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.”
Tag: corpotate tax
Shauwn Mpisane: More than 100 tax fraud charges withdrawn
Durban tender queen Shauwn Mpisane has walked out of the Durban Regional Court a free woman after the state withdrew more than 100 tax fraud charges against her. Mpisane, the owner of Zikhulise Cleaning, Maintenance and Transport, was charged with defrauding the SA Revenue Service of R4.7 million by submitting false VAT invoices, but applied to National Director of Public Prosecutions Advocate Mxolisi Nxasana to have the case withdrawn over prosecutorial misconduct. This morning Nxasana was at court for the hearing, at which prosecutor Arno Rossouw told Magistrate Blessing Msane that he had been instructed to withdraw the case in terms of Section 6 (b) of the Criminal Procedure Act.
The limitation of deductions for untaxed interest
Author: Kyle Mandy (PwC) The Taxation Laws Amendment Bill 39 of 2013 proposes the introduction of a new section (section 23M) to the Income Tax Act (ITA) to limit the deduction of interest incurred by a debtor in respect of a debt owed to a creditor that is in a ‘controlling relationship’ with the debtor and the interest in question is not subject to South African tax. The restriction will apply to interest incurred on or after 1 January 2015. In essence, the section limits the deduction for interest paid between connected persons where the interest is not taxed in the hands of the recipient to an amount determined with reference to 40% of taxable income before interest and capital allowances.
Transfer Pricing adjustments: What are the consequences?
Author: Billy Joubert (Deloitte) South Africa’s transfer pricing rules changed radically for years of assessment starting on or after 1 April 2012. This means that the consequences of such an adjustment being made now are very different, depending on whether the adjustment relates to a year of assessment commencing before – or after – 1 April 2012. Perhaps the most fundamental change was in relation to the mechanics for making transfer pricing adjustments. As regards the consequences of TP adjustments, these are also now very different. Many of the TP adjustments currently being made or contemplated relate to years of assessment commencing before 1 April 2012. For ease of reference we shall refer to such years as old years.
VAT – Fixed property acquired from non-vendor
Although old news to some, there still seems to be little awareness regarding the interplay between value-added tax (VAT) and transfer duty, and the benefits stemming from the ‘not so recent’ amendments to the Value-Added Tax Act No. 89 of 1991 (the Act), as applicable to fixed property acquired by a VAT vendor from a non-vendor on or after 10 January 2012.
Tax Administration Act – Suspension of payment of tax
Any taxpayer who wishes to object to or appeal against an assessment issued by the South African Revenue Service (SARS) must be aware that their obligation to pay any tax under that assessment is not automatically suspended by virtue of the submission of the objection or appeal itself. Any taxpayer who wishes for an objection or appeal to first be concluded before paying the tax due under an assessment would have to lodge a separate request for suspension of payment of tax in terms of section 164 of the Tax Administration Act No. 28 of 2011 (the TAA).
Deductibility of empowerment costs
The costs associated with black economic empowerment transactions are akin to obtaining a licence to operate; on this basis, these costs should form part of the income earning operations of the company.(1) The Income Tax Act(2) contains various provisions relating to deductibility of specific expenditure, some of which have been identified as possibilities for the deduction of expenditure relating to indirect black economic empowerment measures, such as:
Income Tax Deductions v Value-Added Tax Deductions
Broadly speaking, in their ordinary business operations, certain entities are entitled to claim certain deductions for income tax and value-added tax (“VAT”) purposes. In this article we discuss the tests used by South African courts and in practice, for income tax and VAT purposes, in order to determine whether a taxpayer will be entitled to such deductions. Consideration will be given specifically to the deduction of legal expenses incurred by a taxpayer in terms of section 11(c) of the Income Tax Act No. 58 of 1962 (“Income Tax Act”) and the deduction of input tax in respect thereof in terms of section 1 read with section 7 of the Value-Added Tax Act No. 89 of 1991 (the “VAT Act”).
Taxpayer – choose your weapon carefully
The Pretoria Tax Court made an interesting ruling in Income Tax Case No 1866 75 SATC 268.Section 32(1) of the Value-Added Tax Act, No 89 of 1991 (VAT Act) states that the following decisions of the South African Revenue Service (SARS) are subject to objection and appeal, namely:
Determining A 'Group Of Companies' For Purposes Of The Corporate Rules
Author: Andrew Lewis (CliffeDekkerHofmeyr) The Income Tax Act, No 58 of 1962 (the Act) contains a definition of a ‘group of companies’ in s1 of the Act. However, a narrower definition of the term ‘group of companies’ is contained in s41 of the Act, which applies to certain corporate tax roll-over rules and other provisions contained in the Act. It is important to identify which companies fall within the different definitions of a ‘group of companies’ in order to determine whether one qualifies for the applicable tax relief.