By Joon Chong, Partner & Cor Kraamwinkel, Partner at Webber Wentzel. The proposals in South Africas 2023 National Budget include welcome moves on boosting energy generation, relief for consumers and businesses, and improving the efficiency of tax collection The National Budget delivered today by South Africas Minister of Finance, Enoch Godongwana, showed that the government is making some significant financial commitments to restore Eskom to viability and maintain social grants. But with GDP growth projected at 1.4% on average from 2023 to 2025, and a potential tapering-off of the commodities boom over the medium term, how will the government fund these commitments? Below we analyse some of the key proposals on energy and other relief, as well as steps to protect the tax base, foster economic growth and ensure efficient tax collection. Energy We were pleased that government is taking steps to address the current electricity crisis, which the Read More …
Tax News
Tax considerations for disposing and acquiring of loan accounts owing by connected persons at a price less than base cost or face value
It is not uncommon for loan accounts owing by a company (debtor company) to a shareholder (creditor) to be sold by the creditor together with the shares in the debtor company. So too may creditors be tempted to dispose of a loan owed by the debtor company in circumstances where the debtor company cant service it because of the prevailing economic downturn. In these instances, the market value of the loan may be invariably less than the face value and also the base cost; and, as such, may be sold at a discount to face value resulting in a capital loss. Where the debtor company is a connected person as defined in section 1(1) of the Income Tax Act, 1962 (as amended) (ITA) in relation to the creditor and the loan is sold at a price less than the base cost of the loan (and assuming the base cost is Read More …
Avoid future headaches: raising all grounds of objection is critical in SARS tax disputes
In recent years, SARS has become increasingly litigious, resulting in disputes often ending up in the Tax Court or the High Court. Such a dispute will generally arise when a taxpayer disagrees with an assessment raised by SARS. An aspect of the dispute process that can have dire consequences if overlooked is that a taxpayer must canvas all relevant grounds of objection from the outset, as these form the basis of any future litigation. A case in point isCommissioner for the South African Revenue Service v Airports Company for South Africa.In this case, SARS raised an additional assessment for the taxpayers 2011 year of assessment, disallowing deductions of Corporate Social Investment (CSI) expenditure and allowances in terms of section 13quinand 12F of the Income Tax Act,1962 (the ITA). The taxpayer only objected to the disallowance of the CSI expenditure. No objection was lodged to section 13quin and section 12F allowances Read More …
SCA rules on the imposition of USP where a taxpayer relied on an opinion
The South African Revenue Service (SARS) may impose penalties on taxpayers who make errors in their tax returns, but relief is available under certain circumstances. Understatement penalties (USPs) are levied in terms of section 222(1) of the Tax Administration Act, 2011 (TAA) and provide that in the event of an understatement by a taxpayer, the taxpayer must, in addition to the tax payable, pay a USP, unless it is the consequence of a bona fideinadvertent error. A provision in theTAAfurther states that SARS must remit a penalty imposed for a substantial understatement if it is satisfied that: the taxpayer was in possession of an opinion by an independent registered tax practitioner that was issued by no later than the date the relevant return was due; the opinion was based upon full disclosure of the specific facts and circumstances of the arrangement; and the opinion confirmed that the taxpayers position is Read More …
Another reminder that SARS bears the onus of proving understatement penalties
In the matter ofLance Dickson Construction CC v Commissioner for the South African Revenue Service, the High Court set aside the order of the Tax Court in favour of the South African Revenue Service (SARS) and upheld an appeal by Lance Dickson Construction CC (Taxpayer) with costs. The Taxpayer, in its tax return for the 2017 year of assessment, did not declare any proceeds from the disposal of certain property to a related entity, Kwali Mark Construction CC (KMC), as it believed and as stated in the agreement of sale between the Taxpayer and KMC, that capital gains tax (CGT) would be paid by the Taxpayer when the property was on-sold by KMC to an unrelated third-party and the relevant proceeds were received by the Taxpayer. Because these conditions were not fulfilled in the 2017 year of assessment, the Taxpayer did not declare proceeds on the disposal of the property Read More …
