Specifications for the reporting of information under FATCA, AEOI and domestic law

Pretoria 3 April 2014 – On 8 February 2013, the National Treasury and the South African Revenue Service (SARS) announced the start of negotiations with the US Department of the Treasury to enter into an inter-governmental agreement (IGA) with respect to the USA’s Foreign Account Tax Compliance Act (FATCA). The wording of a draft IGA has now been agreed upon and will be signed at Governmental level as soon as possible. When signed, the US Treasury will view South African financial institutions as being generally compliant with FATCA.

Section 24I(10A) – unrealised exchange gains and losses on loans between connected persons

Section 24I of the Income Tax Act (“the Act”) governs the income tax treatment of exchange gains or losses made in respect of both realised and unrealised foreign exchange transactions. Unrealised exchange differences on foreign denominated debts between connected persons have been subject to an array of income tax treatments over the past few years. Realisation of the exchange difference is triggered to the extent that the related debts have been repaid, setoff or settled in any other manner. Previous tax treatment of unrealised exchange differences Unrealised exchange differences that arose in respect of foreign denominated capital loans and advances between connected persons, before November 2005, are included, or

Bikini model says SARS ruined her life

 Author: NASHIRA DAVIDS and PHILANI NOMBEMBE MODEL CITIZEN: International swimwear model Candice van der Merwe arrives at the Cape Town High Court with SARS aiming to haul her and her father before an inquiry for tax fraud Picture: Swimwear model Candice van der Merwe’s life has been “devastated” by the “draconian” South African taxman.   Yesterday the Cape Town High Court ordered that she could be hauled before a SARS tax inquiry. Her father, Cape Town businessman Gary van der Merwe, has been involved in tax fraud litigation amounting to millions of rands for almost a decade. The 21-year-old model claimed late last year that an unknown Arab admirer gave $15.3-million (about R168.3-million) after she caught his eye at a private Seychelles resort.

Ruling on the definition of 'listed shares' for purposes of the foreign dividend exemption

Author: Heinrich Louw (Cliff Dekker Hofmeyer) The South African Revenue Service (SARS) released Binding Class Ruling No 42 on 7 February 2014. The factual circumstances in respect of which the ruling was made are as follow: Company Y is a company incorporated and resident in foreign country Y. Company X is a company incorporated and resident in country X. Company X is also a wholly-owned subsidiary of Company Y. Company X is to be listed on the JSE Limited. Its business is investment in foreign debt instruments, on which it will receive interest returns.

Interest on debt instruments with equity features

On 4 July 2013, the draft Taxation Laws Amendment Bill (DTLAB) was issued by National Treasury in terms of which it was proposed that new anti-avoidance rules will be introduced into the Income Tax Act No. 58 of 1962 (the Act) in order to reduce the opportunity for the creation of equity instruments that are artificially disguised as debt instruments. The first set of proposed anti-avoidance rules focus on the features relating to the instrument itself and are contained in section 8F of the Act. The second set of proposed anti-avoidance rules focus on the nature of the yield of the instrument and are contained in section 8FA of the Act.

Firms seeking tax benefits face legal repercussions

THE tax consequences of decisions made in the boardroom have been highlighted in some recent court cases, where judgments were made against parties who had entered into transactions that were motivated by the potential tax benefits it would bring rather than the profits they would generate. A judgment laid down in the case of ABC vs the South African Revenue Service (SARS) heard in the Western Cape Tax Court last year reiterated the importance of paying attention to the details of a transaction as reflected in the financial statements, including related taxes. ABC acquired land with a forest on it and carried on forestry activities on the land. It then sold the land together with the forest for a specific amount, of which R144.7m related to the forest. The question before the court was whether the R144.7m should be included in ABC’s gross income.

On South African tax compliance, tax morality and taxpayers’ freedom to do tax planning – Canada, Ireland and South Africa are not worlds apart

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.”

Amalgamation transactions following asset-for-share transactions

The South African Revenue Service (SARS) recently released Binding Private Ruling 159 (Ruling), which deals with the disposal of assets, being shares, in terms of an amalgamation transaction immediately after having acquired those shares in terms of an asset-for-share transaction. The facts were that companies A and B are controlled by various shareholders (individuals and family trusts). The shareholders wanted to hold their investments through a single company and not through both companies A and B.

Sars takes on South African billionaire

Pretoria – South African billionaire Mark Krok’s local assets, worth R298m, were placed under curatorship by the North Guateng High Court in Pretoria on Friday. The SA Revenue Service (Sars) obtained a final preservation order against the businessman. Judge Hans Fabricius confirmed a provisional preservation order granted in February last year against Krok’s South African assets. The assets include a large portfolio of shares in JSE-listed companies such as African Bank, BHP Billiton, Bidvest, First Rand, MTN, Vodacom, Sasol, SABMiller, and Tsogo Sun. They also include a plot in Plettenberg Bay, a R40m property in Clifton and a Jeep Sahara.

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.