‘Ruling could take parties unaware’ – Piet Nel. JOHANNESBURG – Public benefit organisations (PBOs) should take note of a new binding ruling issued by the South African Revenue Service (Sars), which could result in the loss of their tax exemption on business undertakings or trade activities. Last month, Sars issued a binding general ruling, which aims to provide clarity on the concept “substantially the whole”.
Category: SARS Binding Rulings
International Tax – Base erosion and profit shifting
The Organization for Economic Cooperation and Development (OECD) issued a 15 point action plan on base erosion and profit shifting (BEPS). The plan aims to “effectively prevent double non-taxation” and to ensure that low tax jurisdictions will not be able to continue with practices that “artificially segregate taxable income from the activities that generate it”. It seems that the action plan of the OECD will have a huge impact on worldwide transfer pricing and these actions must be carefully considered as it may have a major impact on how multinational groups operate.
Deductibility of empowerment costs
The costs associated with black economic empowerment transactions are akin to obtaining a licence to operate; on this basis, these costs should form part of the income earning operations of the company.(1) The Income Tax Act(2) contains various provisions relating to deductibility of specific expenditure, some of which have been identified as possibilities for the deduction of expenditure relating to indirect black economic empowerment measures, such as:
Definition of foreign dividend
The South African Revenue Service (SARS) issued Binding Class Ruling 41 (Ruling) on 24 July 2013 regarding the question of whether a dividend distributed by a foreign company will constitute a ‘foreign dividend’ as defined in section 1 of the Income Tax Act No. 58 of 1962 (the Act).
Receipt of foreign assets and the subsequent donation thereof to a non-resident trust
Binding Private Ruling 157 dealt with the income tax consequences arising from, and the attribution rules applicable to a distribution of foreign assets made by non-resident discretionary trusts to a beneficiary who is a resident of South Africa, and the subsequent donation by the beneficiary of such assets to another non-resident trust.
Residency Status Of a Non-Resident Who Applies For a Temporary Residence Permit
Author: PwC Now that South Africa has a residence-based system of income tax, a decision by a non-resident to become tax-resident in South Africa has the result that his world-wide income will become subject to tax in South Africa, save to the extent that relief is given by a double-tax agreement or that unilateral relief is available in terms of section 6 quat of the Income Tax Act 58 of 1962. It is therefore not a decision to be taken lightly.
Receipt of Foreign Assets and the Subsequent Donation Thereof to a Non-resident Trust
Author: BDO Binding Private Ruling 157 dealt with the income tax consequences arising from, and the attribution rules applicable to a distribution of foreign assets made by non-resident discretionary trusts to a beneficiary who is a resident of South Africa, and the subsequent donation by the beneficiary of such assets to another non-resident trust.
A Conundrum? The VAT Consequences of a PBO Entering into a Joint Venture with a Third Party
Author: Prof Daniel Erasmus (TRM Services) A public benefit organisation (“PBO”) is a nonprofit company with members that includes the following objects as set out in its Memorandum of Incorporation: “… to develop technology and materials in support of such objectives…”. The PBO wants to enter into a Joint Venture arrangement with a company (“the Company”) that is able to contribute the skills and expertise “… to develop technology and materials in support of such objectives…”. But it only wants to do so if there are no adverse value-added tax (“VAT”) consequences.
Binding Ruling – BPR 143 – Headquarter company
Binding Private Ruling 143, dated 2 May 2013, issued in terms of section 76Q of the Income Tax Act No. 58 of 1962 (the Act), deals with whether certain preference shares held by the applicant (a public company incorporated and resident in South Africa) qualify as equity shares in the context of the definition of headquarter company in section 1 of the Act.
5 Top Tips to Understanding the Work of the Tax Ombud
Judge Bernard Ngoepe inaugurated as South Africa’s first Tax Ombudsman. Stiaan Klue, Chief Executive of the SA Institute of Tax Practitioners (SAIT), takes a closer look at this vital position and explains how the Ombud’s office can assist the general tax payer in resolving their disputes with Sars. Why a Tax Ombud? The Tax Ombud serves to protect tax payer’s rights and operates as a counter balance to the far reaching powers which the 2012 Tax Administration Act entrusted to Sars.