Time bars taxpayers from correcting readily apparent undisputed errors
There are provisions within the Tax Administration Act, 2011 (the TAA) that allow taxpayers to request assessment corrections without having to rely on the often protracted dispute resolution procedures provided for in the TAA, read together with the Tax Court Rules. In particular, section 93 of the TAA deals with Reduced Assessments and provides (with our emphasis) as follows: (1)SARS may make a reduced assessment if (a) the taxpayer successfully disputed the assessment under Chapter 9; (b) necessary to give effect to a settlement under Part F of Chapter 9; (c) necessary to give effect to a judgment pursuant to an appeal under Part E of Chapter 9 and there is no right of further appeal; (d)SARS is satisfied that there is a readily apparent undisputed error in the assessment by (i) SARS; or (ii)the taxpayer in a return; (e) a senior SARS official is satisfied that an assessment was Read More …
Budget 2023 – Govt is so desperate to end load shedding it’s happy to slash your taxes
Government, which is desperate to end load shedding, will reward households and businesses with tax deductions if they opt for renewables. On Wednesday, Finance Minister Enoch Godongwana, during the tabling of the Budget, announced two tax measures to support the rollout of renewables by businesses and households and thereby relieve pressure on the national grid to reduce load shedding. Individuals from 1 March 2023 will be able to claim 25% in tax deductions on the cost of solar PV panels for rooftop installations. The incentive is capped at R15 000 and is available for one year, Godongwana said. So if an individual were to purchase 10 solar panels at the cost of R40 000, their personal income tax liability would be reduced by R10 000 for the 2023/24 financial year. The condition of the tax rebate for households is that the solar panels must be purchased and installed at a Read More …
Budget 2023’s big news: Eskom debt, solar tax bonanza and tough choices
This year’s National Budget, delivered on Wednesday, was dominated by South Africa’s power woes, with Finance Minister Enoch Godongwana announcing that government will take over a large part of Eskom’s debt. In addition, major tax incentives were announced to encourage more South Africans to embrace renewables and get off the grid. The Budget confirmed that South Africa has stepped further away from a fiscal cliff that loomed in 2020, with its ballooning state debt starting to stabilise, and tax revenue larger than previously expected. But Godongwana warned of major risks ahead. State of government finances Thanks to stronger-than-expected tax revenues, South Africa enjoyed a main budget primary surplus meaning that government spending (excluding debt interest payments) is less than the revenue it received – for the first time since 2008/09. Government’s tax income was almost R94 billion more than it expected a year ago. This will help the government’s budget Read More …
Budget 2024 – Budget Speech and Tax Pocket Guides
Budget Speech by the Minister of Finance (1,697kb) Budget Highlights (148kb) Errata – 2023 Budget (Chapter 7) (170kb) Budget 2023 Presentation: Navigating an uneven economic recovery (1,069kb) 2023 Budget FAQs – Solar Panel Tax Incentive (475kb) Budget 2023 Dashboard
Budget 2023 – Tax Proposals
Government proposes tax relief totalling R13 billion in 2023/24 to support the clean energytransition, increase the electricity supply and limit the impact of consistently high fuel prices. R4 billion in relief is provided for individuals that install solar panels, and R5 billion tocompanies through an expansion of the renewable energy tax incentive. Inflation-related adjustments to the personal income tax tables, the retirement tax tables,and transfer duties are provided. Excise duties on alcohol and tobacco will increase in line with expected inflation of 4.9 percent. The rate for sparkling wine is pegged at 3.2 times that of natural unfortified wine. As in the 2022 Budget, government again proposes no changes to the general fuel levy orthe Road Accident Fund levy. To limit the impact of the energy crisis on food prices, the diesel fuel levy refund will beextended to manufacturers of foodstuffs for a period of 2 years, from 1 April Read More …