The Minister endorsed the work of the Davis Committee and reiterated South Africa’s commitment to the work of the Organisation for Economic Cooperation and Development (OECD) and G20 on base erosion and profit shifting (BEPS). He announced that South Africa would continue to measure its tax system against internationally accepted tax trends, principles and practices, and keep pace with international initiatives to improve tax compliance and deal with problems of base erosion.
Category: International Tax
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.
Africa tax in brief
Author: Celia Becker (ENSafrica). KENYA: Amnesty granted to landlords In terms of the new section 123C, introduced into the Income Tax Act by Finance Act 2015 (the “Act”), the Kenya Revenue Authority (“KRA”) has granted a tax amnesty to landlords with effect from 1st January 2016. The Act provides amnesty for persons who shall willingly declare their 2014 and 2015 rent, pay the implied principal tax and file returns (original or amended) between 1 July 2015 and 30 June 2016. For the two years (2014 and 2015), penalties and interest shall be waived, as well as the principal, interest and penalties for 2013 and prior years.
New reportable arrangement: non-resident service providers
The South African Revenue Service (SARS) published notice No 140 in the Government Gazette (No 39650) on 3 February 2016, in terms of s35(2) of the Tax Administration Act, No 28 of 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:
Proposed extension of existing prescription periods
Author: Mareli Treurnicht (International Law Office). Introduction Section 99 of the Tax Administration Act (28/2011) prescribes the period of limitations for issuance of assessments. It states that, among other circumstances, the South African Revenue Service (SARS) may not make an assessment in terms of Chapter 8 of the Tax Administration Act: three years after the date of an original assessment by SARS; in the case of self-assessment for which a return is required, five years after the date of an original self-assessment by the taxpayer or, if no return is received, an assessment by SARS; or in the case of a self-assessment for which no return is required, five years after: the date of the last tax payment for the tax period; or the effective date, if no payment was made in respect of the tax period.
Is the OECD’s base erosion and profit shifting action plan on transfer pricing flexing the arm’s length principle’s muscles; or proposing a different pricing standard under the guise thereof?
Using South Africa as our departure point, s31 of the Income Tax Act, No 58 of 1962 (Act) provides that the tax payable in respect of international transactions is to be based on the arm’s length principle. In brief, s31 of the Act provides that: where any transaction, operation, scheme, agreement or understanding (hereinafter, transaction) constitutes an ‘affected transaction’ has been concluded between connected persons; and such transaction contains a term or condition which differs from any term or condition that would have existed had the parties to the transaction been independent vis-à-vis one another and transacting at arm’s length; and the term or condition results in a tax benefit for a party to the transaction; then the tax payable by the benefitting party must be calculated as if the transaction had been concluded between independent parties transacting at arm’s length.
Retroactive application of double tax agreement
On 16 October 2015, a Protocol amending the double tax agreement (DTA) between South Africa and Cyprus was published in the Gazette. In normal circumstances, the promulgation of a protocol does not cause much excitement. However, one of the articles in the Protocol raises unusual issues. Article IV of the Protocol contains two paragraphs: The first paragraph provides that each of the states shall notify the other of the completion of the procedures required by its domestic law to bring the Protocol into effect, and that the Protocol shall come into effect on the date of receipt of the later of these notifications. The operative date in that respect was 18 September 2015.
South Africa signed two new double tax agreements with Kenya and Hong Kong
Readers will note from SARS Watch that a new double taxation agreement between South Africa and Kenya was recently published in the Gazette. Subsequent to this, a further agreement, this time with Hong Kong, was published in the Gazette on 24 November 2015. Both of these agreements come into effect in South Africa as from 1 January 2016. In Kenya, the DTA also takes effect on 1 January 2016, whereas the agreement with Hong Kong will be effective in that jurisdiction from 1 April 2016.
Customs and excise legislation gets much needed overhaul
Author: Georgia Mavropoulos (EY). New legislation will affect customs systems, processes and policies. International conventions, best practice, globalisation, and technology have assisted in giving the South African customs legislative framework a make-over. This resulted in changes to systems, processes and policies affecting importers and service providers. The current Customs and Excise Act 91 of 1964 is over 50 years old, and is getting a long overdue overhaul.
Africa tax in brief
Author: Celia Becker. ANGOLA: Budget Law 2016 adopted by National Assembly The Angolan National Assembly adopted the final version of Budget Law 2016 on 11 December 2015, following its approval of the Program of Economic Diversification on 7 December 2015. The Program includes the introduction of the Special Contribution on Banking Transactions (“SCBT”) and the Special Contribution levied on transfers for the payment of technical assistance or management fees. The SCBT is to be levied at a rate of 0.1% on the value of each banking transaction (excluding the payment of salaries and other payments of a personal nature) performed by financial institutions, including banks, leasing companies, insurance and reinsurance companies, and investment companies.