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FEATURED ARTICLE: Tax Issues for SMME

The primary responsibility of the tax practitioner with regard to the submission of the ITR14 is to ensure that complete and accurate information is submitted to SARS and that defendable positions are taken whenever Uncertain Tax Positions arise. The tax compliance function is not simply an administrative function; the tax practitioner must exercise “reasonable care” when preparing the ITR14. Failure to do so may lead to an understatement penalty of 25% in a standard case – even where the...

SAIT CPD
PAGSA Newsflash 2018-14: UIF Declaration Changes Delayed

During 2017, a number of communications (PAGSA Newsflashes 201737, 201740, 201803 and PAGSA Newsletter 201801) were issued to inform you of the amendments to the Unemployment Insurance Act, as well as the intention that the current E03 Declaration specification that payrolls must comply with to create the monthly declaration file for submission to the Fund, will be changed to accommodate the new requirements resulting from the amendments.

Payroll Authors Group of South Africa
Diesel Refund Survey

We are running a survey to determine whether participants are experiencing delays in receiving diesel refunds from SARS.  Please participate in this survey if you claim the diesel refund either on your business/operation’s behalf (e.g. you are a farmer or a mining company employee) or on behalf of your client/s (i.e. you are a tax practitioner).  The survey will run until 31 May 2018.

SAIT Technical

Tax Administration & Interpretation
(SARS and Office of the Tax Ombud)

FAIR PLAY ISSUE 8

Welcome to the eight issue of the Office of the Tax Ombud’s stakeholder newsletter, Fair Play, a vibrant and informative newsletter which aims to keep stakeholders abreast of important matters affecting the Office and developments in the tax recourse sphere. Click the link below to read the full newsletter or find it on our Publications Page.

Tax Ombud
Notice 480 GG 41621 11 May 2018

Incidences of non-compliance by a person in terms of section 210(2), that are subject to a fixed amount penalty in accordance with sections 210(1) and 211 of the Act

SARS
Draft Notice in terms of Section 25 of the TAA 2011

Persons specified in the attached Schedule must submit returns for the 2018 year of assessment, as defined in the Schedule.

SARS

TAX CASES

S G Taxpayer v Commissioner for the South African Revenue Service (IT14264) [2018] ZATC 1 (9 May 2018)

The central issue in this matter is whether, as the appellant (“the taxpayer”) contends, there is a sufficiently close connection between the contribution of R48 million (“the expense”) paid by it to a certain Trust in respect of its own employee management share incentive scheme (“the scheme”), and its production of income during the 2005 to 2012 years of assessment (“the income”) for purposes of s 11(a) of the Income Tax Act.

SARS Court Cases
TCIT 13492 JHB 01 March 2017

The appellant is an entity called AB CC which made various loans to its related close corporations and companies during the years of assessment which are relevant to this appeal – namely the years 2007 – 2011.

SARS Court Cases
TCIT 13863 JHB 30 November 2017

The appellant conducts business as a “contract miner”. It concludes contracts with third parties who hold mining rights and it undertakes to render certain services to such parties.

SARS Court Cases

Legislative & Policy
(National Treasury & Parliament)

Rates and Monetary Amounts and Amendment of Revenue Laws (“VAT”) Bill: Briefing & Public Hearings; Davis Tax Committee

The Standing Committee on Finance, jointly with the Select Committee on Finance, held public hearings on the Rates and Monetary Amounts and Amendment of Revenue Laws Bill. National Treasury highlighted that the Rates Bill was published on Budget Day and dealt with key rate monetary threshold changes, and more complex tax proposals would be dealt with in Tax Laws Amendment Bill (TLAB) and Tax Administration Laws Amendment Bill (TALAB) to be published in July for public comments. Tax proposals...

Parliamentary Monitoring Group
Terms of Reference for the Independent Panel of Experts for the Review of Current List of VAT Zero Rated Food Items

The Value-Added Tax (VAT) rate was increased from 14 to 15 per cent on 01 April 2018, as was announced in the February 2018 National Annual Budget. The increase of the VAT rate by one percentage point is expected to raise additional revenue in the amount of R22.9 billion in 2018/19. The decision to increase the VAT rate was taken to protect the integrity of the public finances by narrowing the budget deficit, stabilising government debt and laying the foundation for new investment and...

