Multinational organisations operating in Africa face significant tax exposure and risks in the form of withholding taxes. “Multinationals considering doing business on the continent need to consider the potential tax treatment of their transactions upfront,” says Elandre Brandt, an International Tax Partner at PwC and Head of the Africa Tax Desk based in Johannesburg. “Contractual terms may have a significant impact on the applicable withholding tax, and may range from anything between five percent to as much as 30% of the gross amount of the transaction,” warns Brandt. “Planning for a withholding tax liability allows for certainty regarding the tax liability associated with any commercial transaction.”
Author: Danielle Botha (DLA CLiff Dekker Hofmeyer) Section 98 of the Tax Administration Act, No 28 of 2011 (TAA) makes provision for the withdrawal of an assessment by the South African Revenue Service (SARS) in certain circumstances. Prior to its amendment, s98 allowed for the withdrawal of an assessment (despite no appeal having been noted or objection lodged), that was: a) issued to the incorrect taxpayer; b) issued in respect of the incorrect tax period; or c) issued as a result of an incorrect payment allocation.
Author: SARS Legal and Policy What is it? The institution of legal proceedings is a process whereby a taxpayer delivers court papers to SARS requiring the Commissioner for SARS to appear and defend a matter in the High Court. Prior notice before the institution of the proceedings is required in some instances, particular in matters involving the State. What does the tax and customs laws say? There are two different Acts in terms of which the institution of legal proceedings against the Commissioner for SARS is governed and although they have a similar purpose, the requirements are not identical.
Author: Caroline Rogers and Megan McCormack of ENSafrica In an unreported decision, Jen-Chih Huang and 13 others v Commissioner of SARS and others with case number: SARS 4/2013 and dated 18 November 2013 (“the Unreported Judgement”), Tuchten J of the North Gauteng High Court handed down an important judgment in relation to information and documentation obtained by the South African Revenue Service (“SARS”) in terms of Part D of the Tax Administration Act No. 28 of 2011 (“the TAA”).
Current provisions of the Tax Administration Act The Tax Administration Act No. 28 of 2011 (the TAA) became effective on 1 October 2012 and introduced the understatement penalty regime. In terms of section 222 of the TAA, a taxpayer must pay an understatement penalty in addition to the tax payable for the relevant tax period in the event of an “understatement”. What constitutes an “understatement”? An “understatement” is defined as any prejudice to the South African Revenue Service (SARS) or the fiscus in respect of a tax period as a result of:
In order to avoid interest on the late payment of assessed income tax, taxpayers have to pay outstanding tax by the ‘second date’ indicated on the income tax assessment. We are finding that SARS has shortened the number of days between the date of assessment and the second date in many cases, to only a few days. If your income tax calculation indicated that you will have to make a payment to SARS, please be aware that you may have to make the payment within a few days of submission of your return, in order to avoid interest.
The tax debate, internationally and in South Africa, is progressively focusing on closing perceived tax loopholes (in order to boost collections) and increasing self-assessment through vigorous auditing by the tax authorities. In pursuing this goal, Finance Minister Pravin Gordhan has appointed Judge Dennis Davis as the chairman of the Davis Tax Committee. Davis has been quoted as saying that the challenge for the committee is to design a tax system that, among other things, achieves “the spending needs of the government and its distributional ambitions”. The collection of taxes is important but addresses only one part of the equation.
The Pretoria Tax Court made an interesting ruling in ITC No 1866  75 SATC 268. Section 32(1) of the Value-Added Tax Act No. 89 of 1991 (the VAT Act) states that the following decisions of the South African Revenue Service (SARS) are subject to objection and appeal, namely: In terms of section 23(7) of the VAT Act notifying that person of SARS’s refusal to register that person in terms of the VAT Act. In terms of section 24(6) or (7) of the VAT Act notifying a person of SARS’s decision to cancel, or refusal to cancel his registration in terms of the VAT Act.
The Tax Administration Act, No. 28 of 2011 (the TAA) took effect on 1 October 2012. In light of SARS’s strong emphasis on compliance, this article considers the procedures SARS should follow where it believes that a serious tax offence might have been committed. A “serious tax offence” is defined as “a tax offence for which a person may be liable on conviction to imprisonment for a period exceeding two years without the option of a fine or to a fine exceeding the equivalent amount of a fine under the Adjustment of Fines Act, 1991 (Act No. 101 of 1991).”
An interesting judgment was handed down in the North Gauteng High Court on 3 October 2013 in the matter of Commissioner for the South African Revenue Service v Miles Plant Hire (Pty) Ltd (case no 23533/2013). Miles Plant Hire (Pty) Ltd (the taxpayer) was involved in a dispute with the South African Revenue Service (SARS) in terms of which an appeal was pending. The taxpayer adopted a resolution to file for business rescue. When SARS became aware of the resolution, it brought an application for the setting aside of the resolution, and for the taxpayer to be wound up in terms of section 177(1) of the Tax Administration Act, No. 28 of 2011 (the TAA).