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Debt restructuring – practical considerationsWith effect from 1 January 2013, new rules were introduced in the Income Tax Act No. 58 of 1962 (‘the Act’) governing the tax consequences flowing from the reduction or waiver of debts. According to the Explanatory Memorandum, the amendments were prompted in response to the global financial crisis and the unusually large number of companies facing financial distress. The intention was therefore to establish a mechanism which facilitated debt reductions without creating an additional obligation to pay further tax. Share
The importance of documentation in tax disputes highlighted in the new dispute resolution rulesWith effect from 1 January 2013, new rules were introduced in the Income Tax Act No. 58 of 1962 (‘the Act’) governing the tax consequences flowing from the reduction or waiver of debts. According to the Explanatory Memorandum, the amendments were prompted in response to the global financial crisis and the unusually large number of companies facing financial distress. The intention was therefore to establish a mechanism which facilitated debt reductions without creating an additional obligation to pay further tax. Share
Collection and exchange of tax related information by tax authoritiesTax authorities across the globe are working aggressively to collect taxes which they believe are collectable in their respective jurisdictions. States are entering into bilateral and multilateral agreements aimed at assisting each other in the collection of information and taxes. South Africa has actively taken part and in some respects been a regional leader in issues relating to the gathering of information and sharing thereof with other states to Share
Securities transfer tax and earnout provisionsIntroduction Often the parties to a sale of shares agreement agree to an earnout clause – a provision that part of the price will be paid in future if certain conditions are met. For example, the parties may agree that while the seller must transfer ownership of all the shares to the purchaser at the time of the sale, the purchaser will pay part of the purchase price only if the company reaches specified financial targets in future. Share
Contentious international corporate restructuring rulingAuthor: Andrew Lewis (Cliffe Dekker Hofmeyr) The corporate tax rollover relief provisions contained in section 41 to section 47 of the Income Tax Act, No 58 of 1962 (Act) were recently expanded to cater for international corporate restructurings. The South African Revenue Service (SARS) released Binding Private Ruling 178 (BPR 178) on 14 August 2014 where the applicant sought clarity on the tax consequences of an international corporate restructuring in terms of section 42 (asset-for-share transactions) and s45 (intra-group transactions).  Share
How to calculate your medical tax creditAuthor: Ingé Lamprecht (Moneyweb) New system less beneficial to higher income earners. JOHANNESBURG – In an effort to improve the fairness and equity of the tax system, tax deductions for medical aid contributions and expenses have gradually been replaced with a tax credit system over the last few years. Share
Potential tools in a well-structured estate planAuthor: Anton Maskowitz (Moneyweb) Offshore trusts and companies could be essential. Although recent statistics have shown a steady decrease in the volume of offshore trusts and companies being established by South Africans for tax planning purposes, their value is just as relevant today for estate planning purposes as it had been in years gone by. Share
Nine things to know about tax-free savingsAuthor: Ingé Lamprecht (Moneyweb) JOHANNESBURG – Over the past six months, Moneyweb has published a number of articles about National Treasury’s proposal to introduce tax-free savings accounts from March 1 next year. Each time we have been flooded with e-mails asking for more information. This column gives an overview of these accounts and tries to answer a couple of these questions. Share
Which medical expenses are tax deductible?Author: Ingé Lamprecht (Moneyweb) Deductions soon to be replaced by credits. JOHANNESBURG – The current tax filing season, which covers the 2014 tax year, marks the last time individuals will be able to claim a tax deduction for qualifying medical expenses.( From next year, this deduction will be replaced with a medical tax credit, similar to the one already applicable to medical aid contributions for taxpayers below the age of 65. Share
Proposed changes to reportable arrangementsThe concept of reportable arrangements was introduced in 2005 to require early disclosure to the South African Revenue Service (SARS) of certain types of transaction that may give rise to tax avoidance concerns so as to enable SARS to investigate them timeously. Fewer than 150 transactions were reported by 2008, causing significant amendments to the reportable arrangement legislation to ensure a greater response. The draft Taxation Laws Amendment Bill of 2014, published in July for public comment, contains several proposed changes to the reportable arrangement legislation. Some of the main proposals are: Share
Refundable compliance rebate – revision of small business corporation tax reliefOne of the important proposals relates to the revision of the Small Business Corporation (SBC) tax regime. An SBC is defined in s12E(4)(a) of the Income Tax Act, No 58 of 1962 as any close corporation or cooperative or any private company as defined in the Companies Act, No 71 of 2008 (thus excluding trusts, sole proprietors and partnerships), all shareholders of which are at all times during the year of assessment natural persons, where the gross income for the year of assessment does not exceed R20 million per annum. A number of other limitations with regard to shareholding andContinue reading Continue reading →