National Treasury
Latest SAIT Submissions to National Treasury / SARS / Parliaments Finance Committees

SAIT have commented on various proposed amendments to tax legislation and draft interpretation notes in these submissions made on behalf of our members.

SAIT Tax Policy

Call For Comment
SAIT member comments can be directed to taxpolicyadmin@thesait.org.za

Call for Submissions - The independent panel of experts to review the current list of vat zero-rated items

On 25 April 2018, the Minister of Finance published the Terms of Reference for the Independent Panel of Experts to review the current list of zero-rated items, and consider the most effective way to mitigate the impact of the increase in the VAT rate on poor and low-income households. Next due date for comments: 24 May 2018 New!

National Treasury
Income Tax Act, 1962​

Draft Guide on MAPs: DTAs or tax treaties as they may be referred to, are international agreements between the governments of two jurisdictions aimed at eliminating double taxation with respect to taxes on income and on capital without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance.  Next due date for comments: ​15 June 2018 New!

SARS
Tax Administration Act, 2011

Draft notice about returns to be submitted by a person in terms of section 25:  Persons specified in the Schedule to the Notice must submit returns for the 2018 year of assessment, as defined in the Schedule, within the periods specified in the Schedule. Next due date for comments: 23 May 2018

SARS

International and Regional News
(OECD and ATAF)

OECD releases decisions on 11 preferential regimes of BEPS Inclusive Framework Members

Governments are continuing to make swift progress in bringing their preferential tax regimes in compliance with the OECD/G20 BEPS standards to improve the international tax framework. Today the Inclusive Framework released the updates to the results for preferential regime reviews conducted by the Forum on Harmful Tax Practices (FHTP) in connection with BEPS Action 5.

OECD
The United Arab Emirates joins the Inclusive Framework on BEPS

The United Arab Emirates has become the 116th jurisdiction to join the Inclusive Framework on BEPS (“IF”). The IF was established in January 2016, after the G20 Leaders urged the timely implementation of the BEPS package released in October 2015 and called on the OECD to develop a more inclusive framework with the involvement of interested non-G20 countries and jurisdictions, including developing economies.

OECD
Bahrain joins the Inclusive Framework on BEPS

The Inclusive Framework welcomes Bahrain, bringing to 115 the total number of countries and jurisdictions participating on an equal footing in the Project.

OECD

CPD Events

PROFESSIONAL INSIGHT

Refining rules for debt-financed acquisitions of controlling interest in an operating company

Section 24O of the Income Tax Act 58 of 1962 (ITA) was introduced in 2012 and was aimed at discouraging the use of so called "debt push-down" structures (using section 45) by deeming interest incurred on a loan used by a taxpayer to acquire shares in a resident operating company (as defined in section 24O), to be incurred in the production of the income of that taxpayer and laid out for the purposes of its trade. This deeming provision allowed such taxpayer to claim interest expenses as a...

Kyle Beilings - Webber Wentzel
Treatment of trading profits realised by collective investment schemes

Paragraph 61 of the Eighth Schedule of the Income Tax Act 58 of 1962 (ITA) provides that a holder of a "participatory interest" in a portfolio of a collective investment scheme (other than a portfolio of a collective investment scheme in property), must determine a capital gain or capital loss in respect of the participatory interest only upon the disposal of that participatory interest. Any capital gain or capital loss in respect of the disposal of an asset by a portfolio of a collective...

Graham Viljoen & Lisa Lumley - Webber Wentzel
Overlap in treatment of dividend

Section 1 of the Income Tax Act (ITA) defines a "dividend" to be any amount transferred by a resident company for the benefit of any person in respect of any share in that company whether by way of a distribution or consideration for a share repurchase but does not exclude a reduction of contributed tax capital of the company.

Joon Chong - Webber Wentzel
Notification of commencement of audit

The obligation of SARS to collect tax and taxpayers' rights are often at odds with each other. In an attempt to address this issue, the Budget 2018 (Budget) proposes to reconcile the taxpayers' constitutional rights with SARS' constitutional obligations by including a provision in the Tax Administration Act 28 of 2011 (TAA) stipulating that SARS must inform the taxpayer at commencement of the audit when the information submitted in a tax return will be audited. The provision is intended to...

