The South African Revenue Service (SARS) published a Public Notice, Notice No. 140 in the Government Gazette (No 39650) on 3 February 2016, in terms of section 35(2) and 36(4) the Tax Administration Act, 2011 (TAA). Among other things, the notice lists an additional reportable arrangement that was not included in previous notices. The following arrangement is now a reportable arrangement: An arrangement for the rendering of consultancy, construction, engineering, installation, logistical, managerial, supervisory, technical or training services to a person that is a:
Category: International Tax
Automatic Exchange of Information – FATCA, CRS, UK CDOT and other ominous acronyms
Author: Lisa Brunton (Senior Associate at Cleffe Dekker Hofmeyr). By now, we’re all familiar with the term, Automatic Exchange of Information (AEOI), otherwise referred to as ‘routine exchange’, but do we really appreciate what it means? From a South African fiscal perspective, AEOI involves the systematic and periodic transmission of taxpayer information by the source jurisdiction to the residence jurisdiction. This may also include instances where tax residence is based on differing criteria (eg domicile in the United Kingdom (UK); citizenship in the United States of America (USA)) or where an entity or person has tax obligations in several jurisdictions.
The evolution of the “foreign partnership” definition in South Africa
Author: Refilwe Mashale (Tax Consultant at ENSAfrica). In South Africa, the determination of whether a foreign entity is a company or partnership is an important one, as it subsequently determines the applicable tax treatment of the foreign entity. The issue of whether foreign entities should be recognised as foreign companies or foreign partnerships in South Africa was recently brought into the spotlight once again by the Taxation Laws Amendment Act No. 25 of 2015 (the “2015 Amendment Act”).
Africa tax in brief – April 2016
Author: Celia Becker (ENSAfrica). BOTSWANA: Protocol to treaty between Botswana and Sweden enters into force The amending protocol to the Botswana/Sweden Income Tax Treaty (1992), which was signed on 20 February 2013, entered into force on 1 December 2015. The protocol generally applies from 1 December 2015 for the provisions on exchange of information and from 1 January 2016 for the remaining provisions.
International Tax – DTA with Hong Kong
The Tax Treaty (and Protocol) between Hong Kong and South Africa has been ratified by both countries with the date of entry into force from 20 October 2015. In South Africa, it was published in the Government Gazette No. 39444 on 24 November 2015. The provisions of the treaty will apply in Hong Kong for years of assessment beginning on or after 1 April 2016. In South Africa, it applies from 1 January 2016 for amounts held at source, and for years of assessment beginning on or after 1 April 2016 in respect of other taxes. In general, the treaty follows the OECD Model Tax Convention. We highlight below some of the departures from the Model and other notable clauses.
Section 104 of the Tax Administration Act and the meaning of ‘exceptional circumstances’ – a cautionary tale
Author: Heinrich Louw (Senior Associate). In terms of s104 of the Tax Administration Act, No 28 of 2011 (Act), a taxpayer who is aggrieved by an assessment or decision of the South African Revenue Service (SARS), may object to the assessment or decision. The Act states that the objection must be lodged within 30 business days from the date of the assessment. A senior SARS official may extend this period by no more than 21 business days, unless the official “…is satisfied that exceptional circumstances exist which gave rise to the delay in lodging the objection”.
OECD Proposed expansion of “permanent establishment” definition
Author: Annalie Pinch and Nicolette Smit. During October 2015, as part of the Organisation for Economic Co-operation and Development (“OECD”)/G20 Base Erosion and Profit Shifting (“BEPS”) Project, the OECD issued its final report in respect of Action 7 “Preventing the artificial avoidance of permanent establishment status” (“BEPS Report”). In terms of Article 7(1) of the OECD’s Model Tax Convention on Income and on Capital (“Model Tax Convention”), a Contracting State will only have taxing rights in respect of the business profits of a foreign enterprise which is a resident of another Contracting State if the enterprise has a “permanent establishment” (“PE”), as defined in Article 5, in that State to which such profits are attributable.
SARS MEDIA STATEMENT – Special Voluntary Disclosure Programme in respect of offshore assets and income
In the 2016 Budget Speech, the Minister of Finance announced a Special Voluntary Disclosure Programme to give opportunity for non-compliant taxpayers to voluntarily disclose offshore assets and income. With a new global standard for the automatic exchange of information between tax authorities providing SARS with additional information from 2017, time is now running out for taxpayers who still have undisclosed assets abroad. To encourage compliance, Government proposes a Special Voluntary Disclosure Programme for individuals and companies to regularise both their tax and exchange control affairs for a limited window period described below. The South African Revenue Service (SARS) and the South African Reserve Bank (SARB) are working jointly to ensure that applications for the Special Voluntary Disclosure Programme are assessed through one joint process for both tax non-compliance and exchange control contraventions.
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).
Budget 2016 – Adjustment for foreign group losses to be removed from the CFC high-tax exemption calculation
The controlled foreign company (CFC) provisions contained in s9D of the Income Tax Act were amended with effect from 1 January 2008 (applicable to foreign tax years of CFCs ending during years of assessment ending on or after that date). Provided that the ‘net income’ of a CFC be deemed nil if the total amount of tax payable to all spheres of government of any country other than South Africa by the CFC on its net income amounts to at least 75% of the amount of normal tax that would be payable in respect of any taxable income of the CFC had it been a resident for the relevant foreign tax year.