Author: Heinrich Louw (DLA Cliffe Dekker Hofmeyr) The South African Revenue Service (SARS) issued Binding Private Ruling No 181 (Ruling) on 4 November 2014, which deals with the application of a treaty for the avoidance of double taxation to withholding tax on interest. The applicants were three companies incorporated and tax resident in South Africa, who intend to construct wind farms in South Africa. The Danish Government, through a funding scheme, intends to provide funding to the applicants for purposes of constructing the wind farms. Once the projects are complete, interest will become payable by the Danish Government (via the funding scheme) in respect of the funding, the term being a period of 15 years.
Category: Interpretation Notes
SARS Interpretation Note 80 – Income Tax treatment of stolen money
1. Purpose This Note provides guidance on – • the deductibility of expenditure and losses incurred in a taxpayer’s trade when money is stolen through embezzlement, fraud or theft, including expenditure incurred on legal and forensic services to investigate such losses; • the inclusion in income of amounts recovered or recouped in respect of such expenditure and losses previously allowed as a deduction; and • the taxation of stolen money in the hands of the thief and the non-deductibility of such amounts when repaid.
Binding Private Ruling 181 – Ruling on withholding tax on interest and the application of a treaty
The South African Revenue Service (SARS) issued Binding Private Ruling No 181 (Ruling) on 4 November 2014, which deals with the application of a treaty for the avoidance of double taxation to withholding tax on interest. The applicants were three companies incorporated and tax resident in South Africa, who intend to construct wind farms in South Africa.
Venture capital companies: part 2 – the investors
Author: by Mansoor Parker Introduction This is the second in my series of articles on venture capital companies. In this article I look at the conditions relating to the investors. In particular, I look at the way the investors are permitted to hold their investments in the venture capital company (‘VCC’) in order to qualify for the tax concessions available to them.
SARS Interpretation Note 75 Updated for Legislative amendments
Author: BDO – South Africa On 22 September 2014 SARS released Issue 2 of Interpretation Note 75 (‘IN75′). IN75 deals with the exclusion of certain companies and shares from a ‘group of companies’ as defined in section 41(1) of the Income Tax Act (‘the Act’) for purposes of the corporate rules. The issue that IN75 addresses is a contentious one which has given rise to much uncertainty in the past. Simply put, for the purposes of the corporate restructuring rules in sections 42 to 47 of the Act, the definition of a ‘group of companies’ is more restrictive than the general definition of ‘group of companies’ in section 1 of the Act.
Improvements effected on land not owned by the taxpayer
Author: Emil Brincker (DLA Cliffe Dekker Hofmeyr) On 1 October 2014, the South African Revenue Service (SARS) released Binding Private Ruling 180 (Ruling) dealing with the question of whether a taxpayer, who is a party to a Public Private Partnership (PPP), would qualify for a deduction under s12N of the Income Tax Act, No 58 of 1962 (Act) in respect of improvements effected on land not owned by the taxpayer.In respect of PPP’s, Government often undertakes to provide underlying land to a private party for the construction of buildings or the improvement of the land, without parting with ownership of such land.
Expenditure relating to deferred accruals
Background The taxpayer operated a mine. Firstly, it would extract mineral ore from the earth, and secondly, by smelting and other processes, it would extract a concentrate (containing the minerals) from the ore. The taxpayer sold the concentrate to a subsidiary company. In terms of the agreement with the subsidiary, and in respect of the sale of concentrate in any particular month, the purchase price would only be finally determined five months later. Section 24M of the Income Tax Act, No 58 of 1962 (Act) allows a taxpayer to include in its gross income an amount accruing to it in a particular tax year only in the tax year that the amount is finally determined.
Binding Private Ruling 166 – A change of domicile by a controlled foreign company
Author: BDO South Africa Binding Private Ruling 166, issued by SARS on 1 April 2014, involved an issue of concern to many holding companies in South Africa that have non-resident subsidiaries which hold their off-shore investments. The issue is whether a South African holding company will be deemed, for the purposes of para 11 of the Eighth Schedule to the Income Tax Act 58 of 1962, to have incurred a ‘disposal’ of assets if its controlled foreign subsidiary changes its domicile, even where its place of effective management remains outside South Africa.
Binding Ruling on leasehold improvements
The South African Revenue Service (SARS) released binding private ruling 177 (Ruling) on 31 July 2014. The Ruling concerned a lease and a sublease and SARS was asked to rule on the income tax consequences for, inter alia, the landlord in circumstances where there is an obligation on the sub-lessee to make improvements to the land.
Ruling on leasehold improvements
Author: Heirich Louw (Cliffe Dekker Hofmeyr) The South African Revenue Service (SARS) released binding private ruling 177 (Ruling) on 31 July 2014. The Ruling concerned a lease and a sublease and SARS was asked to rule on the income tax consequences for, inter alia, the landlord in circumstances where there is an obligation on the sub-lessee to make improvements to the land.