Nirvasha Singh & Yashika Singh - Webber Wentzel
Tax Revenews | issue 5

Issue 5 of ENSafrica’s tax revenews, a snapshot of the latest tax developments in South Africa. 

The Tax Department - ENSafrica
Indian revenue authority gets pole position against Formula One

The concept of a permanent establishment (PE) is a fundamental concept in international tax law as it establishes the right to tax business profits of non-resident entities in the country where business activities are carried out. There is no single infallible test of invariable application regarding what constitutes a PE, however in most tax treaties, a PE is generally considered to be a fixed place of business through which the business of an enterprise is wholly or partly carried on. 

Gigi Nyanin - Cliffe Dekker Hofmeyr
Employee share schemes: Tax deductibility of employer contributions

Many employee share incentive schemes work as follows: The employer company forms a scheme trust. The company pays a non-refundable cash contribution (or grant) to the trust (instead of, say, lending cash to the trust). The trust uses the cash to buy, or subscribe for, shares in the employer company or another related company. Eligible employees are given the opportunity to participate in the scheme by, say, acquiring units in the trust, subject to the employees continuing to comply with...

Ben Strauss - Cliffe Dekker Hofmeyr
PWC Tax Alert: Fixed non-compliance penalties imposed on TP documentation

The SA Revenue Service (“SARS”) has indicated that the failure by a SA-resident Tier 1 company to submit a Country-by-Country report (“CbCR”), Master file (“MF”) or Local file (“LF”) return within 12 months from the final day of the group’s “Ultimate Parent Entity’s” financial year end will be an instance of non-compliance that will, in terms of sections 210(1) and 211 of the SA Tax Administration Act (“the TAA”), attract a financial penalty of up to R16,000 per month.

PWC
Africa tax in brief

AFRICA: Continental Free Trade Agreement approved by Ghana and RwandaThe Council of Ministers of Rwanda approved the African Continental Free Trade Area Agreement (“ACFTA”) on 11 April 2018 and the Ghanaian Parliament ratified the ACFTA on 26 April 2018. As reported earlier, the ACFTA will come into force upon ratification by at least 22 countries. 

Celia Becker - ENSafrica

Tax News In The Press

Minister Nhlanhla Nene - Finance Dept Budget Vote 2018/19

[Govt of SA] 2018 Budget Vote: National Treasury opening address Nhlanhla Nene Minister of Finance

Red Ants 'Win Back' Tax Compliance Status in Legal Wrangle With SARS

[News24Wire] The South African Revenue Service (SARS) has been given 24 hours to restore the tax compliance status of Red Ant Security and Eviction Services, the company known for the tearing down of illegally-erected houses, which could collapse without the critical compliance status.

2018 Budget Vote: National Treasury, Opening Address, Nhlanhla Nene, Minister of Finance

National Treasury is the custodian of the long-term prosperity of South Africa, a mandate it derives from none other than the supreme law of the land, the Constitution. This mandate is further fleshed out in the Public Finance Management Act, the PFMA

National Treasury
A small change in legislation could earn Sars R5bn

A small change in the Tobacco Products Control Act will give the tax man the authority to collect an additional R5 billion per year in excise duty and solve the problem of trade in illicit cigarettes.

Adriaan Kruger - Moneyweb
Africa Will Be Pretoria's Real Testing Ground On Foreign Policy

[ISS] This week, in her maiden budget speech as South Africa's minister of International Relations and Cooperation, Lindiwe Sisulu promised a thorough review of South Africa's foreign policy. She told Parliament that in the memory of democratic South Africa's first president Nelson Mandela, who was born 100 years ago, the country had 'a responsibility to regain that stature that he left for us'.

Hogan Lovells Went Out of Their Way Not to Investigate SARS' Jonas Makwakwa, Documents Show

[Daily Maverick] The tale of State Capture is incomplete when the looting of state coffers is discussed and denounced as if in the exclusive purview of public officials. When successful, the event co-exists in a mutually parasitic relationship where the public purse is the feeding ground and corporates are the enablers and agents of whitewash. The #GuptaLeaks portrayed this eloquently when journalists shone a spotlight on the immorality and malpractice of the KPMGs, McKinseys and Bell...