South Africa: transfer pricing legislation to be amended againThe draft Taxation Laws Amendment Bill (“DTLAB”), released for public comment on 17 July 2014, proposes certain changes to the transfer pricing secondary adjustment mechanism in terms of which the amount of the secondary adjustment will now be deemed to be a dividend in specie paid by the South African taxpayer to the non-resident connected person. Share
The implications of FATCA in South AfricaBackground The Foreign Account Tax Compliance Act (FATCA) was enacted in 2010 by the US to target non-compliance by US taxpayers using foreign accounts. FATCA essentially requires foreign financial institutions to report information about financial accounts held by US taxpayers, or by foreign entities in which such taxpayers hold a substantial ownership interest, to the IRS. Until now, FATCA has largely impacted US taxpayers with specified foreign financial assets. Share
Donating to Public Benefit OrganisationsPublic benefit organisations (‘PBOs’) provide invaluable healthcare, education, poverty alleviation, housing, conservation, environmental, cultural and religious services in South Africa. The important role that these organisations play in our society is recognised by the legislature which has provided PBOs with a number of tax advantages. Share
Are Gains From the Sale of Share Scheme Shares Being Correctly Taxed?This article, which examines the taxation treatment that results from the sale of share scheme shares, concludes that it is advisable to hold any shares for a period of at least three years before disposing of them – including shares acquired in terms of an employer’s share incentive scheme. Section 8C of the Income Tax Act (‘the Act’) taxes gains and allows for the deduction of losses arising on the vesting of ‘equity instruments’ that are acquired by virtue of employment, or office of director of any company, or from any person by arrangement with the taxpayer’s employer. The mostContinue reading Continue reading →
STC Credits to Expire on 31 March 2015Companies should take note of the fact that Secondary Tax on Companies (STC) credits that they have accumulated up to 31 March 2015 will expire on that date. The implication is that companies with STC credits should take advantage of the credits by paying dividends on or before 31 March 2015. The benefit of STC credits is only enjoyed at the point where dividends are distributed to shareholders who are not exempt from the Dividends Tax – for example where dividends are paid to shareholders who are natural persons. Therefore multi-tier groups of companies will have to pay dividends allContinue reading Continue reading →
Important Notice: 60 Day Time Limit Placed on Section 6quin RebateIt has come to our attention that there are still taxpayers who are unaware of the fact that they have to notify SARS within 60 days (from the date the foreign tax was withheld) if they intend to use the section 6quin rebate for foreign withholding taxes paid. The Taxation Laws Amendment Act No. 24 of 2011 (TLAA) introduced subsection (3A) to section 6quin of the Income Tax Act in January 2012. Share
Challenges for corporate taxpayers and the role of advisorsAuthor: Pieter van der Zwan (North-West University) Being a corporate taxpayer in an environment with constant developments in legislation and regulations coupled with complex tax issues that arise on a regular basis is not an easy task. One need not look further than a number of cases that appeared before the courts over the past year to see evidence of this. It is submitted that the nature of the challenges faced highlights the fact that the role of a corporate tax advisor’s involvement in the tax affairs of a client has evolved to be much more than merely assisting toContinue reading Continue reading →
The case of GB Mining v Commissioner: SARSAuthor: Erich Bell (SAIT Technical) This case stems from disallowed and partially disallowed objections raised against revised assessments for the 2003-2006 tax years of the appellant, GB Mining, where the matter went on appeal through the Pretoria Tax Court which dismissed the appeal except for certain management fees which do not form part of the appeal to the SCA. This case clearly highlights the importance of supporting information submitted with a return and the burden of proof on the taxpayer when disputing an assessment. Share
Tax advisory work in the context of Mergers and AcquisitionsAuthor: Stephen Zaaiman (Renmere) It is difficult to define the term ‘Mergers and Acquisitions’ or ‘M&A’ as an abstract concept.  Whereas most commercially-minded practitioners ‘know it when they see it’, it often seems that no single definition quite succeeds in capturing the concept within four corners.  This is particularly true in the field of tax where it is not uncommon for the resident M&A practitioner to declare jurisdictional authority over anything ranging from a residential lease agreement to a capital allowance review.   Share
Relief from transfer pricing for controlled foreign companiesAuthor: Arnaaz Camay (ENSafrica) The current transfer pricing provisions contained in section 31 of the Income Tax Act, 58 of 1962 came into effect on 1 April 2012 and are applicable for years of assessment commencing on or after that date. In terms of section 31(2), where: Share
Government improves customs efficiency but holds off on tax increasesAuthor: Kayn Woolmer (Deloitte) The draft Customs Duty Bill and Customs Control Bill have been under development for almost six years now. As such it was expected that the Minister of Finance would make some mention as to when these bills would be promulgated into legislation thereby paving the way for enhanced customs controls and potentially improved customs management techniques and opportunities for both SARS and businesses in his Budget Speech earlier this year. Share
The Supreme Court of Appeal admonishes the South African Revenue ServiceAuthor: Beric Croome  Under the provisions of the Tax Administration Act, the Commissioner: South African Revenue Service (‘SARS’) is entitled to request that a taxpayer submits relevant material that SARS requires in terms of section 46 of the Tax Administration Act No. 28 of 2011 (‘TAA’). Section 1 of the TAA in turn defines ‘relevant material’ as meaning: Share
