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On 26 October 2022, the Minister of Finance (Minister) delivered the Medium-Term Budget Policy Statement (MTBPS). While it appears that the MTBPS speech was generally positively received, from a tax and tax policy perspective, there were also some interesting announcements. Tax collections The Minister indicated that since the 2022 Budget, revenue collection has exceeded projections and the gross tax revenue estimate for 2022/23 has been revised upwards by R83,5 billion, to R1,68 trillion. It was indicated that the reasons for this higher estimate are largely the improvements made in corporate income tax collections, with strong receipts from the finance and manufacturing sectors. What is interesting about this is that the amendments to the Income Tax Act 58 of 1962 that came into effect earlier this year, specifically the reduction of the corporate income tax rate to 27% and concomitant interest deductibility and limitation of assessed losses amendments, were aimed at Read More …

By Joon Chong, Partner at Webber Wentzel. After wide consultation, National Treasury and SARS have made some changes and clarifications to the original proposals on introducing a “two pot” retirement system On 29 July 2022, the 2022 Draft Revenue Laws Amendment Bill was released for public comment, setting out proposals for implementing a new “two-pot” retirement fund system to provide more flexibility for members. The public comments period closed on 29 August, with National Treasury (Treasury) receiving written comments from 27 organisations and 80 individuals. There have also been workshops and discussions with the Standing Committee on Finance about these proposals. Broadly, the plan in the draft bill is to create two “pots” for retirement fund members. From the date the new system comes into effect, members will be able to make one taxable withdrawal a year from their “savings pot” (one-third of contributions), but the “retirement pot” (the other Read More …

The dispute resolution process contained in the Tax Administration Act 28 of 2011 (TAA), and the Rules of the Tax Court (Rules), is designed to allow SARS and taxpayers to engage on the subject of a dispute in a structured manner, aimed at ventilating the dispute between the parties. This maximises the potential for a reduction in the scope of disagreement, and potentially the resolution of the dispute. The recent case of F Taxpayer v CSARS (Case No: IT 45842, 25 February 2022) (F Taxpayer Case), determined whether delays by SARS in engaging with the dispute resolution process set out in the TAA, culminating in the late submission of its rule 31 statement of grounds of assessment and opposing appeal, was grounds for a final bar to SARS pursuing the dispute. It also highlighted whether the taxpayer ought to be granted a final decision on the appeal for relevant years Read More …

In the last few weeks, many South Africans have been affected by the extreme weather and flooding around the country, particularly in KwaZulu-Natal. While government intervention is required to alleviate the harm and impact on affected South Africans, effective alleviation of their plight will require collaboration between Government and civil society, such as charitable organisations. For civil society organisations, including charities, to assist most efficiently, it is crucial that our tax laws relieve them of the tax burden that they would otherwise incur, which in South Africa is done by way of the tax dispensation applicable to public benefit organisations (PBOs). In XY Mining v The Commissioner for the South African Revenue Service (Case No IT25390) (as yet unreported), the Tax Court summarised this as follows: “a PBO by designation exists to relieve the state of certain burdens. Accordingly, only those organisations that qualify as PBOs should be released from Read More …

In the last few weeks, many South Africans have been affected by the extreme weather and flooding around the country, particularly in KwaZulu-Natal. While government intervention is required to alleviate the harm and impact on affected South Africans, effective alleviation of their plight will require collaboration between Government and civil society, such as charitable organisations. For civil society organisations, including charities, to assist most efficiently, it is crucial that our tax laws relieve them of the tax burden that they would otherwise incur, which in South Africa is done by way of the tax dispensation applicable to public benefit organisations (PBOs). In XY Mining v The Commissioner for the South African Revenue Service (Case No IT25390) (as yet unreported), the Tax Court summarised this as follows: “a PBO by designation exists to relieve the state of certain burdens. Accordingly, only those organisations that qualify as PBOs should be released from Read More …

