South Africa updates

Corporate Tax

Contributed by Cliffe Dekker Hofmeyr
Company law versus income tax law: amalgamations now regularised
  • South Africa
  • 19 April 2019

One of the amendments proposed by Budget 2019 aims to reconcile the incongruency that exists between South African company law and income tax law with regard to the deregistration or liquidation of companies that are involved in amalgamation transactions. The amendment is a welcome change, as it will ensure that the Companies Act and the Income Tax Act operate in conjunction with, and in support of, each other.

Domestic treasury management companies – alignment of tax and exchange control provisions
  • South Africa
  • 12 April 2019

When the domestic treasury management company (DTMC) regime came into effect in 2013, a 'DTMC' was defined in the Income Tax Act as a company that is incorporated or deemed to be incorporated in South Africa. The 2019 Budget explains that in 2017 the Income Tax Act was amended to remove this requirement, which conflicts with the South African Reserve Bank's requirements, prompting calls for reassessment.

Controlled foreign company comparable tax threshold to be decreased
  • South Africa
  • 05 April 2019

The 2019 Budget noted that a global downward trend in corporate taxation rates may lead to an unintended increase in the imputation of the net income of controlled foreign companies (CFCs) in South African shareholders' taxable income. This could occur despite the fact that at its inception, a CFC has operated in a jurisdiction with tax rates which met the threshold contained in the Income Tax Act. As such, the budget proposes to reduce the threshold to less than 75%.

Deducting interest for debt incurred during acquisition of shares
  • South Africa
  • 29 March 2019

It has always been a contentious issue whether a purchaser of shares can claim a deduction for the interest that it incurs on monies borrowed to acquire the shares. The legislature intervened by introducing Section 240 of the Income Tax Act, which allows purchasers to deduct interest for a debt that is used to fund the acquisition of shares in certain circumstances. However, the target must be an operating company and form part of the same group of companies as the acquirer.

Anomalies arising from value-shifting rules
  • South Africa
  • 22 March 2019

The Taxation Laws Amendment Act introduced a new section into the Income Tax Act which deals with value mismatches involving the transfer of assets in exchange for the issue of shares. Essentially, the section applies where the value of the asset given in consideration for the shares issued is different from what it would have been had the transaction been between independent persons acting at arm's length.

Environment & Climate Change

National Biodiversity Economy Strategy: opportunities for innovation and investment
  • South Africa
  • 11 February 2019

In October 2018 the draft National Biodiversity Framework (NBF) was published for public comment. Considering that South Africa is the third most biodiverse country in the world, the government, as custodian of the country's biodiversity, has implemented approximately 30 national strategies, frameworks and systems in the biodiversity sector. The NBF's purpose is to coordinate and align the efforts of the many organisations and persons involved in the complex interplay between these strategies.

Healthcare & Life Sciences

Contributed by ENSafrica
Medical cannabis: growing pot-ential
  • South Africa
  • 05 December 2018

Cannabis has enjoyed heightened attention following a recent ruling decriminalising the private possession, consumption and cultivation of the plant for recreational purposes. While there have been several positive developments in the promotion of the medical cannabis market in South Africa, the overarching regulatory framework and authorities' current practice remain barriers to entry for prospective local players in the medical cannabis product manufacturing market.

Bioprospecting and biotrade requirements
  • South Africa
  • 03 October 2018

The Biodiversity Act regulates bioprospecting on and biotrade with indigenous biological resources and indigenous genetic resources and the use of traditional knowledge. Although the early years of regulation under the act were stormy and there was much confusion over who needed to apply for permits and what was required from applicants, there is now more certainty as to what is required.

Ownership of genetic information and tissue under National Health Act
  • South Africa
  • 08 August 2018

The legal and philosophical issues relating to the concept of ownership of various kinds of human biological material has been hotly debated. This is an emotive topic that requires balancing societal and commercial interests with individuals' rights, such as the constitutional right to bodily and psychological integrity, which includes the right not to be subjected to medical research or scientific experiments without giving informed consent.

Focus on healthcare and life sciences legislation: Genetically Modified Organisms Act
  • South Africa
  • 06 June 2018

The Genetically Modified Organisms (GMO) Act provides the requirements to ensure the responsible development, production, use and application of GMOs. Any entity or person planning to perform a regulated activity under the act must prepare an application to the registrar and pay the application fee. Regulated activities include activities involving genetic modification, the experimental or trial release of a GMO, the contained use of a GMO and the general release of or commodity clearance regarding a GMO.

Biopharming: new frontier for affordable medicines
  • South Africa
  • 11 April 2018

The South African government has focused on biopharming as a means of developing the bioeconomy for more than a decade. In addition, different government departments have already implemented legislation concerning plant-based protein production. Given this infrastructure and the highly active local biopharming research community, South Africa is considered a promising jurisdiction for the production of plant-based therapeutic proteins, with many possible opportunities for investment and collaboration.

Intellectual Property

Contributed by KISCH IP
Royalties, currency conversion and taxes: what rights holders need to know
  • South Africa
  • 22 April 2019

South Africa has significant exchange control regulations in place that restrict and require approval for payments in international IP licensing relationships. Typically, if an IP right in issue has been commercialised or if its commercialisation is imminent, exchange control requires an appropriately motivated valuation substantiating the price to be furnished.

Patent law overview
  • South Africa
  • 08 April 2019

A patent grants the holder an exclusive right or monopoly to exclude third parties from exploiting the patented invention for a limited period in a specific territory. This article discusses the nuances of South African law in this regard, including with regard to patentable inventions, patent longevity and the requirements for patent specifications.

Are trade secrets and know-how protected?
  • South Africa
  • 01 April 2019

South Africa has no specific legislation governing trade secrets or know-how, although they can be effectively protected under common law. Parties will often enter into agreements when transferring trade secrets or know-how between each other for any purpose. These agreements expressly protect the use and handling of information and set out the indemnities in respect of its loss or misuse.

Overview of trademark legislation
  • South Africa
  • 25 March 2019

Trademarks are a company's most valuable asset. Over time, they can appreciate in value and as a company's reputation grows, so too will the value of its trademarks. This article provides an overview of South Africa's trademark legislation and serves as a useful guide on, among other things, the trademark application procedure, buying and selling trademarks and company or close corporation name protection.

What constitutes copyright in South Africa and how can it be protected?
  • South Africa
  • 18 March 2019

Under South African statute, the owner of copyright in a work is given the exclusive right to perform certain specified acts in respect of that work or to authorise others to do so, thus preventing unauthorised persons from performing those acts. However, only certain specified categories of work defined in the Copyright Act are eligible for copyright protection.

Real Estate

Clarification in SARS' latest issue of Interpretation Note 64
  • South Africa
  • 11 January 2019

The South African Revenue Service recently published the fourth issue of Interpretation Note 64, which seeks to provide guidance on the application and interpretation of Section 10(1)(e) of the Income Tax Act. With the rising prevalence of complex developments, security estates, shopping centres, wellness compounds and high-rise flats in South Africa, body corporates, homeowners' associations and share block companies are commonplace and clear guidelines as to the taxation of these entities is imperative.

Residential property developers face cash-flow crunch due to VAT on temporary letting of units
  • South Africa
  • 06 April 2018

Many residential property developers will begin 2018 with a major cash-flow challenge, as they may be faced with a substantial value added tax (VAT) liability in respect of the temporary letting of residential units which have been developed for resale. It is hoped that the South African Revenue Service and the National Treasury will urgently address the problems with regard to the VAT rules concerning the change-in-use adjustments for property developers.