Cliffe Dekker Hofmeyr updates

Doubtful debts no longer so doubtful?
Cliffe Dekker Hofmeyr
  • Corporate Tax
  • South Africa
  • 21 September 2018

The draft Taxation Laws Amendment Bill 2018 has proposed a number of significant legislative amendments, including with regard to the allowance for doubtful debts set out in Section 11(j) of the Income Tax Act. The proposed amendments envisage separating the tax treatment of two defined categories of taxpayer – namely, those which use International Financial Reporting Standards 9 for financial reporting purposes and those which do not.

National Treasury includes cryptocurrencies in draft tax legislation
Cliffe Dekker Hofmeyr
  • Corporate Tax
  • South Africa
  • 14 September 2018

The draft Taxation Laws Amendment Bill, which was recently published for public comment, represents a first for South African taxpayers as it introduces legislative provisions regarding cryptocurrencies. The draft bill is indicative of the National Treasury's approach to the tax treatment of cryptocurrencies, with the proposed amendments demonstrating an identifiable impact on cryptocurrency traders at the outset.

Decrypting the law: proposed VAT Act amendments affecting cryptocurrencies
Cliffe Dekker Hofmeyr
  • Corporate Tax
  • South Africa
  • 07 September 2018

The supply of cryptocurrencies can cause administrative difficulties with regard to the value added tax (VAT) system. As such, the former minister of finance recently proposed that the VAT legislation be amended. In the interim, the South African Revenue Service has stated that it will not require persons to register for VAT for the supply of cryptocurrencies until there has been policy clarification in this regard. The exemption of cryptocurrency transactions from VAT is undoubtedly the preferred route.

Re-prioritising of sorts? Proposals on interaction between dividend stripping rules and corporate reorganisations
Cliffe Dekker Hofmeyr
  • Corporate Tax
  • South Africa
  • 31 August 2018

The Explanatory Memorandum on the Taxation Laws Amendment Bill notes that the 2017 amendments to the Income Tax Act which provided that the anti-avoidance rules on dividend stripping override the corporate reorganisation rules may affect some legitimate transactions. As such, a number of amendments have been proposed to remedy this issue.

Reassurance for taxpayers seeking debt relief
Cliffe Dekker Hofmeyr
  • Corporate Tax
  • South Africa
  • 24 August 2018

Given the current economic climate, debt restructuring and relief have increased and thus received concomitant increased attention from the relevant tax and finance authorities. The latest round of proposed tax amendments in this regard attempt to address a number of concerns discussed in the explanatory memorandum on the draft Taxation Laws Amendment Bill.

If no tax debt, SARS must pay refund: notable judgment on Tax Administration Act's refund provisions
Cliffe Dekker Hofmeyr
  • Corporate Tax
  • South Africa
  • 10 August 2018

A recent judgment dealt with the pertinent and relevant issue of whether the South African Revenue Service (SARS) was legally justified in refusing to pay certain value added tax (VAT) refunds to a taxpayer on the grounds that the taxpayer owed an income tax debt, which SARS alleged was due and payable. The judgment should be seen as positive by taxpayers that have experienced difficulties in getting SARS to pay VAT refunds.

South Africa's first transfer pricing case?
Cliffe Dekker Hofmeyr
  • Corporate Tax
  • South Africa
  • 03 August 2018

Section 31 of the Income Tax Act concerns transfer pricing, one of the most contentious areas of tax law not only in South Africa, but also around the world. Historically, there has been no judicial precedent in South Africa regarding the application of Section 31 – in particular, the arm's-length principle. However, the High Court recently issued its findings regarding the application of certain provisions included in Section 31.

Accrual of amount on cession of right to dividends
Cliffe Dekker Hofmeyr
  • Corporate Tax
  • South Africa
  • 06 July 2018

Dividends are exempt from income tax even if a person receives the dividend by virtue of a cession to that person of the right to receive the dividend. In a notable exception to this principle, if a shareholder cedes the right only to receive dividends (ie, without transferring the other rights attaching to the underlying shares) to a company, the dividend accruing to the company is subject to income tax.

Efficient or inept? Corporate income tax rate and restructuring rules
Cliffe Dekker Hofmeyr
  • Corporate Tax
  • South Africa
  • 29 June 2018

In 2016 the Davis Tax Committee (DTC) formed a corporate income tax (CIT) sub-committee to prepare a CIT report setting out the DTC's position. To ensure that the recommendations made in the report were practical, the DTC took into consideration South Africa's present economic position as well as its outlook. The DTC recognises that in the context of low economic growth, taxes must be raised in a manner that causes as little disruption to economic growth and employment as possible.

Procedure is everything: win for taxpayers and importance of right to just administrative action
Cliffe Dekker Hofmeyr
  • Corporate Tax
  • South Africa
  • 22 June 2018

In recent years, taxpayers have frequently been unsuccessful in their disputes with the South African Revenue Service, especially where the dispute has involved the interpretation or application of the substantive provisions of tax legislation. However, where disputes have involved compliance with the procedural requirements of tax legislation, taxpayers have generally had greater success.