Branch vs. Subsidiary: Key tax considerationsAuthor: Wendy Lumsden Foreign investors frequently face the decision of whether to conduct operations in South Africa as a branch or whether to setup a subsidiary for undertaking South African activities. This article highlights the key South African tax consequences of a Branch as opposed to those of a Subsidiary and considers some of the other key considerations, such as legal liability. Share
Capital gains tax, savings and inflationAuthor: Ben Strauss of DLA Cliffe Dekker Hofmeyr Consider the following example: A taxpayer bought shares for R100 000 on 1 June 2004, and sold them on 1 June 2014. Assume that: the inflation rate during the period the shares were held was 6% per year compounded; the value of the shares grew at a (generous) rate of 10% per year compounded; the taxpayer has no other capital gains during the tax year ending 28 February 2015 and has no assessed capital loss; and the taxpayer pays income tax at the highest marginal rate of 40%. Share
Allowances in respect of public private partnershipsAuthors: Nicole Paulsen and Gigi Nyanin of DLA Cliffe Dekker Hofmeyr On 17 July 2014, the National Treasury released the draft Taxation Laws Amendment Bill (TLAB) which aims to give effect to the various tax proposals announced in the 2014 Budget. Share
Remedy for declined tax clearance certificateOn 18 February 2014 the North Gauteng High Court delivered a judgment on the remedies available when a tax clearance certificate (‘TCC’) is declined by SARS. What is clear from the judgment is that when a taxpayer is dependent on a TCC for financial or business purposes and it gets declined by SARS, the potential impending economic harm that may come to a taxpayer from such refusal does not entitle the taxpayer to a court order compelling SARS to issue such a TCC sought. Share
Discussion paper on the assumption of contingent liabilities in a going concern acquisitionSARS released the above discussion paper in December 2013 and it was open for comment to 31 March 2014. It deals with the treatment of so-called ‘free-standing’ contingent liabilities from the points of view of the seller as well as the purchaser, where the contingent liabilities are assumed by the purchaser as part settlement of the purchase price for the acquisition of the assets of a going concern. It distinguishes between valuation provisions, ‘embedded’ obligations and free-standing contingent liabilities. A valuation provision, for example a provision for doubtful debts and an embedded obligation, for example the statutory duty to reforestContinue reading Continue reading →
Binding Ruling on leasehold improvementsThe South African Revenue Service (SARS) released binding private ruling 177 (Ruling) on 31 July 2014. The Ruling concerned a lease and a sublease and SARS was asked to rule on the income tax consequences for, inter alia, the landlord in circumstances where there is an obligation on the sub-lessee to make improvements to the land. Share
Securities transfer tax and “earnout” provisionsOften parties to a sale of shares agreement agree to an ‘earnout’ or ‘agterskot’ clause: a provision that part of the price will be paid in future if certain conditions are met. For example, the parties may agree that, while the seller must transfer ownership of all the shares to the purchaser at the time of the sale, the purchaser will pay a part of the purchase price only if the company reaches specified financial targets in future. Share
SARS revelations: Lawyer silent on spy claimsThe lawyer who laid a complaint against SARS group executive Johann van Loggenberg after their relationship ended refused on Sunday to comment on reports that she was a State Security Agency spy. “I don’t want to comment and I will be issuing a summons against City Press,” Belinda Walter told Sapa. Share
Youth wage subsidy a delicate balancing actAuthor: Talita Laubscher (Bowman Gilfillan Africa Group) The Employment Tax Incentives Act, 2013 (EITA), was signed into law on 18 December 2013 as one of government’s responses to the persistently high rate of youth unemployment. The EITA seeks to encourage the employment of younger workers by allowing a reduction in the mandatory pay as you earn tax (PAYE) that is payable by employers to the South African Revenue Service (SARS), in respect of employees who qualify in terms of the Act. The EITA has, however, not been without controversy. Share
Securities transfer tax and “earnout” provisionsAuthor: Ben Strauss (Cliffe Dekker Hofmeyr) Often parties to a sale of shares agreement agree to an ‘earnout’ or ‘agterskot’ clause: a provision that part of the price will be paid in future if certain conditions are met. For example, the parties may agree that, while the seller must transfer ownership of all the shares to the purchaser at the time of the sale, the purchaser will pay a part of the purchase price only if the company reaches specified financial targets in future.  Share
Ruling on leasehold improvementsAuthor: Heirich Louw (Cliffe Dekker Hofmeyr) The South African Revenue Service (SARS) released binding private ruling 177 (Ruling) on 31 July 2014. The Ruling concerned a lease and a sublease and SARS was asked to rule on the income tax consequences for, inter alia, the landlord in circumstances where there is an obligation on the sub-lessee to make improvements to the land. Share
Disposals by share incentive trustsThe South African Revenue Service (SARS) issued Binding Private Ruling 174 (Ruling) on 29 July 2014. The applicant was a share incentive trust established by a local company for the benefit of its employees in senior management. It was proposed that the company would make cash contributions to the trust and the trust would use the cash to purchase shares in the company on the open market. In terms of the incentive scheme, the trust would award the shares in tranches to the employees over a period. When the shares vest, the trust would transfer the shares to the employees.Continue reading Continue reading →
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