The Tax Court recently issued its decision in a case concerning a taxpayer's claim for R90 million as an expense or loss during the 2007 assessment year, the deduction of which was prohibited by the South African Revenue Service. Among other things, the court had to consider whether the taxpayer had been carrying on the trade of selling coal when it had paid the R90 million and whether the expense had been incurred in the production of income or for trade purposes.
The debt reduction provisions provided for in the Income Tax Act have been the subject of significant debate since their introduction. As a result, the National Treasury included various proposed changes to the provisions in the first draft of the Taxation Laws Amendment Bill 2017. Following consultation on the bill, the National Treasury recently published a revised bill, which contains further significant amendments.
The recently published Draft IP Policy Phase 1 2017 includes a number of provisions relating to parallel import and state 'walk-in' rights for access to affordable medicines. Although there are complex issues surrounding access to affordable medicines, the inclusive process that the government has used in the implementation of the new policy is encouraging.
The High Court's decision in a recent case involving a protective writ issued by a creditor of Hanjin at the time of the company's collapse was recently appealed before the Supreme Court of Appeal. A number of Hanjin creditors have filed an application for a time extension to serve the writs of arrest pending the outcome of the appeal. In the absence of an extension, the writs will have no further force or effect.
Under the Tax Administration Act, a Tax Court judgment regarding an appeal under the dispute resolution provisions contained in the act must be published for general information purposes. The South African Revenue Service recently published a raft of Tax Court judgments that have thus far been handed down in 2017, which provide for interesting reading and cover a broad range of procedural and administrative issues.
The Tax Court recently addressed the question of whether a taxpayer is entitled to condonation for the late filing of an appeal under the Tax Administration Act. The Tax Court referred to a Constitutional Court judgment which found that a delay cannot be a determining factor in condonation applications. In addition, it noted that other important considerations should be taken into account, such as whether the omission or failure was the applicant's fault and the extent of the delay.
As online consumer confidence grows in South Africa, the online market is becoming an increasingly attractive space for counterfeiters and fraudsters. Counterfeiting not only affects consumers and brand owners, but can also weaken a country's economy and impact its ability to attract foreign investment. However, consumers have the antidote to counterfeiting and, as such, must make sure to use it.
Section 12O of the Income Tax Act provides an incentive to stimulate the domestic production of films in the form of an exemption from normal tax for income derived from the exploitation rights of a film. The South African Revenue Service recently issued guidance reflecting its interpretation of this provision.
Following the implementation of the Organisation for Economic Cooperation and Development's Base Erosion and Profit Shifting Action Plans, which impose country-by-country reporting requirements on multinational enterprises, taxpayers can no longer – or at least cannot easily – strategically escape taxation by shifting their profits to low or no-tax jurisdictions. This is because the South African Revenue Service has become aware of issues regarding tax avoidance and is actively taking steps to address them.
Under the Value Added Tax Act, vendors were previously prohibited from claiming notional input tax deductions for the acquisition of second-hand goods comprising gold or goods containing gold in an attempt to curb fraudulent notional input tax deductions regarding the acquisition of gold and gold jewellery. However, the amendment had a negative impact on legitimate transactions in the industry, so the definition of second-hand goods was recently amended in order to limit the extent of the exclusion.
The keenly anticipated draft IP Policy Phase 1 (2017) was recently published for public comment. It constitutes the first phase in the implementation of a comprehensive IP policy for South Africa. One of the key issues to be addressed is the interplay between the constitutional rights relating to property and access to healthcare. According to the policy, the scope of compulsory licences will be strengthened and clarified in an effort to facilitate the process of exporting IP goods, such as medicines.
In recent years, the South African craft beer industry has grown rapidly. Larger commercial beer companies have been heavily affected by this shift in the market and have thus started to acquire craft breweries. In order to prevent the term 'craft beer' from becoming diluted in the near future, many remaining craft breweries feel that the market should be completely transparent. As such, it is surely only a matter of time before South Africa adopts a certification process to protect the nature of 'true' craft beer.
The longstanding practice of issuing a protective writ is directed at preserving the claimant's right to arrest a vessel in rem, notwithstanding a subsequent change of ownership. This matter did not come before the South African courts until recently, when the buyer of a vessel applied to the courts to have the protective writ set aside. The root of the problem lies in the apparent paradoxical Admiralty Jurisdiction Regulation Act provisions relating to the time of commencement of an admiralty action.
The Mthatha High Court recently ruled that the South African Revenue Service (SARS) had failed to comply with Section 96 of the Tax Administration Act in ordering an additional assessment of a taxpayer's income tax. The case reaffirms the fact that just as taxpayers have a duty to pay tax, SARS has duties that it must fulfil in order to be entitled to collect this tax.
South African Revenue Services decisions are generally subject to the internal remedy available under Section 9 of the Tax Administration Act. However, decisions that are given effect to in an assessment or notice of assessment are excluded, since assessments generally have the separate remedy of objection and appeal. A recent memorandum on the Draft Tax Administration Laws Amendment Bill proposes that such decisions be subject to the remedy under Section 9 of the act.
There has been a great deal of uncertainty surrounding the claiming of value added tax (VAT) input credits, particularly where mixed taxable and non-taxable supplies are made and in the context of expenses relating to corporate actions. This uncertainty regarding the deductibility of input tax credits in certain instances has created a VAT risk for many vendors. The courts and the South African Revenue Service have differing views on this matter.
In order to protect trade secrets, companies should, among other things, require that anyone exposed to trade secrets sign a non-disclosure agreement. Where this party is an employee, a restraint of trade agreement may also be used. However, the courts are reluctant to enforce excessively onerous restraint of trade agreements, as these restrict employees' rights to practise their trade and make a living.
The National Treasury recently published the Draft Taxation Laws Amendment Bill 2017, which proposes to clarify the tax implications that arise when a person assumes contingent liabilities under the corporate reorganisation rules contained in the Income Tax Act. The proposal is to insert a new definition in Section 41 of the act, expressly stating that debt for the purposes of the corporate reorganisation rules includes contingent debt.
South Africa has an abundance of natural resources and, as a result, a large proportion of patent applications are filed covering a process or apparatus used in the production of a product. In terms of patent law, there is no substantive difference between the patentability requirements for a patent for a product or a patent for a process. However, there are important differences between product and process patents when it comes to enforcement.
In order to assist companies in financial distress, it has been proposed that definitive rules dealing with the tax treatment of conversions of debt into equity be introduced. The Draft Taxation Laws Amendment Bill 2017 therefore proposes that the rules dealing with a debt that has been cancelled, waived or discharged should not apply to a debt that is owed by a debtor to a creditor that forms part of the same group of companies.