The inclusion of any part of an allowance paid or payable in an employees taxable income is governed by section 8(1)(a) of the Income Tax Act 58 of 1962 (Act). At a glance It has recently been reported in the news that the Department of Health has agreed to pay a temporary allowance of R3,153 to nurses in the public sector to enable them to buy uniforms. From a tax perspective, this amount will potentially not be subject to tax. In terms of section 10(1)(nA) of the Income Tax Act 58 of 1962, where an employee is, as a condition of their employment, required while on duty to wear a special uniform which is clearly distinguishable from ordinary clothing, the value of such uniform, or any allowance provided in lieu of any such uniform, given to the employee by his employer, will be exempt from normal tax and therefore not Read More …
Tax News
Tax Vertical mergers are back
Section 44 of the Income Tax Act 58 of 1962 (Tax Act) is one of the lesser used of the so-called corporate rollover relief rules, but is nevertheless one of the more hotly contested. Broadly, it provides for rollover relief from tax where two companies amalgamate to form one company, the other being liquidated.
Court Case – VAT agency and principals
The terms agent and agency are not defined in the Value Added Tax Act 89 of 1991 (VAT Act). The South African Revenue Service (SARS) has indicated in Interpretation Note 42 (IN 42) that it accepts that the common law relationship between the principal and the agent prescribes the value-added tax (VAT) consequences of this legal relationship. The general VAT rule is that where a person, acting as agent, supplies goods or services on behalf of a principal to a third party, the supply is deemed to be made by the principal and not the agent (section 54(1) of the VAT Act). Conversely, where a third-party supplier makes a supply to an agent acting on behalf of a principal, that supply is deemed to be made to the principal (section 54(2) of the VAT Act). In these instances, the principal and not the agent must account for VAT on the Read More …
Commissioner for the South African Revenue Service v Medtronic International Trading S.A.R.L (Case no 456/2021) [2023] ZASCA 20 (03 March 2023)
The Supreme Court of Appeal (SCA) dismissed an appeal from the Gauteng Division of the High Court, Pretoria. This appeal concerned itself with whether certain provisions of the Tax Administration Act 28 of 2011 (TAA) precluded remission of interest levied on late payment of value added tax (VAT), as provided for in the Value Added Tax Act 89 of 1991 (VAT Act).
New tax dispute resolution rules come into effect immediately
New tax dispute resolution rules provide for, amongst others, 80 days to submit an objection and more independence of an ADR facilitator. On 10 March 2023, the Minister of Finance published new dispute resolution rules in the Government Gazette in terms of the Tax Administration Act (TAA). These rules describe the procedures for objections and appeals, for the alternative dispute resolution (ADR) mechanism and for the conduct and hearing of appeals before a Tax Board or Tax Court.
Foreign employers will be required to register with SARS
National Treasury proposed in the February 2023 Budget that it intends to align the obligations on South African and foreign employers, which creates certain practical issues The global trend of remote working, which has surged since the Covid-19 lockdowns, allows employers at one end of the world to employ South Africans (SA) whom they may never have met face-to-face. These arrangements benefit both employers (because they may be able to employ highly skilled workers more cheaply than in their own countries) and employees (who may broaden their opportunities to earn income).
Skirting the Tax Court is not a quick-fix solution to a tax dispute
The road to finalising a dispute against an additional assessment or a SARS decision can be a “protracted slog” to the Tax Court. Recent case law suggests that relief in the High Court is only available in exceptional circumstances. The TAA process Chapter 9 of the Tax Administration Act (TAA) and the dispute resolution rules (Rules) provide for aggrieved taxpayers to dispute assessments and SARS decisions using the objection and appeal procedures.
South Africans bask in solar power tax breaks
Authors: Joon Chong & Chetan Vanmali, Partners at Webber Wentzel. The demand for solar power installations in South Africa is likely to heat up considerably this year after new incentives were announced in the February 2023 Budget. Responding with glacial speed to years of escalating load shedding, National Treasury has provided new incentives for installing solar PV systems to help expand the countrys available power generation.
SARS additional disclosure requirements for tax clearance in respect of transferring funds abroad
SARS has introduced an enhanced compliance system change in relation to the current tax clearance status (TCS) required for the transfer of funds by a taxpayer intending to make use of their foreign investment allowance (FIA) of up to R10 million per calendar year. It has been noted the effective date of this change is24 April 2023. The enhanced changes to the TCS system require additional information on the approval of an International Transfer (AIT) Application, to aid SARS in ensuring that all required tax payable has been duly reported by the taxpayer. It is further noted that this would only apply for amounts in excess of R1 million. No TCS is required for transfers up to R1million per calendar year.
VAT registrations: SARS announces more stringent requirements with immediate effect
An important objective and design principle of SARSs administrative platform is to balance the ease of VAT registration with the potential risk of abuse that this could give rise to: persons merely seeking to obtain a VAT number in order to claim fraudulent VAT refunds. In aMedia Releaseissued by SARS on 11 May 2023, it noted concern following a trend of suspicious VAT registrations during the month of April. In particular, SARS noted that its sophisticated risk system indicated that there was a significant increase in the number of VAT registrations during April. Upon further analysis by SARS it appears that a large number of such VAT registrations were, in their view, created with the intention of defrauding SARS.