The South African Revenue Service recently issued Binding Private Ruling 291, which addresses the taxation of subsistence allowances paid by employers to their employees in certain circumstances. The ruling appears to offer guidance regarding the application of Section 8 of the Income Tax Act and suggests that employers may have some leeway in structuring the subsistence allowances that they provide to their employees.
The Tax Department recently announced that companies and self-employed individuals that are required to submit annual accounts will be given an additional three months to file their tax returns for the year ended December 31 2016. The department has also issued a circular clarifying the requirement to produce audited financial statements to support tax returns.
The 2018 federal budget signifies another chapter in the Department of Finance's saga to overhaul the taxation of private corporations and their shareholders. Budget 2018 sets out two changes to the taxation of private corporations: a reduction of the small business deduction based on the amount of passive investment income earned at a corporate level and a restriction on obtaining refunds of corporate tax on dividends paid from income taxed at the reduced small business rate.
The British Columbia Property Transfer Tax Act applies only to registered transfers of real property. However, significant real property-related tax changes are rumoured to be proposed in the upcoming provincial budget. Any amendment to the act that would tax transfers of beneficial ownership should not be made haphazardly. Such an amendment must be joined by, among other things, a mechanism to relieve the tax where the beneficial ownership is transferred to an affiliate.
The South African Revenue Service (SARS) recently published a binding private ruling on the application of Paragraph 38(1) of the Eighth Schedule to the Income Tax Act to the distribution of shares by a trust to beneficiaries in the context of an employee share scheme. Although SARS stated that Paragraph 38(1) was not applicable to the trust's distribution of shares, the matter is complicated by the interaction between Section 8C of the act and the rules contained in the Eighth Schedule.
At a basic level, cryptocurrencies constitute property under the Income Tax Act. As such, dispositions of cryptocurrencies ordinarily lead to income tax consequences. Although cryptocurrencies are an exciting development, along with the rewards come a variety of risks, not least of which is tax. Failure to comply with all applicable tax obligations can result in severe penalties and hefty arrears interest.
The South African Revenue Service (SARS) recently released a binding class ruling which addressed, among other things, the eligibility of a partner in an en commandite partnership to claim a deduction in respect of venture capital shares acquired by the partnership. SARS ruled that subject to the Income Tax Act, each class member will be entitled to claim the deduction pro rata to its proportionate share of the investment in the partnership.
Article 9(B) of the Income Tax Law 2002 (as amended) provides for a notional interest deduction for tax purposes on new equity capital injected into companies and permanent establishments of foreign companies on or after January 1 2015 to finance business assets, calculated by applying a reference rate to the new equity. The Tax Department recently announced the 10-year government bond yields for December 31 2017, which will be used as the basis for the notional interest deduction for the 2018 tax year.
The latest chapter in the story of the 'half-loaf' plan was recently penned by the Federal Court of Appeal. The case concerned a plan by which the taxpayer intended to split the capital gains on a share sale to an arm's-length purchaser between him and his wife and thus benefit from both of their lifetime capital gains exemptions. On appeal, the taxpayer argued that none of the conditions of the general anti-avoidance rule had been met; however, the Federal Court of Appeal disagreed.
The recently approved Budget Law has harmonised the taxation of dividends and capital gains earned by non-business individuals on substantial and non-substantial participation held in Italian and foreign companies, among other things. Companies and partnerships will be unaffected by these changes, as the distinction between substantial and non-substantial participation is irrelevant.
The Federal Court of Appeal has held that the minister of national revenue has no discretion to admit a taxpayer into the objections regime under Section 220(2.1) of the Income Tax Act. Applying the implied exception rule of statutory interpretation, the court chose an interpretation that gave effect to more specific provisions (the objections regime), and held that taxpayers must comply with the strict time limits set out in the act.
The recently enacted tax reform legislation significantly expanded the application of Subpart F, adding a new inclusion rule for non-routine controlled foreign corporation (CFC) income, termed global intangible low-taxed income (GILTI). The GILTI rules apply higher tax rates to GILTI attributed to individuals and trusts that own CFC stock than to C corporation shareholders. There are several steps which individuals and trusts may take to defer or reduce the effect of the GILTI rules on individuals and trusts.
Switzerland has become a major hub for initial coin offerings (ICOs). Yet to date, there has been little clarity about the resulting tax implications. Recent discussions and tax ruling negotiations with representatives of several tax authorities in Switzerland have provided more clarity on the tax implications of ICOs, at least regarding tokens issued by Swiss companies raising funds under the promise of a participation in future revenues.
The Tax Court recently delivered a judgment that will be of interest to any taxpayers involved in prolonged disputes with the South African Revenue Service (SARS), particularly where there are delays on the part of SARS. The case involved an application by the taxpayer for default judgment and an application by SARS for condonation for the late filing of its answering affidavit opposing the default judgment application.
The Tax Department recently issued Circular 57, which provides a definition of a 'permanent establishment' for domestic law purposes and underlines that such fixed places of business require a tax registration number. Although the circular has been issued with a limited scope, it may have additional benefits, including identifying whether a foreign entity or individual has a permanent establishment operating in Chile.
At the end of 2017, a number of amendments to the Tax Code came into force which significantly increased the scope of information and documents that Russian divisions of some international companies must submit to the tax authorities. Russian companies and foreign companies subject to taxation in Russia must now provide a notice of participation in an international group of companies and so-called 'country information'.
The Process of Adjustment of Tax Arrears Law 2017 establishes a procedure for settling tax arrears by monthly instalments and provides a waiver of interest and penalties of up to 95% for all nationally imposed taxes. Although the law was enacted in February 2017, it did not take effect immediately in order to allow time for the necessary payment systems to be implemented. The deadline for submitting applications to participate in the scheme was originally set at three months, but was recently extended.
For the purposes of determining a party's taxable income derived from carrying on a trade, the Income Tax Act provides for the deduction of legal expenses which arise during or by reason of its ordinary trading operations. However, in order for a taxpayer to deduct legal expenses, they must relate to a claim, dispute or action at law. Further, they must have arisen during or by reason of the taxpayer's ordinary operations undertaken in the course of its trade and must not be of a capital nature.
The BVI tax information exchange system is largely modelled on international principles developed by the Organisation for Economic Cooperation and Development and is split into two types of regime. The 'automatic' exchange of information regime requires financial institutions to exchange formulistic data about the accounts of foreign taxpayers, while the 'on request' regime deals with specific and potentially in-depth investigations into the affairs of named taxpayers with offshore or international holdings.
Recent broad tax reform legislation which applies to both US and non-US multinationals with cross-border operations has, among other things, reduced the corporate income tax rate and reformed the US international tax system. Several of the provisions could increase a foreign multinational entity's (FMNE's) US tax liability and compliance and administrative burdens. As such, FMNEs should thoroughly review their US operations, paying particular attention to cross-border payments to non-US related parties.