tag:blogger.com,1999:blog-67449338804399894522024-03-13T15:42:05.649+02:00Dr Beric CroomeAdvocate of the High Court of South Africa | Tax Author | Tax Accountant CA(SA) | Taxpayers' Rights | Tax Administration | Trust & Estate Specialist |Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.comBlogger144125tag:blogger.com,1999:blog-6744933880439989452.post-4185658170883182262019-04-28T08:50:00.000+02:002019-04-28T08:50:30.807+02:00In Remembrance Dr Beric Croome 23/5/1960 to 22/4/2019<div class="separator" style="clear: both; text-align: center;">
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<br />Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.com0tag:blogger.com,1999:blog-6744933880439989452.post-36887623413085322702018-11-12T07:30:00.000+02:002018-11-12T07:30:04.719+02:00Late Submission of Tax Returns<br />
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Filing season for non-provisional
individual taxpayers ended on 31 October 2018. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Those taxpayers who failed to
meet the deadline face the risk of being subjected to administrive penalties
for the late submission of returns. The penalties are based on the taxpayer’s
level of taxable income and the number of months that the tax return is
overdue.</span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">The administrative penalty is determined
according to the table set out below:<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<b><span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">Assessed loss or taxable income for
‘preceding year’ ‘Penalty’<o:p></o:p></span></span></b></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">Assessed loss <span style="mso-spacerun: yes;"> </span>R
250<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">R0-R 250 000<span style="mso-spacerun: yes;">
</span>R 250<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">R250 001-R500 000<span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span>R 500<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">R500 001- R 1 000 000<span style="mso-spacerun: yes;">
</span>R 1 000<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">R 1 000 001-R
5 000 000<span style="mso-spacerun: yes;">
</span>R 2 000<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">R 5 000 001- R 10 000 000<span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span>R 4 000<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">R 10 000 001- R
50 000 001<span style="mso-spacerun: yes;">
</span>R 8 000<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">Above R 50 000 000<span style="mso-spacerun: yes;">
</span>R 16 000<o:p></o:p></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">Where the South African Revenue Service is
in possession of the taxpayer’s current address and is able to deliver the assessment,
the penalty can be imposed for 35 months from the date of the assessment. Where
SARS is not in possession of the taxpayer’s address the penalty can be imposed
for up to 48 months.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">For example, where a taxpayer has a taxable
income of R 400 000 and has failed to submit a tax return for 34 months
the administrative penalty will amount to R 17 000. It must be remembered
that the penalty is levied for each annual tax return that is filed late.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">Thus, those taxpayers who choose to delay
submitting the submission of their tax returns can face a nasty surprise when
SARS imposes the administrative penalty for the late submission of tax returns.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://2.bp.blogspot.com/-r196AiLbDbM/W9Wr4Z0a6tI/AAAAAAAABL4/G3fqB1q-PK4B5CaHiE--DACom7yAso53gCLcBGAs/s1600/iStock_000068059945_Double.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="1067" data-original-width="1600" height="425" src="https://2.bp.blogspot.com/-r196AiLbDbM/W9Wr4Z0a6tI/AAAAAAAABL4/G3fqB1q-PK4B5CaHiE--DACom7yAso53gCLcBGAs/s640/iStock_000068059945_Double.jpg" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i style="font-size: 12.8px;">Individual taxpayers who choose to delay submitting the submission of their tax returns can face a nasty surprise from Sars.</i><br style="font-size: 12.8px;" /><span style="font-size: xx-small;">Image bought from i-Stock Stock photo ID:479528416 nd3000</span></td></tr>
</tbody></table>
<br />
<div class="MsoNormal" style="text-align: left;">
<span style="font-family: Georgia, "Times New Roman", serif;">Initially, the administrative penalty only applied
to the late submission of tax returns by individual taxpayers. SARS announced
recently that with effect from December 2018 the administrative penalty would
apply to the late submission of company tax returns well.</span></div>
<div class="MsoNormal" style="text-align: left;">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal" style="text-align: left;">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">Thus, those companies which have tax
returns outstanding from 2009 can face the administrative penalty as per the
table set out above. The greater the company’s taxable income the higher the
