Changes in carbon tax rates In terms of section 5 of the Carbon Tax Act 15 of 2019 (Carbon Tax Act), the carbon tax rate must increase annually by the change in the November consumer price index as determined by Statistics South Africa, compared with the November consumer price index that falls within the tax period, plus 2%. Pursuant to this, it was announced that the carbon tax rate for the 2022 tax year (January to December) would increase from R134 per tonne CO2e, to R144 per tonne CO2e. As a result of this increase in the carbon tax rate, the carbon fuel levy, which is administered under the fuel levy regime will also increase by the same percentage. The carbon fuel levy for 2022 will increase by 1c to 9c/l for petrol and by 1c to 10c/l for diesel from 6 April 2022. It must be appreciated that this Read More …
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Tax compliance status for taxpayers under business rescue to be investigated
South Africa introduced the concept of business rescue in the (new) Companies Act 71 of 2008 with the intention of including a mechanism for the rehabilitation of financially distressed companies. Once a company is placed under business rescue, temporary supervision and management of the company is handed to a business rescue practitioner. The aim is to rescue the company from its financial distress by, for example, reducing cost overheads and positioning the company to continue offering its products or services. As with all businesses, customers and suppliers expect the businesses that they transact with to be tax compliant. Section 256 of the Tax Administration Act 28 of 2011 (TAA) deals with the tax compliance status (TCS) of taxpayers. Specifically, section 256(3) states that a taxpayer’s TCS may only be marked as “compliant” if the taxpayer is: registered for tax; does not have any outstanding tax debt (excluding a tax debt Read More …
A measured approach … Budget 2022
Webber Wentzel’s Tax Team welcomed a balanced National Budget presented by Minister of Finance Enoch Godongwana on Wednesday. Notable tax aspects which bring much-needed relief include the following. A cut in the corporate tax rate from 28% to 27% for years of assessment ending on or after 31 March 2023. A 4.5% inflationary adjustment to all personal income tax brackets, rebates and medical tax credits. There is also no increase to the personal income tax rates. No increase in the fuel levy or the Road Accident Fund levy this year – this is the first time since 1990 there has been no increase. The enhanced employment tax incentive (ETI), from ZAR500/pm to ZAR1 500/pm for the first year, and from ZAR 500/pm to ZAR 750/pm for the second year. Small businesses will also find it easier to qualify for ETI relief. The extension of the R&D incentive to end-2023 is Read More …
The nitty gritty of SARS’ Voluntary Disclosure Programme
The Tax Administration Act, 2011 (“TAA”) allows a taxpayer to approach the South African Revenue Service (“SARS”) to “come clean”, provided all the relevant requirements are met. In particular, the requirements for a valid application in terms of the “voluntary disclosure programme” (“VDP”) in terms of section 227 of the TAA are that the disclosure must: be voluntary; involve a “default” that has not occurred within five years of the disclosure of a similar “default” by, inter alia, the applicant; be full and complete in all material respects; involve certain behaviours referred to in the understatement penalty provisions; not result in a refund due by SARS; and be made in the “prescribed form and manner.” In a recent Supreme Court of Appeal (“SCA”) case, Purveyors South Africa Mine Services (Pty) Ltd v Commissioner for the South African Revenue Services (Pty) Ltd, an appeal against the decision of the Tax Court was dismissed, upholding Read More …
Risks of tax return non-disclosure increased by Supreme Court of Appeal
A fundamental reason for the existence of the rules of “prescription” in South African tax law is to provide a taxpayer with certainty as regards its tax position. Under certain circumstances, SARS is barred from changing a favourable to an unfavourable assessment. In disputes, prescription is a powerful defence available to compliant taxpayers, allowing them to bring finality to their tax assessments. Whether the defence of prescription is available to a taxpayer is, inter alia, dependent upon disclosure in its annual tax return. The importance of tax return disclosure was dealt with in quite some detail in the recent Supreme Court of Appeal decision in the matter of CSARS v Spur Group (Pty) Ltd. The court found against the Taxpayer both on the merits of the case, which related to the deductibility, in terms of section 11(a) read with section 23H of the Income Tax Act, 1962, of a contribution made to a share Read More …
South Africa’s Budget Speech 2022: A deep dive