Davis Tax Committee releases final reports
Cliffe Dekker Hofmeyr
  • Corporate Tax
  • South Africa
  • 15 June 2018

The Davis Tax Committee (DTC) recently issued a media statement announcing the publication of four additional final reports and the conclusion of its work based on its terms of reference. The closing report on the work done by the DTC states that the 12 sub-committees consulted widely and that a number of themes emerged from the consultations with various stakeholders. The closing report also mentions some of the challenges faced by the DTC.

Raising jurisdictional issues
Cliffe Dekker Hofmeyr
  • Corporate Tax
  • South Africa
  • 08 June 2018

The focus of a recent Supreme Court of Appeal case was not the merits of the dispute between the parties, but rather the correctness of the procedure that the taxpayer had followed in its appeal to the Tax Court. The Supreme Court of Appeal held that determining whether the Tax Court's decision was appealable was contingent on whether the decision was one contemplated in the Tax Administration Act.

Status of SARS interpretation notes
Cliffe Dekker Hofmeyr
  • Corporate Tax
  • South Africa
  • 01 June 2018

A recent Supreme Court of Appeal judgment referred with approval to certain sections of a South African Revenue Service (SARS) interpretation note. The taxpayer appealed to the Constitutional Court, which held that the courts should not have regard to SARS interpretation notes when interpreting legislation, but may do so where SARS's practice is evidenced by an interpretation note which has been recognised by SARS and the taxpayer.

SARS speaks up: clarity provided on taxation of cryptocurrencies
Cliffe Dekker Hofmeyr
  • Corporate Tax
  • South Africa
  • 25 May 2018

The South African Revenue Service (SARS) recently announced that it will continue to apply normal income tax rules to cryptocurrencies and expects affected taxpayers to declare cryptocurrency gains or losses as part of their taxable income. Due to the growing popularity of cryptocurrencies in South Africa and the absence of legislation concerning their taxation and regulation, SARS's decision to address this issue was widely anticipated.

Tax treatment of doubtful debts to be clarified through statutory amendments
Cliffe Dekker Hofmeyr
  • Corporate Tax
  • South Africa
  • 18 May 2018

In line with the removal of the remnants of the administrative assessment system in 2015, the South African Revenue Services commissioner's discretion in respect of the doubtful debt allowance was to be deleted from the Income Tax Act. The intention behind this deletion was that, in future, the allowance would be claimed according to certain criteria set out in a public notice. However, according to the recent budget, it is now proposed that the criteria for determining the allowance be included in the act.

Tax rate adjustments
Cliffe Dekker Hofmeyr
  • Corporate Tax
  • South Africa
  • 11 May 2018

​Although an increase of 1% in the value added tax rate was announced in the budget in February 2018, no adjustments have been made to the top four income tax brackets. Rather, below-inflation adjustments to the bottom three income tax brackets were announced. It was also announced that the primary, secondary and tertiary rebates will be partially adjusted to account for inflation.

VAT increase: what rate should be charged?
Cliffe Dekker Hofmeyr
  • Corporate Tax
  • South Africa
  • 04 May 2018

The minister of finance recently announced that the standard rate of value added tax (VAT) will increase from the current rate of 14% to 15% from April 2018. Unfortunately, the date of introduction of the new rate leaves vendors little time to amend their systems and implement procedures to ensure that VAT is correctly accounted for from that date. There is also uncertainty as to when supplies still qualify for VAT at 14% and when VAT should be levied at 15%.

SARS issues new Guide to Understatement Penalties – a move towards greater certainty?
Cliffe Dekker Hofmeyr
  • Corporate Tax
  • South Africa
  • 27 April 2018

One of the key changes to the tax administration regime following the Tax Administration Act's promulgation in 2012 was the conversion from the so-called 'additional tax' regime to the understatement penalty regime. While this shift towards greater certainty has been welcomed, a key challenge remains as the new regime's criteria are open to differing interpretations. In this regard, the South African Revenue Service recently published its Guide to Understatement Penalties.

Recent developments in PBO arena
Cliffe Dekker Hofmeyr
  • Corporate Tax
  • South Africa
  • 20 April 2018

The South African Revenue Service (SARS) recently issued a press release regarding its intention to investigate possible tax non-compliance in the religious sector. According to SARS, the investigation is in response to, among other things, general reports which have suggested that certain religious organisations and leaders are contravening tax laws and enriching themselves at the expense of tax compliance and their altruistic and philanthropic purpose.

Consecutive asset-for-share transactions
Cliffe Dekker Hofmeyr
  • Corporate Tax
  • South Africa
  • 06 April 2018

Section 42 of the Income Tax Act allows taxpayers to transfer assets to a company free of immediate tax consequences, provided that certain requirements are met (ie, there is a roll over for tax purposes). However, certain anti-avoidance provisions may be triggered if the company that acquired the assets disposes of them within 18 months of acquisition. The South African Revenue Service recently provided some guidance on this matter in a binding private ruling.

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