penalty will be.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: left;">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal" style="text-align: left;">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">Besides the administrative penalty, the
failure to file a tax return constitutes an offence under the Tax
Administration Act. Section 234(d) of the Tax administration Act provides that
upon a conviction for the failure to submit a tax return, the taxpayer may be
subjected to a fine or a period of imprisonment not exceeding two years.</span></span></div>
<div class="MsoNormal" style="text-align: left;">
<span style="font-family: Georgia, "Times New Roman", serif;"><br /></span></div>
<div class="MsoNormal" style="text-align: left;">
<span style="font-family: Georgia, "Times New Roman", serif;">Recently, SARS has been pursuing high
profile celebrities who have failed to file their tax returns on time. Once the
defaulting taxpayer has appeared in court, they can be named and photographs
can appear in the press. SARS no doubts hopes that by targeting celebrities it
will act as a deterrent to other non-compliant taxpayers.</span></div>
<div class="MsoNormal" style="text-align: left;">
<span style="font-family: Georgia, "Times New Roman", serif;"><br /></span></div>
<div class="MsoNormal" style="text-align: left;">
<span style="font-family: Georgia, "Times New Roman", serif;">Taxpayers need to submit their tax returns
within the time allowed, failing which they will be subject to the
administrative penalty and could also face a criminal prosecution which can
result in a criminal record.</span></div>
<div class="MsoNormal" style="text-align: left;">
<br /></div>
<div class="MsoNormal" style="text-align: left;">
<i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.4px; line-height: 21.56px;"><span style="font-family: georgia, "times new roman", serif;"><b>Dr Beric Croome</b> is a Tax Executive at ENSafrica. This article first appeared in Business Day, Business Law and Tax Review, November 2018.</span></i></div>
<div class="MsoNormal" style="text-align: center;">
<br /></div>
<div class="MsoNormal" style="text-align: center;">
<span lang="EN-ZA"><o:p><span style="color: red;"><b><span style="font-family: Georgia, Times New Roman, serif;"> </span><span style="font-family: Arial, Helvetica, sans-serif; font-size: large;">***YEAR END NOTICE ***</span></b></span></o:p></span></div>
<div class="MsoNormal" style="text-align: center;">
<br /></div>
<span style="color: red; font-family: Arial, Helvetica, sans-serif; font-size: large;"><div style="text-align: center;">
The November 2108 Business Day Business Law and Tax Review is the last for the year. </div>
<div style="text-align: center;">
Columns will resume in February 2019. </div>
<div style="text-align: center;">
Thank you for your support during the challenges of the past year.</div>
<div style="text-align: center;">
<br /></div>
<div style="text-align: center;">
***</div>
</span>Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.com0tag:blogger.com,1999:blog-6744933880439989452.post-8723067311002669002018-10-08T07:30:00.000+02:002018-10-08T07:30:10.583+02:00Celebrating Five years of the Office of the Tax Ombud<br />
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;">The Office of the Tax Ombud was created on
1 October 2013 and celebrates its fifth anniversary in October this year. The
office was created to deal with taxpayers’ complaints which could not be
resolved by taxpayers using the South African Revenue Service’s internal
complaints processes.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;"><br /></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">The Office has a degree of independence as
it reports to the Minister of Finance and can appoint its own staff without
having to consult SARS. In addition, the office is funded by a budget approved
by the Minister and not SARS.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">Before taxpayers can lodge a complaint with
the Ombud they must exhaust SARS internal complaints procedures unless
compelling circumstances exist. To determine if compelling circumstances exist,
it must be established if the complaint raises systemic issues or exhausting
SARS complaint procedures will cause undue hardship to the taxpayer or is
unlikely to produce a result within a period of time the Ombud considers
reasonable.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">The question that must be addressed is what
constitutes a systemic issue. During August 2018 the Ombud published a list of
twenty items that constitutes systemic issues. If a taxpayer encounters a
systemic issue they do not need to exhaust SARS internal mechanisms first
before filing a complaint with the Ombud.<o:p></o:p></span></span></div>
<div class="separator" style="clear: both; text-align: center;">
</div>
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://3.bp.blogspot.com/-ckGGSS0AKaU/W7mkw7LdZoI/AAAAAAAABLk/l09NhsxgpGsYjqGvAlF03snORTot1DFjACLcBGAs/s1600/oto5.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="177" data-original-width="750" height="148" src="https://3.bp.blogspot.com/-ckGGSS0AKaU/W7mkw7LdZoI/AAAAAAAABLk/l09NhsxgpGsYjqGvAlF03snORTot1DFjACLcBGAs/s640/oto5.jpg" width="640" /></a></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">The systemic issues are the following:<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Delay in refunds in certain
