The Supreme Court of Appeal recently ruled on the South African Revenue Service's (SARS's) right to impose understatement penalties on a taxpayer and the quantum thereof. The judgment will be welcomed by taxpayers involved in disputes with SARS regarding understatement penalties, as it reaffirms that the Tax Court cannot, of its own volition, increase an understatement penalty.
The historically high level of unemployment among South Africa's youth has led to the introduction of various tax incentives and benefits which aim to encourage the employment and training of such persons. Among these is the employment tax incentive scheme. A review of the scheme has demonstrated positive outcomes, including a significant increase in the employment growth rate and the number of employees in firms that have claimed the employment tax incentive.
One of the amendments proposed by Budget 2019 aims to reconcile the incongruency that exists between South African company law and income tax law with regard to the deregistration or liquidation of companies that are involved in amalgamation transactions. The amendment is a welcome change, as it will ensure that the Companies Act and the Income Tax Act operate in conjunction with, and in support of, each other.
In a recent unreported case regarding a taxpayer that conducted business in the wholesale and retail industry, the Tax Court had to decide whether the taxpayer could claim the employment tax incentive under the Employment Tax Incentive Act for certain periods. In its decision, the court not only considered the provisions of the act, but also applied various principles of South African labour law.
The focus of a recent Supreme Court of Appeal case was not the merits of the dispute between the parties, but rather the correctness of the procedure that the taxpayer had followed in its appeal to the Tax Court. The Supreme Court of Appeal held that determining whether the Tax Court's decision was appealable was contingent on whether the decision was one contemplated in the Tax Administration Act.
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.