Although an increase of 1% in the value added tax rate was announced in the budget in February 2018, no adjustments have been made to the top four income tax brackets. Rather, below-inflation adjustments to the bottom three income tax brackets were announced. It was also announced that the primary, secondary and tertiary rebates will be partially adjusted to account for inflation.
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 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.
The South African Revenue Service recently set out the tax consequences for the restructuring of an unlisted property portfolio under the Income Tax Act. The parties to the transaction were a listed company incorporated and resident in South Africa which carried on business as a long-term insurer (the applicant), a company incorporated and resident in South Africa and 100% owned by the applicant and a corporate real estate investment trust to be listed on the Johannesburg Stock Exchange.
The Financial Surveillance Department of the South African Reserve Bank recently issued an exchange control circular regarding the information that is required in an application for exchange control relief. The circular forms part of the joint tax and exchange control Special Voluntary Disclosure Programme, which was announced by the minister of finance in the 2016 budget speech.
Following Budget 2016, a number of amendments have been proposed to the laws and regulations that apply to tax-free investments (TFIs). These include amending the Income Tax Act in order to prevent the circumvention of estate duty; removing the requirement to submit dividend tax returns following the receipt of dividends from TFIs; and introducing draft regulations to outline the process for transferring TFIs between service providers.
The Tax Administration Act prescribes the period of limitations for issuance of assessments. A new bill proposes to extend these prescription periods to account for delays arising from failure by the taxpayer to provide requested material, resolution of information entitlement disputes and certain audits and investigations under the Tax Administration Act. The proposed amendments seek to address the issue of delaying tactics used by taxpayers.
The South African Revenue Service recently amended the ITR12T form (the income tax return for trusts). The amended form incorporates certain legislative changes, makes mandatory certain previously optional fields and includes automatic calculations. The amendments arise from the implementation of system changes to cater for the processing of certain collective investment scheme registrations and value added tax registrations.
Taxpayers often enter into arrangements under which a company buys back its own shares held by certain shareholders, and immediately thereafter issues new shares to new shareholders. This practice has long raised tax avoidance concerns for the South African Revenue Service, as it could circumvent the payment of capital gains tax by the shareholder whose shares are bought back.
The South African Revenue Service (SARS) has the power to request a taxpayer or other party to submit relevant material to it. The Tax Administration Laws Amendment Act has now amended the definition of 'relevant material' to mean "any information... that in the opinion of SARS is foreseeably relevant for the administration of a tax act". Thus, it is no longer within the other party's discretion to decide whether material is relevant.