specific cases – the Ombud deals with twelve categories in this regard:<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 72.0pt; mso-add-space: auto; mso-list: l0 level2 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">o<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Failure to link submitted
documentation requested by SARS to the main file <o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 72.0pt; mso-add-space: auto; mso-list: l0 level2 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">o<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">The unwarranted placing of
Special Stoppers <o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 72.0pt; mso-add-space: auto; mso-list: l0 level2 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">o<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Using the filing of new returns
as an excuse to block refunds; <o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 72.0pt; mso-add-space: auto; mso-list: l0 level2 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">o<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Delay in the lifting of
stoppers and lack of a timeframe for doing so <o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 72.0pt; mso-add-space: auto; mso-list: l0 level2 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">o<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Refunds for one period being
withheld while an audit/verification is in progress on another period <o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 72.0pt; mso-add-space: auto; mso-list: l0 level2 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">o<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Using historic returns to delay
the payment of refunds <o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 72.0pt; mso-add-space: auto; mso-list: l0 level2 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">o<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Raising assessments to clear
unallocated credits <o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 72.0pt; mso-add-space: auto; mso-list: l0 level2 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">o<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Requesting further information
during an audit <o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 72.0pt; mso-add-space: auto; mso-list: l0 level2 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">o<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Assessments successfully, but
refund still not paid out <o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 72.0pt; mso-add-space: auto; mso-list: l0 level2 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">o<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Raising assessments
prematurely;<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 72.0pt; mso-add-space: auto; mso-list: l0 level2 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">o<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Debt set-off not withstanding a
request for suspension of payment <o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 72.0pt; mso-add-space: auto; mso-list: l0 level2 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">o<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Verification assigned to the
auditor but not finalised within the prescribed timeframe<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 72.0pt; mso-add-space: auto; mso-list: l0 level2 lfo1; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><br /></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Incorrect allocation by SARS of
payments made by taxpayers<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><br /></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Taxpayers being affected by
employer’s non-compliance with legislation relating to IRP5s<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><br /></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Inconsistency by SARS in
providing taxpayers with timelines for finalisation of audits/verifications<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><br /></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Victims of identity theft being
held liable for tax debts<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><br /></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Non-adherence by SARS to
dispute resolution turnaround times<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><br /></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">SARS’s failure to take
information at its disposal into account, specifically relating to information
requested during audit/verification and objection procedures<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><br /></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">SARS taking collection steps
when legally barred from doing so<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><br /></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">SARS’s failure to take
