With the extended deadline for the submission of applications for inclusion in the deferred settlement scheme for tax arrears established by Law 4(I)/2017 now less than one month away, the Tax Department has issued a further reminder of the scheme's main features. For example, all tax returns due must have been submitted and all tax liabilities for periods after December 31 2015 must have been settled or be in the process of being settled in accordance with an agreed payment schedule.
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 Income Tax Law was amended in 2012 to introduce accelerated capital allowances for tax purposes on assets purchased between 2012 and 2014, inclusive. For plant and machinery acquired up to the end of 2018, the annual writing-down allowance rate will be 20% or any higher rate applying to the category of assets concerned. For industrial buildings and hotels acquired up to the end of 2018, the annual writing-down allowance will be 7%.
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.
Taxpayers that are not afforded the opportunity to seek review by Internal Revenue Service appeals after a case has been docketed in the Tax Court should seek to elevate the matter up the chain to obtain reconsideration and reversal of such a decision. If that course of action is unsuccessful, taxpayers should consider other options. In this regard, the outcome of Facebook's recent case in the District Court for the Northern District of California may be instructive.
The legislature is in the process of adopting a number of tax benefits intended to stimulate the development of innovative companies and marquee investments in Russia. A new law has expanded the list of expenses that can be excluded from taxable profits. Further, recently passed draft bills have introduced a new investment tax deduction and determined the terms for enforcing the concessionary income tax rates available to investors implementing large investment projects in certain areas.
The notional interest deduction (NID) regime has been in effect since the 2011 fiscal year. Under this regime, Italian resident companies and permanent establishments of non-resident companies may deduct notional interest from their corporate income taxable base. The NID is calculated according to the equity increase (ie, new equity rate) from the end of the 2010 fiscal year, multiplied by a rate determined annually.
The Tax Department recently opened a public consultation on proposed legislation to implement the EU Anti-tax Avoidance Directive, which extends the rules to hybrid mismatches. The consultation period will last until December 8 2017. The consultation documents, which are in Greek, are available on the Tax Department's website.
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 Federal Court of Appeal recently overturned a Tax Court decision which had found that a number of transactions undertaken by the Univar corporate group constituted abusive tax avoidance under the General Anti-avoidance Rule (GAAR). The judgment contains several important points concerning the analysis and application of the GAAR and will undoubtedly be relied on by taxpayers in future.
The Tax Court recently rejected an Internal Revenue Service (IRS) attempt to expand on the privilege waiver principles set out in a previous case. The court concluded that the IRS was not entitled to any documents from the period after a notice of deficiency was issued, making clear that subpoenas are not for broad-based 'fishing expeditions'. The case is consistent with the IRS's recent pattern of arguing aggressively against the assertion of privilege and work-product protections in tax audits.
The Internal Revenue Service (IRS) recently published an Office of Chief Counsel IRS memorandum, which deals with a merchant bank's claim that its revenue from merchant discount fees qualifies as domestic product gross receipts under Internal Revenue Code Section 199. The memorandum is further proof that taxpayers and the IRS do not see eye to eye.
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.
The Process of Adjustment of Tax Arrears Law 2017 established a procedure for settling tax arrears by monthly instalments, providing a waiver of up to 95% of interest and penalties and covering all nationally imposed taxes. The Tax Department recently issued an announcement informing taxpayers who have applied to participate in the scheme that strict compliance with the agreed terms is essential. In particular, payments must be made on or before the due date or penalties will be applied.
The Supreme Court recently revoked two appeal court decisions in which the underlying issue was the Tax Department's authority to deny taxpayers the ability to issue invoices in certain circumstances. It is unclear whether the Tax Department will review its criteria in this regard, as court decisions in Chile affect only the parties in the specific case.
Coca-Cola is seeking a redetermination in the Tax Court of certain Internal Revenue Service (IRS) transfer-pricing adjustments relating to its 2007 to 2009 tax years. The IRS has moved for partial summary judgment seeking a ruling that a 1996 Internal Revenue Code Section 7121 closing agreement executed by the parties is not relevant to the case before the court.
Faced with the prospect of potential tax liability after an unsuccessful audit, taxpayers can file a petition in the US Tax Court before paying the liability or pay the liability, make a claim for refund and sue the government for a refund in a local district court or the Court of Federal Claims. For taxpayers that select the Tax Court route, sometimes a question later arises as to whether they can seek to dismiss their case in order to refile in a different forum.
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.
The US Department of the Treasury recently submitted a report to the president recommending the withdrawal, revocation or revision of eight Treasury regulations in order to eliminate or otherwise mitigate the "burdens imposed on taxpayers". This action springs from Executive Order 13789, which called on the Treasury to identify and reduce tax regulatory burdens that impose undue financial burdens on US taxpayers or otherwise add undue complexity to federal tax laws.
In December 2015 Cyprus's tax laws were amended to provide a temporary tax exemption for loan restructurings in order to facilitate and encourage the restructuring of non-performing loans. The exemptions introduced in 2015 were intended to be valid for two years from the date on which the various amending laws entered into force and were therefore set to expire on December 31 2017. However, a number of new laws recently extended the exemptions for a further two years.