On 18 November 2013 the South African Revenue Service (SARS) issued Binding Private Ruling 157 (BPR). The Applicant, a natural person and resident in South Africa, was a beneficiary of two non-resident discretionary trusts A and B. Trusts A and B held various foreign assets such as loan accounts, cash, and shares. Specifically, trusts A and B held all the shares in non-resident companies A and B. It was proposed that trusts A and B would distribute certain of their foreign assets to the Applicant. Upon receipt, the Applicant would donate the assets to a non-resident trust C.
Category: Trusts
Tax Administration Act – Criminal investigation in relation to a serious tax offence
The Tax Administration Act, No. 28 of 2011 (the TAA) took effect on 1 October 2012. In light of SARS’s strong emphasis on compliance, this article considers the procedures SARS should follow where it believes that a serious tax offence might have been committed. A “serious tax offence” is defined as “a tax offence for which a person may be liable on conviction to imprisonment for a period exceeding two years without the option of a fine or to a fine exceeding the equivalent amount of a fine under the Adjustment of Fines Act, 1991 (Act No. 101 of 1991).”
On South African tax compliance, tax morality and taxpayers’ freedom to do tax planning – Canada, Ireland and South Africa are not worlds apart
The upcoming Budget Speech comes against the backdrop of a depressing South African growth rate, stubbornly high unemployment, a depreciating Rand (with more US tapering still to come), continued strikes in the mining sector, deadly service delivery protests and declining tax revenues. On a more positive note: In November 2013 Minister Gordhan pointed to the continued growth in tax compliance by South Africans and said: “… the ability to collect tax revenue …to finance the provision of public services and socioeconomic infrastructure has been a cornerstone of our democracy these 20 years.”
Capital Gains Tax – Reits, recoupments and assessed losses
Author: Louis van Manen (Grant Thornton) The Taxation Laws Amendment Bill of 2013 (TLAB) contains a proposed amendment to the newly introduced Real Estate Investment Trust (REIT) legislation which should be welcomed by such trusts. While it is generally assumed that the tax burden associated with income and capital gains of REITs is effectively shifted to shareholder level under the REIT legislation, it will not always be the case under the current legislation. Despite enjoying exemption from Capital Gains Tax (CGT) on most immovable
Taxpayer's rights on SARS audits
The Tax Administration Act, Act 28 of 2011 (the TAA) came into effect on 1 October 2012. Its promulgation brought with it many changes to not only taxpayers’ rights and obligations but the reciprocal rights and obligations on the part of the South African Revenue Service (SARS) in its continuous business of revenue collection. Some of the amendments and repeals of sections previously contained in the Income Tax Act No. 58 of 1962 (the Act) have seen a welcome improvement in taxpayers’ rights. One of these improvements is contained in section 42 of the TAA.
Tax Adminstration Act No 28 of 2011 – Tax Litigation
Tax litigators will now have to consider, inter alia, the impact of certain provisions under the Tax Administration Act No. 28 of 2011 (the TAA) as amended by the Tax Administration Laws Amendment Act No. 21 of 2012 on the doctrine of legal professional privilege and a recent judgment reflecting the view of a court with regards to the adherence to the rules of the Tax Court by the South African Revenue Service (SARS).
Appointing new beneficiaries of a trust
ITC 1828 70 SATC 91 is not a new tax case. However, it is an interesting case, which highlights some of the potential tax implications that may be triggered upon the appointment of new beneficiaries to a trust, particularly, a discretionary trust. In ITC 1828 70 SATC 91 a discretionary trust (trust) had been established with the object of benefiting the founder, the founder’s wife and the children, being the discretionary income and capital beneficiaries. The trust had acquired certa
The matter of validity: was a trust even created?
Author: Trinette Hartley (Sanlam) Trusts (and more specifically inter vivos discretionary trusts) are known to be useful estate planning tools with numerous benefits. Unfortunately, many trusts are created without a full understanding of what trusts are and how they work. This leads to trusts being created for the wrong reasons, trust deeds being invalid and trustees abusing their power. As a result, our courts are increasingly clamping down on trusts and one should therefore make sur
Proposed amendments to the taxation of trusts
Author: Doria Cucciolillo (The SAIT) Background According to the 2013/2014-budget review the National Treasury intends to amend current income tax legislation that relates to trusts. At present trusts function as flow-through mechanisms and therefore provide loopholes to avoid taxes. The proposed amendments aim to reduce the available tax saving schemes involving trusts, but will have no effect on so-called special trusts (established to take care of minor children and persons with disabilities). This article investigates the income tax consequences of the proposed changes.
Year in Review – 2012 Tax Developments in South Africa
During 2012 a number of significant amendments were made to the tax legislation in South Africa. This report provides a brief description of certain of these amendments which may be of interest to foreign companies that conduct business in South Africa as well as those seeking investment opportunities in South Africa.