information at its disposal into account, specifically relating to the tax
compliance system and the “pin” on the client’s profile indication tax
compliance status (TCS)<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><br /></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Non-adherence to legislative
requirements in respect of final demand and third party appointment in terms of
section 179 (5) of the Tax Administration Act<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><br /></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Numerous follow-ups by
taxpayers without being advised of the escalation process (unless the taxpayer
was represented by a tax professional)<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><br /></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Pay-As-You-Earn Statement of
Account issues relating to, inter alia, the reconciliation of the account
specifically when recovering a debt<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><br /></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Numerous follow-ups relating to
situations where SARS issues duplicate income tax numbers under one identity
number (unless the taxpayer was represented by a tax professional)<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><br /></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">SARS incorrectly invalidating
the notice of appeal</span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-spacerun: yes;"> </span><o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">SARS revising an assessment
without issuing any prior communication<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><br /></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">SARS revising an assessment
without issuing a letter of findings<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><br /></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Refunds paid into wrong bank
accounts<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><br /></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">E-filing profile hijacking<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><br /></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Delay in e-filing profile
transfer between tax practitioners due to as system error<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><br /></span></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Dispute resolution
e-filing/system issues <o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">It is anticipated that taxpayer complaints
will get to the Ombud quicker than before as, if the complaint is systemic in
nature, taxpayers do not need to adhere to SARS internal complaint mechanisms.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">The Ombud has become an important means of
redress for taxpayers who have encountered problems in their dealings with
SARS. It is hoped that in time the independence of the office will be enhanced
and greater powers conferred on the office as is the case in other countries.</span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">Areas in which the Tax Ombud should have more power are:<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l1 level1 lfo2; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">In the United States, the
Taxpayer Advocate, an office similar to the Tax Ombud, can issue Taxpayer
assistance orders directing the Internal Revenue Service to refrain from taking
action against taxpayers in certain well-defined cases. It is unfortunate that,
in South Africa, the Tax Ombud does not, at this stage, have a similar power. <o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l1 level1 lfo2; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><br /></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo2; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Another problem that still
needs to be addressed is the issue of legal assistance for indigent taxpayers.
In the United States, taxpayers can go to Low Income Taxpayer Clinics for
assistance with their tax affairs. It is hoped that, in time, something similar
will be introduced in South Africa.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo2; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><br /></span></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l1 level1 lfo2; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">The Ombud does not have the
power to award wasted costs to taxpayers as is the case in some jurisdictions
and hopefully in time this will be considered.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l1 level1 lfo2; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><br /></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">The SARS Service Charter has been published
and this should assist the Ombud in evaluating how SARS is meeting the
timeframes specified therein.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA" style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;">The Tax
Ombud must be commended for the work done by the office since 2013 in educating
taxpayers about taxpayers’ rights and addressing the administrative complaints