In the case of L’Avenir Wine Estate (Pty) Ltd v Commissioner for the South African Revenue Service (16112/2021) [2022] ZAWCHC 28 the High Court had to consider this question and more. The vintage return L’Avenir (Taxpayer) is a South African wine producer. In 2006 the Taxpayer applied to the Registrar of Companies to make March the end of its current financial year. Again, in 2010, the Taxpayer applied to change the end of its current financial year, this time to December. Both were approved at the relevant times. The Taxpayer believed that the 2010 change had a retrospective effect for its 2009 tax year, meaning that the period of 1 April 2009 to 31 December 2009 (the disputed period) would be included in the 2009 tax year. SARS, on the other hand, maintained that the approval applied to the Taxpayer’s 2010 tax year (rather than 2009) and that the disputed Read More …

Tax deductible donations to philanthropic and other socially beneficial organisations are a familiar feature of many countries’ tax systems – to the extent that such deductible donations can be said to have gained the tinge of infamy in mainstream media. However, the goal of this type of regulation is to incentivise companies and individuals to donate to organisations dedicated to the provision of social goods and insulated from the personal financial benefits which are associated with for-profit enterprises. On 9 May 2022, the South African Revenue Service (SARS) issued Binding Private Ruling 371 (BPR 371), dealing with the proposed operating model of a trust that is an approved public benefit organisation (PBO). Specifically, whether the operating model was within the provisions of section 30(1)(c)(i). BPRs are issued by SARS under Chapter 7 of the Tax Administration Act 28 of 2011. BPRs are published with the consent of the applicant(s) and Read More …

Following the High Court’s decision regarding the disclosure of former President Jacob Zuma’s tax returns (see our Tax & Exchange Control Alert of 18 November 2021), the confidentiality (or possible lack thereof) of taxpayer information has entered the public mind. Recently, a second case dealing with this confidentiality came before the Eastern Cape Division of the High Court (Grahamstown) in Structured Mezzanine Investments (Pty) Ltd and Another v Commissioner, South African Revenue Services (Case No 1824/2021) (as yet unreported) (SMI v SARS). Although appearing to further erode the confidentiality of taxpayer information under section 69 of the Tax Administration Act 28 of 2011 (TAA), on careful reading this case is not cause for taxpayer concern. Facts The South African Revenue Service (SARS) requested information from Structured Mezzanine Investments (SMI) in terms of section 46 of the TAA, specifically certain loan agreements that SMI had concluded. SMI failed to comply with Read More …

When a purchaser acquires a business, they often also assume some or all of the seller’s liabilities in relation to the business. In negotiating the purchase price, the purchaser may contractually agree to assume the seller’s obligation to pay existing or future liabilities. The question is whether the assumption of such liabilities forms part of the consideration for the supply of the business, on which value-added tax (VAT) is payable. The term “consideration” is widely defined in section 1(1) of the Value-Added Tax Act 89 of 1991 (VAT Act) to mean any payment made or to be made, whether in money or otherwise, or any act or forbearance, in respect of, in response to, or for the inducement of, the supply of any goods or services, whether by that person or any other person. Where a business is transferred as a going concern which qualifies for the zero rate in Read More …

In the case of Bechan and Another v SARS Customs Investigations Unit and Others (19626/2022) [2022] ZAGPPHC 259 (28 April 2022) the High Court was tasked with deciding whether the South African Revenue Service (SARS) acted unlawfully in searching motor vehicles parked outside of designated premises and whether the affected persons could demand the return of the seized items through the mandament van spolie. On 28 March 2022, a warrant was issued in terms of sections 59 and 60 of the Tax Administration Act 28 of 2011 (TAA). The warrant authorised SARS to seize information and documentation at the premises of, and related to, a particular taxpayer (Taxpayer). The day after obtaining the warrant, SARS arrived at the Taxpayer’s premises in order to execute it. The premises were located within an office park, which was shared with a number of other companies. Access to the office park was controlled, and Read More …