Author: TaxTalk The wait is finally over! After three draft documents for public comment, numerous workshops and internal discussions, the new Dispute Resolution Rules (‘the new Rules’) issued in terms of section 103 of the Tax Administration Act (No. 28 of 2011) (‘the TAA’) has today been promulgated into law under Government Notice 550 published in Government Gazette No. 37819. It should be noted that the new Rules replace the Rules issued in terms of section 107A of the Income Tax Act (‘the old Rules’) with immediate effect. Although the new Rules are a lot more comprehensive than the old Rules, the South African Institute of Tax Professionals’ (‘the SAIT’) technical department warns the public of some common pitfalls and welcome changes.
Category: Interpretation Notes
Will SARS’ Interpretation Note No. 77 reduce the compliance burden for employer-provided telecommunication equipment and services?
By Bruce Russell, Tax Consultant, Grant Thornton Cape Employers provide their employees with telecommunication devices and services to enable them to work more efficiently. While the intention may be that these will be used solely for business purposes, there is often an element of private use of the devices, airtime and data.
SARS to Widen List of ‘Reportable Arrangements'
If SARS has its way, the current list of arrangements deemed reportable to SARS in terms of section 35(2) of the Tax Administration Act will be widened considerably. This is apparent from the release on 10th June of a Draft Public Notice (‘the Notice’) listing arrangements that would be deemed to be reportable in terms of the above provision. The Notice has been released for a second round of public comments.
Registration requirements for foreign suppliers of electronic services clarified
Author: Gerhard Badenhorst of ENSafrica The VAT legislation has been amended with effect from 1 April 2014 to give effect to government’s proposal that all foreign suppliers of electronic services in South Africa are required to register for VAT in South Africa. The legislation amendment places an obligation on foreign suppliers to register for VAT in South Africa if they make supplies of electronic services in excess of R50 000 in a 12 month period to South African customers who are either tax resident in South Africa, or where payment for the services by such customers originates from South African banking accounts.
Protecting your reputation: Deductibility of legal expenses
Authors: Nicole Paulsen and Danielle Botha (DLA Cliff Dekker Hofmeyer) The question of deductibility of legal expenses incurred to protect one’s reputation or the goodwill of a business seems to be a recent hot topic of conversation, especially when following the news. Interestingly, two international cases relating to the deductibility of legal expenses, both related to reducing reputational risk and challenging alleged unfounded allegations against the taxpayer, have recently been handed down in Australia and England, respectively.
Assumption of contingent liabilities
The South African Revenue Service (SARS) recently released its discussion paper (Discussion Paper) on the tax implications of the assumption of contingent liabilities in the context of a sale of business as a going concern and where the assumption of the contingent liabilities is in part settlement of the purchase price of the assets. Whereas the purchase price can generally be settled by, for example, a cash payment, the assumption of unconditional liabilities, loan account, or the issue of shares, the Discussion Paper specifically deals with the assumption of contingent liabilities.
Income Tax Deductions v Value-Added Tax Deductions
Broadly speaking, in their ordinary business operations, certain entities are entitled to claim certain deductions for income tax and value-added tax (“VAT”) purposes. In this article we discuss the tests used by South African courts and in practice, for income tax and VAT purposes, in order to determine whether a taxpayer will be entitled to such deductions. Consideration will be given specifically to the deduction of legal expenses incurred by a taxpayer in terms of section 11(c) of the Income Tax Act No. 58 of 1962 (“Income Tax Act”) and the deduction of input tax in respect thereof in terms of section 1 read with section 7 of the Value-Added Tax Act No. 89 of 1991 (the “VAT Act”).
Income protection policies: tax deduction for premiums to be abolished from 1 March 2015
Employees earning remuneration are generally prohibited from claiming tax deductions for any expenditure other than those items listed in section 23(m) of the Income Tax Act (58 of 1962). This is in contrast to persons carrying on a trade independently of an employer.
Transfer Pricing – Income Tax Act 58 of 1962 Section 31 further analysis
The provisions of Section 31 of the Income Tax Act No. 58 1962 (the Act) have been revised. Section 31 was introduced in 1995 to grant the Commissioner power to adjust tax calculations where a taxpayer was involved in cross-border transactions not at arm’s length. The old section 31 provided that the Commissioner could adjust the consideration in respect of the transaction to reflect an arm’s length price for the goods or services. This meant that taxpayers were not obliged to make the adjustments on their tax returns for transactions even if such transactions were not conducted on an arm’s length basis. Taxpayers could therefore file tax returns with excessive deductions, and then sit and wait and hope for the best – which would be that the Commissioner did not pick up these excessive deductions.
Tax Administration Act – Understatement penalty regime
The draft Taxation Administration Laws Amendment Bill, 2013 (TALAB) was released by the South African Revenue Services (SARS) on 5 July 2013 for public comment. The TALAB proposes, amongst other things, that several amendments be made to the Tax Administration Act, No 28 of 2011 (the TAA) in respect of understatement penalties.