in the tax arena. Hopefully, government will accept the recommendations of the
Davis Tax Committee on Tax Administration and formally legislate the proposed
Taxpayer Bill of Rights to further entrench taxpayers’ rights in South Africa.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA" style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA" style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;">Congratulations
to the Office of the Tax Ombud and its staff on reaching its fifth anniversary
and wishing the office every success in its endeavours in the future in
addressing taxpayers’ administrative complaints and teaching taxpayers about
the rights they have when interacting with SARS.<o:p></o:p></span></span></div>
<br /><br />
<i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.4px; line-height: 21.56px;"><span style="font-family: georgia, "times new roman", serif;"><b>Dr Beric Croome</b> is a Tax Executive at ENSafrica. This article first appeared in Business Day, Business Law and Tax Review, October 2018.</span></i>Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.com0tag:blogger.com,1999:blog-6744933880439989452.post-15580937931015263762018-09-10T07:30:00.000+02:002018-09-10T07:30:07.949+02:00Be Aware of Bogus Tax Practitioners<br />
<div class="MsoNormal">
<span style="font-size: 14pt;">The
Tax Administration Act requires that any person who renders tax consulting
services or completes tax returns for a fee must register as a tax practitioner
with the South African Revenue Service (‘SARS’). To register with SARS, </span><span style="font-size: 14pt;"> </span><span style="font-size: 14pt;">the tax practitioner must be a member of a
Registered Controlling Body approved by SARS.</span></div>
<div class="MsoNormal">
<span style="font-size: 14pt;"><br /></span></div>
<div class="MsoNormal">
<span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%; mso-bidi-font-weight: bold;">Currently recognised controlling bodies are:<o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%; mso-bidi-font-weight: bold;"><br /></span></div>
<ul style="margin-top: 0cm;" type="disc">
<li class="MsoNormal" style="mso-list: l0 level1 lfo1; tab-stops: list 36.0pt;"><span class="MsoHyperlink"><span lang="EN-ZA" style="color: windowtext; font-size: 14.0pt; line-height: 107%; text-decoration: none; text-underline: none;"><a href="http://www.cimaglobal.com/Our-locations/Africa/South-Africa/"><span style="color: windowtext; text-decoration: none; text-underline: none;">Chartered
Institute of Management Accountants (CIMA)</span></a></span></span><span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1; tab-stops: list 36.0pt;"><span class="MsoHyperlink"><span lang="EN-ZA" style="color: windowtext; font-size: 14.0pt; line-height: 107%; text-decoration: none; text-underline: none;"><a href="http://www.icsa.co.za/"><span style="color: windowtext; text-decoration: none; text-underline: none;">Chartered Secretaries Southern Africa (CSSA</span></a></span></span><span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;">)<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1; tab-stops: list 36.0pt;"><span class="MsoHyperlink"><span lang="EN-ZA" style="color: windowtext; font-size: 14.0pt; line-height: 107%; text-decoration: none; text-underline: none;"><a href="http://www.fpi.co.za/"><span style="color: windowtext; text-decoration: none; text-underline: none;">Financial Planning Institute (FPI)</span></a></span></span><span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1; tab-stops: list 36.0pt;"><span class="MsoHyperlink"><span lang="EN-ZA" style="color: windowtext; font-size: 14.0pt; line-height: 107%; text-decoration: none; text-underline: none;"><a href="http://www.iacsa.co.za/"><span style="color: windowtext; text-decoration: none; text-underline: none;">Institute of Accounting and Commerce (IAC)</span></a></span></span><span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1; tab-stops: list 36.0pt;"><span class="MsoHyperlink"><span lang="EN-ZA" style="color: windowtext; font-size: 14.0pt; line-height: 107%; text-decoration: none; text-underline: none;"><a href="https://www.saica.co.za/Default.aspx"><span style="color: windowtext; text-decoration: none; text-underline: none;">SA Institute of Chartered
Accountants (SAICA)</span></a></span></span><span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1; tab-stops: list 36.0pt;"><span class="MsoHyperlink"><span lang="EN-ZA" style="color: windowtext; font-size: 14.0pt; line-height: 107%; text-decoration: none; text-underline: none;"><a href="http://www.saipa.co.za/"><span style="color: windowtext; text-decoration: none; text-underline: none;">SA Institute of Professional Accountants (SAIPA)</span></a></span></span><span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1; tab-stops: list 36.0pt;"><span class="MsoHyperlink"><span lang="EN-ZA" style="color: windowtext; font-size: 14.0pt; line-height: 107%; text-decoration: none; text-underline: none;"><a href="http://www.thesait.org.za/"><span style="color: windowtext; text-decoration: none; text-underline: none;">SA Institute of Tax
