Author: Heinrich Louw. On 21 January 2016, the South African Revenue Service (SARS) issued Binding Private Ruling 217 (Ruling). The Ruling deals with the estate duty implications for non-resident individual investors (Investors), specifically where such an Investor, who is a resident in Country X, purchases a linked investment plan from a company incorporated and resident in Country X, which carries on the business of life insurance (the Company). The key issue was how certain sections of the Estate Duty Act, No 45 of 1955 (EDA), would apply.
Category: International Tax
Tax: Luring tax back home
Author: Fiona Forde (Financial Mail) IN an anaemic economy, SA’s treasury officials are looking for ways to draw in more revenue, and offshore bank accounts are prominent targets. One likely route is an overhaul of the voluntary disclosure programme (VDP) to collect tax owed. An announcement could be made in the budget speech next month. There has been a sense among officials for some time that not enough is being done to rope in tax evaders and avoiders, particularly those with vast wealth stashed overseas.
The tax risks of cross-border employment
Author: Shohana Mohan (KPMG) The issues relating to the international hiring out of labour, personal tax considerations and what to look out for when structuring contractual arrangements. The world has become increasingly globalised, and cross-border mobilisation is high on the agenda for many countries and companies. Any multi-national company worth its salt has a global mobility policy framework in place, which sets out the parameters for cross-border employment.
Multilateral Competent Authority Agreement
OECD, South Africa November 10 2015. Confronted with high tax rates in their countries of residence, individuals and multinational enterprises are increasingly developing global strategies in order to maximise profits. It is thus not surprising that taxpayers’ links with countries that have favourable tax climates are becoming more tenuous. Although many countries have legislation to curb the ensuing tax avoidance, this problem cannot be addressed only on a national level, as avoidance schemes are encouraged by the very existence of low tax and tax haven jurisdictions. These sovereign jurisdictions are entitled to promulgate their own tax legislation, however onerous (or not) the legislation may be. This issue therefore appears can only be addressed on an international level, if at all.
The opportunities of relaxed exchange controls
Recent relaxations of exchange controls in South Africa have encouraged growing cross-border investments and facilitated freer participation in global financial markets and opportunities. To understand the extent to which exchange controls in South Africa have been relaxed since their inception, it helps to look at their history, which can be broadly categorised into three phases: It all began in 1939 with the introduction of restrictions on the outflow of funds to non-sterling area countries. These were extended during 1961 to 1993 in response to the worsening internal political situation, the introduction of economic and financial sanctions against South Africa in the mid-eighties, and a moratorium on the repayment of South Africa’s foreign debt. The 1961-1993 era was characterised by a comprehensive system of exchange controls embracing both current and capital account transactions over residents and non-residents. The third phase commenced in 1993 and spearheaded a period of gradual relaxation of Read More …
Tax Transparency – the Common Reporting Standard: Implications for South Africa
Globally, taxpayers are becoming more interdependent, and engage in cross-border financial activities with more regularity. With this, comes the need for enhanced co-operation and understanding across countries on issues such as tax administration and transparency, to curb tax evasion and ensure a fair allocation of taxes to tax jurisdictions. “The Common Reporting Standard (CRS) developed by the The Organisation for Economic Co-operation and Development (OECD), is a global standard for the automatic exchange of information relevant to tax. Over 50 jurisdictions have agreed to comply with the CSR, including South Africa, committing to exchange data in September 2017, and other jurisdictions will begin participating from 2018” states Ferdie Schneider, National Head of Tax at BDO South Africa.
Retroactive application of a 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 contains two paragraphs: The first states 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.
Global Forum on tax transparency pushes forward international co-operation against tax evasion
Major implementation milestones are being met by members of the world’s leading forum on tax transparency as the international community continues to move ahead towards greater tax transparency. The imminent shift to the automatic exchange of information will send a strong warning to tax evaders. Significant strides towards a major increase in tax transparency have been made since last year when over 90 members of the Global Forum on Transparency and Exchange of Information for Tax Purposes committed to automatically exchange information, beginning in 2017 or 2018. Panama and the Cook Islands are the latest financial centers to join these commitments bringing the total number to 96.
‘Interest’ for purposes of Withholding Tax on Interest (WTI)
Author: Lisa Brunton (Cliffe Dekker Hofmeyr). The Taxation Laws Amendment Bill 2015 (Bill) proposes the insertion of a definition for the term ‘interest’ in s50A of the Income Tax Act, No 58 of 1962 (Act) to clarify the meaning of interest for purposes of the WTI. ‘Interest’ is to be defined in s50A of the Act with reference to paragraphs (a) and (b) of the definition of ‘interest’ under s24J(1), meaning that for WTI purposes, ‘interest’ includes “the gross amount of any interest or related finance charges, discount or premium payable or receivable in terms of or in respect of a financial instrument;” or “the amount (or portion thereof) payable by the borrower to a lender in terms of a lending arrangement as represents compensation for any amount which the lender would, but for such lending arrangement, have been entitled”.
The OECD/G20 base erosion and profit shifting (BEPS) project – an informed perspective
Author: Lisa Brunton (Cliffe Dekker Hofmeyr) The BEPS Project involves input from the 34 member countries of the OECD, all G20 members, and more than 40 developing countries. The objective of the BEPS Project is to close gaps in international tax rules, effectively eliminating or substantially reducing BEPS; and to secure government revenues by ensuring that profits are taxed in the jurisdiction where the economic activities generating such profits are performed and where value is created. In our October 2014 Tax Alerts, we reviewed the 2014 deliverables of the BEPS Project and speculated about whether the OECD would be able to achieve its 2015 objectives timeously.