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The South African Revenue Service’s (SARS) core function is the efficient and effective administration of tax Acts. This necessarily includes the collection of the proper amount of tax from various taxpayers. Part of the means at SARS’ disposal to ensure this is achieved, is requiring taxpayers to submit relevant information, augmented by data collected from third-party entities. A further mechanism at SARS’ disposal to ensure the information received is full and correct, are the investigatory powers granted to SARS under Chapter 5 of the Tax Administration Act 28 of 2011 (TAA). A familiar part of the tax administration process for corporate taxpayers is the preparation and submission of a corporate income tax supplementary declaration form titled IT14SD (IT14SD). In this form, companies selected for verification by SARS are required to reconcile income tax, Value-Added Tax (VAT), Pay-As-You-Earn (PAYE) and Customs declarations after the submission of their corporate income tax returns. Read More …

On appeal from a full bench of the High Court, the Supreme Court of Appeal (SCA) dispensed with a taxpayer’s request for default judgment against the South African Revenue Service (SARS) in the recent case of Commissioner, SARS v Candice-Jean van der Merwe [2022] ZASCA 106. Although the facts surrounding the SCA’s decision were unique to that case, it does beg a broader question regarding a taxpayer’s right to be provided with grounds for an assessment issued under section 95 of the Tax Administration Act 28 of 2011 (TAA). Facts The taxpayer in this case received a large sum of money from an overseas benefactor which she declared as a donation when filing her tax return for the 2014 tax year. SARS disagreed with this and included the amount received in the taxpayer’s gross income, thus subjecting her to normal tax. The dispute between SARS and the taxpayer was resolved Read More …

Value-added tax (VAT) is levied on the supply of goods or services by registered vendors, on the importation of goods and on the importation of services into South Africa. The VAT on supplies of goods and services must be paid by the supplier, whereas the importer of goods is responsible for the payment of the import VAT. VAT on imported services must be paid by the recipient. Persons who acquire services from foreign suppliers often omit to pay the VAT on these services. It is for this reason that the South African Revenue Service is focusing on imported services in its VAT audits. However, not all services rendered by foreign service suppliers comprise imported services. What are imported services? “Imported services” is defined in the Value-Added Tax Act 89 of 1991 (VAT Act) as services rendered by a supplier who is resident or carries on business outside the Republic, to Read More …

Value-added tax (VAT) is levied on the supply of goods or services by registered vendors, on the importation of goods and on the importation of services into South Africa. The VAT on supplies of goods and services must be paid by the supplier, whereas the importer of goods is responsible for the payment of the import VAT. VAT on imported services must be paid by the recipient. Persons who acquire services from foreign suppliers often omit to pay the VAT on these services. It is for this reason that the South African Revenue Service is focusing on imported services in its VAT audits. However, not all services rendered by foreign service suppliers comprise imported services. What are imported services? “Imported services” is defined in the Value-Added Tax Act 89 of 1991 (VAT Act) as services rendered by a supplier who is resident or carries on business outside the Republic, to Read More …

Share block schemes are defined in the Share Blocks Control Act 59 of 1980 (SBC Act) as “any scheme in terms of which a share, in any manner whatsoever, confers a right to or an interest in the use of immovable property”. In a nutshell, share block schemes can be described as an alternative form of property ownership and allow a single company – referred to as a ‘share block company’, to own a particular development. Individuals who become shareholders within the share block company are allowed to buy the right to use a specific unit or space within the development. Purchasers individually buy a grouping or block of shares which grants the holder specific rights. The share block company acquires ownership and title to the property by means of a registered title or by renting the land from the owner. These companies must specifically include the expression “share block” Read More …

Is the revenue authority obliged to comply with unlawful instructions from National Treasury? Recently, the High Court had to answer this question in Republic v Commissioner of Domestic Taxes & Ex-Parte London Distillers (K) Limited [2022] eKLR. Brief facts In a letter dated 15 September 2021, LDK applied to the Cabinet Secretary for National Treasury and Planning for the abandonment of KES 517,118,680 which LDK had collected as excise duty in the course of its business. National Treasury allowed the application and approved the abandonment of 80% of the outstanding principal excise duty and waived 100% of the penalties and interest. Subsequently, the KRA wrote to LDK acknowledging the outcome of the abandonment and demanding a sum of KES 80 million, being the 20% outstanding tax arrears. The KRA and LDK agreed on the settlement of the said amount in weekly instalments of KES 7,500,000 beginning on 2 February 2022. Read More …

Farming and agriculture form the lifeblood of any economy. It is no wonder that the Income Tax Act 58 of 1962 (Act) provides for a special set of beneficial rules applicable to farmers in South Africa. This special taxation regime is by and large set out in the First Schedule to the Act. Even though the South African Revenue Service (SARS) has already issued an interpretation note on “Game Farming”, namely Interpretation Note 69, SARS has previously not provided an extensive explanatory note or guide on the First Schedule. Farmers would therefore have welcomed the publishing of the SARS Draft Guide on the Taxation of Farming Operations on 22 September 2022 (Draft Guide). This article discusses some of the key guidance notes contained in the Draft Guide. Meaning of farming operations In order for the special tax regime in the First Schedule to apply there are a number of requirements Read More …

Subject to certain exemptions and exceptions, value-added tax (VAT) is levied at the standard rate of 15% on the supply of goods or services by a vendor in the course or furtherance of the vendor’s enterprise. However, the supply of an enterprise or part of an enterprise as a going concern may be subject to VAT at the zero rate provided that certain requirements, as stipulated in section 11(1)(e) of the Value-Added Tax Act 89 of 1991 (VAT Act), are complied with. In terms of section 11(1)(e), the supply of an enterprise or part thereof, which is capable of separate operation may be subject to VAT at the zero rate, provided that the seller and purchaser are both registered vendors; the supply consists of an enterprise or part of an enterprise capable of separate operation; the parties agree in writing that the supply is a going concern; the parties, at Read More …

Before discussing BRP 379, it is worthwhile revisiting section 8E and section 8EA of the Income Tax Act 58 of 1962 (ITA). A thorough discussion of these sections falls outside the scope of this article. However, we wish to briefly discuss the effect of these sections before discussing BRP 379. Section 8E and section 8EA of the Income Tax Act Before discussing BRP 379, it is worthwhile revisiting section 8E and section 8EA of the Income Tax Act 58 of 1962 (ITA). A thorough discussion of these sections falls outside the scope of this article. However, we wish to briefly discuss the effect of these sections before discussing BRP 379. The effect of section 8E and 8EA of the ITA is that if the requirements of section 8E(2) or section 8EA(2) of the ITA are met, dividends received by a person are deemed to be income. Simply put, section 8E(2) Read More …

At their inception, most businesses have nothing but their names on their back and a bit of property to kickstart their operations. As employees join the business and begin contributing their time and innovative ideas, these eventually drive up the business’ unique selling point and ultimately, its value in the market. When these employees look to leave the business, it may cause a decrease in its value in relation to what those employees do with the confidential information they had access to in the course of their employment. In an attempt to protect this value, employers may enter into restraint of trade agreements with exiting employees where the employees will receive financial compensation in exchange for refraining from engaging in a particular activity in a particular area for a period of time. The importance of the categorisation of these payments in one’s tax returns was highlighted in the case of Read More …