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In October 2021, the CDH Tax & Exchange Control team discussed the landmark judgment handed down by the Supreme Court of Appeal (SCA) on 15 October 2021, in Commissioner for the South African Revenue Service v Spur Group (Pty) Ltd (Case no 320/20) [2021] ZASCA 145 (15 October 2021). In that case, the SCA held that a capital contribution made by an employer taxpayer to a trust established for purposes of an employee share incentive scheme, was not deductible for income tax purposes. Share The judgment raised the question whether such capital contributions would henceforth always be considered non-deductible or rather whether it was a case of considering the merits and specific facts and circumstances of each case. Many taxpayers would thus have been relieved when reading SARS Binding Class Ruling 78 issued on 24 January 2022 (BCR 78) which, amongst others, determined the income tax consequences of an employee Read More …

In October 2021, the CDH Tax & Exchange Control team discussed the landmark judgment handed down by the Supreme Court of Appeal (SCA) on 15 October 2021, in Commissioner for the South African Revenue Service v Spur Group (Pty) Ltd (Case no 320/20) [2021] ZASCA 145 (15 October 2021). In that case, the SCA held that a capital contribution made by an employer taxpayer to a trust established for purposes of an employee share incentive scheme, was not deductible for income tax purposes. Share The judgment raised the question whether such capital contributions would henceforth always be considered non-deductible or rather whether it was a case of considering the merits and specific facts and circumstances of each case. Many taxpayers would thus have been relieved when reading SARS Binding Class Ruling 78 issued on 24 January 2022 (BCR 78) which, amongst others, determined the income tax consequences of an employee Read More …

By Duncan McAllister (Consultant) from Webber Wentzel. Parties wishing to cancel a contract should try to do so within the same year of assessment as it was entered into, to avoid adverse cash-flow consequences The Taxation Laws Amendment Act 25 of 2015 introduced a number of amendments to address the cancellation of contracts, which came into effect on 1 January 2016. The principle underlying these amendments is that prior year assessments cannot be reopened to take account of subsequent events. In Caltex Oil (SA) Ltd v SIR, Botha JA stated the following:[1] ‘What is clear, I think, is that events which may have an effect upon a taxpayer’s liability to normal tax are relevant only in determining his tax liability in respect of the fiscal year in which they occur and cannot be relied upon to redetermine such liability in respect of a fiscal year in the past.’ The taxpayer in New Adventure Read More …

By Wesley Grimm, Senior Associate & Rudi Katzke, Partner at Webber Wentzel. National Treasury is asking for public comment by 7 February 2022 on its proposals to impose a specific excise tax on both the non-nicotine and nicotine solutions in e-cigarettes National Treasury published a draft discussion paper in December 2021 on the proposed taxation of electronic nicotine delivery systems (ENDS) and electronic non-nicotine delivery systems (ENNDS), commonly known as e-cigarettes. According to National Treasury, e-cigarettes are battery powered devices that do not burn or use tobacco leaves but vaporise e-liquid solutions which a user inhale. In its discussion paper, National Treasury acknowledges that there is uncertainty about the actual health-related risks of e-cigarettes. Consequently, it wishes to engage with stakeholders on its fiscal policy recommendations for the taxation of e-cigarettes, as countries like the Philippines, Kenya and Russia are doing. National Treasury proposes to introduce a specific excise tax Read More …

By Duncan McAllister, Consultant at Webber Wentzel Although personal rights are clearly assets for CGT purposes, they add a layer of complexity which has not been clarified in recent court decisions Personal rights play an important role in the determination of capital gains and losses. They may comprise assets in their own right for CGT purposes and play a role in establishing proceeds and base cost. Unfortunately, they impose a layer of complexity on the Eighth Schedule which cannot be avoided. What is it? A personal right (jus in personam) is a right in or against a particular person or group of persons. Personal rights are of two types:  jus in personam ad rem acquirendam, a right to claim delivery of a thing; and jus in personam ad faciendum, a right to claim performance or an act. Put differently, a personal right is a right against another person for performance Read More …

On 31 January 2022, SARS hosted a public workshop to discuss the draft Voluntary Disclosure Programme Guide and uncertainties about the Voluntary Disclosure Programme process. As part of its ongoing efforts to reform its Voluntary Disclosure Programme (VDP), the South African Revenue Service (SARS) hosted another workshop with interested stakeholders, primarily to discuss comments on its draft VDP Guide. The draft VDP Guide explains SARS’ understanding of the VDP process and provides general guidance to taxpayers wishing to make use of the VDP to voluntarily disclose and regularise tax defaults. Two of the main agenda items discussed at the workshop were: the impact of prescription on the VDP process; and the meaning of “audit” and “voluntary” for purposes of the VDP. Regarding the impact of prescription, and the associated document retention timeframes, as set out in the Tax Administration Act, 2011 (TAA), SARS was firm that taxpayers wishing to regularise Read More …

Author: Prenisha Govender, Associate in the Tax Practice, Baker McKenzie Johannesburg. The recent High Court judgment Graspan Colliery v The Commissioner for the South African Revenue Services (8420/18) [2020] could have significant implications for mining operators and their ability to claim diesel refunds. The judgment dealt with the interpretation of Note 6(f)(iii) to Schedule 6 of the Customs and Excise Act, 1964 and the limitations with regard to what activities constitute primary production activities in mining, for the purposes of claiming diesel refunds. What is included in primary production activities in mining is defined in Note 6(f)(iii)(aa)-(vv) to Schedule 6. The list of activities included in Note 6(f)(iii) was considered non-exhaustive, following the Glencore Operations SA (Pty) Ltd v The Commissioner for the South African Revenue Service judgment. In this judgment, the court concluded that the word “include” in Note 6(f)(iii) goes beyond its primary meaning, and activities that qualify Read More …

From 1 January 2021, there is no longer a prohibition on loop structures in South Africa. This is a significant exchange control relaxation that will impact many structures for both corporates and individuals. A loop structure is essentially an arrangement whereby a South African resident invests in an offshore vehicle which, in turn, invests in South African assets.

Author: Ben Strauss. Ms X inherited a large number of valuable shares in a blue chip listed company. She has no other material assets. She is concerned that, from a wealth planning perspective, all her eggs are in one basket. She wishes to diversify her portfolio. If Ms X sold her shares with a view to buying a mixture of other shares or investments, she would ordinarily incur capital gains tax (CGT) on the capital gain derived in respect of the sale, assuming that she holds her shares as a long-term investment, that is, not for speculative purposes.

The provisions of section 8F of the Income Tax Act, 58 of 1962 (the Act) regulate hybrid debt instruments. Broadly speaking, from the time that an interest-bearing debt qualifies as a hybrid debt instrument, the interest incurred in respect thereof will be deemed to be a dividend in specie that is declared by the company which incurred such amount (i.e. the borrower) to the person to whom that amount accrued (i.e. the lender). Furthermore, the borrower is denied a tax deduction in respect of such interest.