The application of the apportionment rules to South African retirement fund benefits due to South African residents who contributed to these funds while they worked abroad, is currently not clear. The South African Revenue Service (“SARS”) holds the view that lumps sum benefits should be treated differently from annuity payments. This view impacts on the tax treatment of provident fund payments and the lump sum portion of pension fund payments.
Tax News
Proposed gambling tax
In 2011 government announced a national gambling tax proposal, that with effect from 1 April 2012, all gambling winnings above R25,000, including those from the National Lottery, would be subject to a final 15 per cent withholding tax. It was also indicated that similar gambling taxes exist in India, the Netherlands and the United States. According to the Minister the proposed gambling tax would assist in discouraging excessive gambling in South Africa.
Reforming the taxation of trusts: a long time coming
High Net Worth Individuals (HNWI’s) and their use of trusts for tax and estate planning purposes go hand in hand. A trust is often praised for its “flexibility”. Open any financial planning periodical and there’s bound to be an article on the virtue of trusts.
Retirement reform
Treasury released a further Consultation Paper together with the Budget documentation. The reform Consultation Paper is trying to bring together the strands of thinking that were set out very clearly in the four papers released by the National Treasury in September/October 2012.
VAT registration of foreign businesses
The tax issues associated with e commerce on the Internet remains largely unresolved. Enforcement of tax compliance is generally reliant or can be pin-pointed to geographical areas however in cyber space or the Internet world these geographical boundaries do not exist. The underlying question is whether existing direct and indirect principles can be successfully implemented in imposing and enforcing the taxation of e commerce. E commerce changes things of fundamental importance from a direct and indirect tax
Cross issue of shares
DLA Cliffe Dekker HofmeyrAndrew LewisSouth Africa Section 24B of the Act was initially introduced to deal with the acquisition of assets through the issue of shares. Pursuant to the judgment of CIR v Labat Africa Limited 72 SATC 75 a company would ordinarily not incur expenditure in connection with the issue of its own shares and thus the need for s24B. Section 24B of the Income Tax Act was recently amended to only deal with the issue of shares in exchange to the issue of shares (ie the cross-issue of shares), being an “anti-avoidance” provision. Section 24B(2) of the Income Tax Act provides that if a company acquires shares that are issued to that company “directly or indirectly in exchange for shares issued by that company“, that company incurs no expenditure for the acquisition of the shares issued to it. As a result, the subsequent disposal of the shares by Read More …
Withholding taxes – extended to service fees
Taxpayers have been anticipating the introduction of a withholding tax on interest paid to non-residents for a number of years now. The effective date for the commencement of the withholding tax on interest will be further delayed from 1 July 2013 to 1 March 2014. The royalty withholding tax to be imposed at a rate of 15% (which is currently imposed at a rate of 12%) will also be delayed until 1 March 2014.
Share schemes
Share incentive schemes are once again in the spot light in this year’s tax budget proposals. It appears that previous amendments have not satisfied Treasury’s concerns on share incentive schemes. Treasury indicates that some staff equity schemes are used as a tool to lower overall tax rates for executives and other-high-income earners. Schemes for lower income taxpayers are sometimes subject to anomalies that may give rise to double taxation.
Budget review – 2013 budget highlights
Introduction The 2013 budget read by the Minister of Finance on 27th February 2013 contains relatively fewer tax proposals than prior years. However, some of the proposals are quite far reaching particularly relating to Trusts and Corporate gearing. In this brief analysis we highlight some of the key proposals for tax law changes.
The tax saving opportunities of e-toll
Issued by Philip Rosenberg, TaxTalk The introduction of an e-tolling system on roads in certain Gauteng areas were strongly opposed by the parties affected. Not only are consumers faced with a persistent increase in the petrol price, but they are now also exposed to additional traveling expenses each time they pass an e-toll gantry. This situation can be financially overwhelming for some people but fortunately there may be a light at the end of the tunnel for taxpayers.