Navigating the proposed amendments to section 7C: what taxpayers [...]

On 31 July 2023, National Treasury published the 2023 Draft Tax Amendment Bills for public comment. For a summary of some of the proposed amendments that will impact corporate tax compliance,

Section 31 of the Income Tax Act empowers SARS to alter the tax consequences arising from cross-border financial assistance between connected persons. In a recently published SARS Interpretation Note, it is evident that the manipulation of cross-border pricing to generate undue tax benefits or to artificially allocate profits, may cost corporate taxpayers an arm and a leg.

Effective 16 September 2022, the IT14SD was discontinued. Since its discontinuation, there has been an increase in verification / relevant material requests issued by SARS. 

The Tax Administration Act No. 28 (2011) (“TAA”) allows the South African Revenue Service to provide and procure administrative assistance to and from foreign tax authorities under international tax agreements. Such administrative assistance can be effected in the form of an automatic exchange of information request.

For a summary of some of the proposed corporate tax policy and administrative adjustments resulting from the 2022 annual tax policy review,

For any tax system to be fair, effective and efficient, it has to be flexible. Current international tax rules have created certainty by facilitating the implementation of arm’s length principles and attempting to eliminate double taxation. However, increased digitalisation of various economic sectors has emphasised that the current international tax rules are not adequately designed to accommodate business models that do not require physical presence in an enterprise’s target markets and where value creation is driven mainly by intangible assets.

Of late, it appears as if the courts are increasingly leaning towards the interpretation of tax law in a manner that is in accordance with constitutionally compliant precepts. This emphasises that the interpretation of tax law is evolving on a continuous basis and that now, more than ever, the outcome depends on the facts and circumstances of each case. This interpretative evolution has even resulted in a court disregarding a SARS Interpretation Note in making its ruling.

In the 2021 Budget Speech, Finance Minister Tito Mboweni indicated that South Africa has a relatively high corporate income tax rate in comparison with other countries. Government’s policy intent is to reduce the number of tax incentives, expenditure deductions and assessed loss offsets available to corporate taxpayers, with the view of lowering the corporate income tax rate over the medium term. In line with Government’s policy objectives, it was announced that the corporate income tax rate will reduce to 27% for companies with years of assessment commencing on or after 1 April 2022. For a summary of other corporate income tax proposals:

SARS recently issued Interpretation Note No. 47 (Issue 4) – Wear-and-tear or Depreciation Allowance (“SARS IN47”). SARS IN47 provides guidance on the application and interpretation of the provisions of section 11(e) of the Income Tax Act, and applies to assets brought into use on / after 24 March 2020.

The Disaster Management Tax Relief Bill No. 11 (2020) proposed amendments to the provisions of the Employment Tax Incentive Act No. 26 (2013), entitling qualifying employers to claim additional ETI amounts for the period 1 April 2020 – 31 July 2020. The last opportunity to claim any additional ETI amounts is in the August 2020 EMP201.

On 23 April 2020, National Treasury released a media statement with respect to further tax measures introduced to combat the COVID-19 pandemic. On 1 May 2020, National Treasury also released the Draft COVID-19 Tax Bills that have been updated to reflect the relief measures requiring legislative amendments. One of the measures announced by National Treasury, was to allow larger businesses to apply to SARS on a case-by-case basis to defer tax payments without incurring penalties, where such businesses can show that they are incapable of making tax payments due to the COVID-19 pandemic. Larger businesses are those businesses with a gross income of more than R100 million (previously R50 million). Following this announcement, SARS has now provided guidance on the process to be followed and the requirements that should be met to apply for the waiving of penalties for tax debt.

Last week, SARS announced the implementation of measures to ensure the safety of all of its employees and clients. It is expected that these measures will be tightened as a result of President Cyril Ramaphosa’s announcement of a nationwide lockdown in light of the COVID-19 pandemic. Want to know more about the SARS measures and the measures announced by President Ramaphosa?

Of late, it is our experience that there is an increase in the severity of understatement penalties imposed by SARS. How can taxpayers safeguard against the imposition of severe penalties?

With the ever-increasing cost of living, annual remuneration increases may not always be sufficient to increase employees’ buying power. One other mechanism that employers can use to assist their employees, is by granting employees bursaries or scholarships for educational expenditure. If an employer grants a bursary or scholarship to a qualifying employee or a relative of such employee, the bursary or scholarship may possibly be exempt from normal income tax in terms of sections 10(1)(q) and 10(1)(qA) of the Income Tax Act.

The Tax Administration Act (2011) entitles an aggrieved taxpayer to object or appeal against an assessment and certain decisions made by SARS. But what should you do if you are aggrieved by a decision made by SARS and such decision is not subject to objection or appeal?

The sale of debts on a non-recourse basis can be a useful cash management tool. Have you considered how recent amendments to section 22 of the Value-Added Tax Act No. 89 of 1991 will impact your corporate tax compliance?

Effective for years of assessment commencing on/after 1 March 2019, directors of private companies are no longer specifically included as employees for purposes of the Fourth Schedule to the Income Tax Act 58 (1962).

Draft Tax Bills Published The Draft Taxation Laws Amendment Bill [...]

After carefully determining your company tax liability and submitting the completed company tax return, SARS will acknowledge the receipt of your return. SARS might then proceed and request relevant supporting material in instances where it is deemed necessary. In our experience, SARS sometimes does not specify the number of days afforded to the taxpayer to comply with the request, and if the number of days is specified, it is unclear whether SARS is referring to calendar days or business days. Sound familiar?

The founders of Nubis.Tax, Cobie de Lange and Izel du Plessis, had a vision to create a platform where top independent tax consulting professionals could work together to offer services of a high standard at cost efficient rates for medium to large corporate clients.