The Finance Minister was able to avoid tax rate increases, and even make a positive contribution to reducing the deficit, as a result of better than expected tax revenues. These were largely contributed by the mining sector due to the increase in commodity prices, strong consumer demand after the COVID-19 lockdowns contributing to VAT and corporate taxes, and better personal tax collections due to improved earnings. The Finance Minister referred to reducing the corporate tax rate in future, and the disbenefits of further rate increases generally. He also cautioned that unless GDP and tax revenue increased, there was no capacity for increased permanent state expenditure. He warned about risks to the fiscal outlook both in the global and the domestic environment, including increased borrowing costs, state wage bill, and the poor state of certain SOEs. In the circumstances, taxpayers may be relieved about a neutral or even slightly positive budget Read More …
Good news in Budget 2022 but implementation still the key
On 25 February 2022, Webber Wentzel hosted a client webinar, “Post Budget Speech Panel Discussion | What does the 2022 South Africa budget mean for you and your company?” Panellists at the webinar were Dr Azar Jammine – Director & Chief Economist of Econometrix, Brad Webber, Samantha Pokroy, Brian Dennehy and Julian Jones. Here’s some of the insights from the panel of experts. The Minister of Finance, Enoch Godongwana, delivered several positive messages in the 2022 National Budget. But it will take a long time, and significant progress on implementation, for government to reverse the long-term downward trajectory in South African economic growth, panellists at the Webber Wentzel Post-Budget Seminar agreed. The Budget showed that revenue collections exceeded original predictions by ZAR181.9 billion, mainly because of taxes paid by mining companies that had benefited from the commodities upturn. The Minister of Finance showed commendable prudence in that he did not assume this windfall will Read More …
The tax burden on annuitants: spread, not lightened
By Joon Chong, Tax Partner at Webber Wentzel. The latest move by SARS to require the withholding of PAYE from annuity payments at an “Effective Tax Rate” as required in directives issued to payers of annuities may help some annuitants to plan their finances but may disadvantage others SARS issued IRP3e tax directives in terms of paragraph 2(2B) of the Fourth Schedule to the Income Tax Act to all payers of annuities in early February 2022 (i.e., to licensed insurers and retirement funds, collectively “administrators”). The directives required the administrators to withhold PAYE on the annuities paid at the “Effective Tax Rate” or “Fixed PAYE Rate” prescribed by SARS on the annuitants. Starting from 1 March or 1 April 2022, annuitants will find that PAYE will be withheld on the annuities they receive at the Fixed PAYE Rate – unless they opt out. How SARS calculates the Fixed PAYE Rate Read More …
The aged usufructuary – tax implications for valuing a usufruct for estate duty purposes
By Duncan McAllister, Consultant at Webber Wentzel. Valuing a usufruct for estate duty purposes may incur a greater tax liability than disposing of it while the usufructuary is alive and paying donations tax, transfer duty and CGT When a usufruct ceases, it can have serious estate duty consequences for a deceased usufructuary. For this reason, amongst others, most planners nowadays shun the usufruct and use an inter vivos trust for estate planning. This article explores one of the options open to an aged usufructuary staring down the barrel of the estate duty gun. At the heart of the problem is s 5(1)(b) of the Estate Duty Act 45 of 1955. It states that a usufruct ceasing on a person’s death should be valued by capitalizing the right of enjoyment at 12% a year over the life of the person who becomes entitled to the right of enjoyment, or if the right is Read More …
The meaning of voluntary in a voluntary disclosure: The SCA weighs in
In the recent judgment of Purveyors South Africa Mine Services (Pty) Ltd vs Commissioner for the South African Revenue Services (135/2021) [2021] ZASCA 170 (7 December 2021), the Supreme Court of Appeal (SCA) considered an appeal brought by the taxpayer (the appellant) in respect of the findings of the High Court in a judgment which upheld the rejection by the South African Revenue Service (SARS) of the voluntary disclosure programme application submitted by the appellant. Share Facts On 12 January 2015, the appellant entered into a dry lease agreement with its holding company (a company incorporated and tax resident in the United States of America (US)) in respect of an aircraft that was registered in the US. The aircraft was subsequently imported into South Africa and was used to transport goods and personnel from South Africa to other countries situated in Africa. As a consequence of the importation of the Read More …