The Supreme Court of Appeal recently considered whether the South African Revenue Service commissioner had been correct in disallowing the use of certain assessed losses under Section 103(2) of the Income Tax Act. Section 103(2) of the act is an anti-avoidance provision which essentially allows the commissioner to disallow the offsetting of an assessed loss or balance of an assessed loss against a taxpayer's income where certain requirements are met.
The Supreme Court of Appeal recently had to determine whether an assessment issued for secondary tax on companies (STC) in respect of a dividend cycle ending in February 2007, which had been levied under the Income Tax Act, had prescribed in accordance with the Tax Administration Act. The key issue for consideration was whether the Tax Administration Act had prohibited the South African Revenue Service from issuing the assessment for STC in respect of that dividend cycle.
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.
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 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 South African Revenue Service (SARS) recently released a statement regarding improvements that have been introduced to the existing dispute resolution process. According to the statement, SARS is implementing these improvements as part of its ongoing commitment to deliver a better service to taxpayers. The statement refers to the implementation of an electronic request for reasons for an assessment and the introduction of a guided process for SARS's eFiling system, among other things.
Budget Day saw the proposal of a number of measures affecting taxpayers. Key proposals cover the recharacterisation of proceeds in case of share buyback; the conversion of interest into dividends; the submission date of the estimate for the second provisional tax payment for the tax year; the withdrawal of the proposed withholding tax on service fees; and collective investment schemes.
A new binding general ruling clarifies the interpretation of the term 'substantially the whole' as used in the Income Tax Act. Approved associations, public benefit organisations, recreational clubs and small business funding entities may carry out limited business undertakings; provided that 'substantially the whole' of these undertakings are directed at the recovery of costs, the receipts and accruals are tax exempt.
Where an employer wishes to regularise its employee's tax affairs through the Voluntary Disclosure Programme and cannot recover the tax directly from the employee, it must pay the pay-as-you-earn tax on behalf of the employee. Such payment constitutes a 'payment of the employee's debt' which triggers a taxable fringe benefit in the hands of the employee.