Authors: Gary Vogelman and Alexa Muller – ENSafrica In terms of the ordinary business practices of property companies, it is not uncommon for such companies to outsource property and asset management functions to third party property and asset managers. In this regard, to the extent that a South African property investment or development company or group (“SA PropCo”) may hold property investments or developments in offshore jurisdictions, SA PropCo would usually establish a subsidiary in the offshore jurisdiction concerned or some other holding jurisdiction to hold such investment (“Foreign SubCo”).
Category: International Tax
PART B – OECD RELEASES FIRST PROPOSALS FOR FIGHT AGAINST TAX AVOIDANCE BY MULTINATIONALS
In Part A of this article we provided an overview of the Base Erosion and Profit Shifting (‘BEPS’) Action Plan and listed the 7 action points which were released by the OECD on 16 September 2014. In this second part of the article we provide an overview of the 7 action points. Action 1 of the BEPS Action Plan deals with the tax challenges of the digital economy. Consensus has been reached that the digital economy cannot be ring-fenced for tax purposes. The proposal includes a detailed analysis of the digital economy, business models, key features and resultant tax challenges of the digital economy. It was concluded that the collection of VAT in business-
PART A – OECD RELEASES FIRST PROPOSALS FOR FIGHT AGAINST TAX AVOIDANCE BY MULTINATIONALS
Author: BDO South Africa The Base Erosion and Profit Shifting (‘BEPS’) Action Plan originated from a need to address aggressive tax planning. The release by the OECD of the first 7 proposals of the 15-point Action Plan on 16 September 2014 is considered to be a milestone in the attempts to prevent the artificial shifting of profits through inter-company charges, the transfer of patent licensing rights and similar practices.
OECD releases first BEPS recommendations to G20 in accordance with Action Plan
As a part of the OECD/G20 project to combat base erosion and profit shifting (“BEPS”), the OECD released the first set of reports and recommendations on September 16, 2014. These reports address seven of the actions described in the 15-point action plan to address BEPS published in July 2013 (the “Action Plan”) and consist of the following items: Recommendations for domestic rules to neutralize hybrid mismatch arrangements and recommended changes to the OECD Model Tax Convention to deal with transparent entities (Action 2, the “Hybrids Report”);
The BEPS Project – OECD keeps tax reform pot boiling
The OECD led Base Erosion and Profit Shifting (BEPS) Project is aimed at updating corporate tax systems around the world to reduce the tax minimisation opportunities created by the global economy. If the Project is successful, all countries will be required to make significant changes to their domestic tax law and treaty networks with the aim of ensuring that multi-national businesses are paying their “fair share” of the income tax burden.
New OECD recommendations may affect not-for-profit organizations
Over the past few years, the issue of “tax avoidance” has dominated agendas at both Canadian and international tax conferences. The issue has also received considerable news coverage as a result of the actions of certain large companies with complicated tax structures that were seen not to be paying their fair share of taxes. Many countries, including Canada, have been waiting to receive guidance on how to deal with this and other issues from the Organization for Economic Co-operation and Development (OECD), the premier supranational organization that helps governments implement international tax principles.
Global tax transparency – I can see clearly now – or can I?
There has been an abundance of press coverage on the subject of FATCA and numerous practitioners have offered helpful insights into the technicalities and operation of the new reporting rules. FATCA marked a pivotal start to some very serious moves on global tax transparency that are continuing apace. We now have the CRS (Common Reporting Standard) coming hazily into view and this subject of global tax transparency seems to be impressing on my day-to-day life given the global reach of my firm.
SARS takes another stab at interpreting the ‘group of companies’ definition
Author: Lisa Brunton (DLA Cliffe Dekker Hofmeyr) In our Tax Alert of 15 March 2013 we reported on the South African Revenue Services’ (SARS’) draft Interpretation Note on the interaction between the definition of a ‘group of companies’ as it appears in s1 and s41(1) of the Income Tax Act, No 58 of 1962 (Act). SARS embellished the draft Interpretation Note somewhat with the release on 24 October 2013 of Interpretation Note No 75 (IN 75) dealing with the exclusion of certain companies and shares from a ‘group of companies’ as defined in s41(1) of the Act. IN 75 has now been superseded by the release of Issue 2 of IN 75 on 22 September 2014.
Proposed simplification of foreign business establishment exemption for controlled foreign companies
Author: Heinrich Louw of Cliffe Dekker Hofmeyer In terms of s9D of the Income Tax Act, No 58 of 1962 (Act), a South African tax resident can be taxed on the ‘net income’ of its controlled foreign companies (CFC). However, various exemptions exist in this regard. For example, in terms of the second proviso to the definition of ‘net income’ in s9D(2A) of the Act, the net income of a CFC will be deemed to be nil if the taxes payable by that CFC in foreign jurisdictions are at least equal to 75% of the tax that the CFC would have paid had it been a South African tax resident. This is often referred to as the high-tax exemption. In performing the calculation regard must be had to any international treaties for the avoidance of double taxation, and tax credits or rebates.
OECD releases finalized proposals on key tax base erosion concerns
On September 16, 2014, the Organization for Economic Cooperation and Development (OECD) released its 2014 deliverables on the Base Erosion and Profit-Shifting (BEPS) project. The BEPS project, an ambitious and wide-ranging effort by the OECD’s Centre for Tax Policy and Administration (CPTA), is aimed at combating tax avoidance strategies in which global businesses minimize their overall tax burden by moving profits into taxpayer-friendly jurisdictions and exploiting differences in the tax laws and treaties of countries around the world. The OECD began its efforts in 2013 at the behest of the G-20 group of nations, which had come to understand that any serious effort to prevent these tax avoidance strategies would require centralized, coordinated planning and study.