of tax fraud unknown – SARS
Author: Amanda Visser (IOL). The South African Revenue Service (SARS) still does not know the full extent of tax evasion, despite its work probing foreign bank accounts held by South African residents. It has been a year since SARS confirmed some account holders had been using their offshore accounts to evade their tax obligations, both locally and internationally. SARS received the damming information through international exchange of information agreements with foreign financial institutions.
Swap taxation for land rentals and watch SA boom
Author: Stephen Meintjes (BDlive). Note how quickly the reaction to white racism connects to land! Writing in Business Day on January 20, author Thando Mgqolozana repeated his earlier controversial tweet: “We can’t deal with one Penny Sparrow at a time. We have to go for the whole thing at once. Decolonisation. Get land. Forcefully.” He is not alone in his stance, which shows that the deeply ingrained emotions around land could indeed upend the historic achievements of our constitutional democracy by unleashing a race war and turning our country into a rubble heap like Syria. The tragedy of this would be that we would have failed to understand our famous Constitution.