Practitioners (SAIT)</span></a></span></span><span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1; tab-stops: list 36.0pt;"><span class="MsoHyperlink"><span lang="EN-ZA" style="color: windowtext; font-size: 14.0pt; line-height: 107%; text-decoration: none; text-underline: none;"><a href="http://www.accaglobal.com/za/en.html"><span style="color: windowtext; text-decoration: none; text-underline: none;">The Association of Chartered
Certified Accountants (ACCA)</span></a></span></span><span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1; tab-stops: list 36.0pt;"><span class="MsoHyperlink"><span lang="EN-ZA" style="color: windowtext; font-size: 14.0pt; line-height: 107%; text-decoration: none; text-underline: none;"><a href="http://www.aatsa.org.za/"><span style="color: windowtext; text-decoration: none; text-underline: none;">Association of Accounting Technicians Southern
Africa (AAT(SA))</span></a></span></span><span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;"><o:p></o:p></span></li>
</ul>
<div class="MsoNormal">
<span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;">In
addition, the following controlling bodies were automatically
recognised in terms of the Tax Administration Act:<o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<ul style="margin-top: 0cm;" type="disc">
<li class="MsoNormal" style="mso-list: l1 level1 lfo2; tab-stops: list 36.0pt;"><span class="MsoHyperlink"><span lang="EN-ZA" style="color: windowtext; font-size: 14.0pt; line-height: 107%; text-decoration: none; text-underline: none;"><a href="http://www.lssa.org.za/"><span style="color: windowtext; text-decoration: none; text-underline: none;">Law Society of South Africa</span></a></span></span><span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l1 level1 lfo2; tab-stops: list 36.0pt;"><span class="MsoHyperlink"><span lang="EN-ZA" style="color: windowtext; font-size: 14.0pt; line-height: 107%; text-decoration: none; text-underline: none;"><a href="http://www.sabar.co.za/"><span style="color: windowtext; text-decoration: none; text-underline: none;">General Council of the Bar of South Africa, Bar
Councils and Societies of Advocates referred to in Section 7 of the Admission
of Advocates Act, 1964</span></a></span></span><span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l1 level1 lfo2; tab-stops: list 36.0pt;"><span class="MsoHyperlink"><span lang="EN-ZA" style="color: windowtext; font-size: 14.0pt; line-height: 107%; text-decoration: none; text-underline: none;"><a href="http://www.irba.co.za/"><span style="color: windowtext; text-decoration: none; text-underline: none;">Independent Regulatory Board for Auditors (IRBA)</span></a></span></span><span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;"><o:p></o:p></span></li>
</ul>
<div class="MsoNormal">
<span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;">Only
members of the bodies referred to above may apply to be registered as a tax
practitioner with SARS. Other persons cannot be registered as tax
practitioners.<o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;">The
purpose in requiring tax practitioners to register is to protect taxpayers from
unscrupulous tax practitioners. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;">In
July this year, tax practitioner Nosicela Ntozini was convicted on 159 counts of
fraud and for failing to register as a tax practitioner. She was sentenced to
six and a half years imprisonment. She was employed by SARS as a call centre
agent and submitted income tax returns for 38 taxpayers, claiming fraudulent
tax refunds. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;">She
manipulated the SARS system to secure the refunds and received a percentage of
the refunds from the taxpayers in question. SARS paid out a total of R399 134
to the taxpayers. Ntozini received R109 660 from the taxpayers as her
share of the fraudulent refunds.<o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;">In
addition to the fraud committed by the accused, she failed to register as a tax
practitioner. The failure to register as a tax practitioner is a criminal
offence under section 234 (c)<span style="mso-spacerun: yes;"> </span>which can
give rise to a fine or a period of imprisonment not exceeding two years.<o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;">Taxpayers
can seek help from SARS officials in completing tax returns during filing
season and no fee is payable for that assistance. Taxpayers should not employ
SARS officials to assist in completing their tax returns as that is a violation
of the SARS code of conduct.<o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;">Where
a tax practitioner fails to comply with their statutory obligations, the
taxpayer may lodge a complaint with SARS which in turn may then lodge a formal
complaint under section 241 of the Tax Administration Act against the tax
practitioner’s Registered Controlling Body.<o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal">
<span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;">It
is important that taxpayers choosing to appoint a tax practitioner to attend to
their tax affairs only appoint a duly registered tax practitioner to do so. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://4.bp.blogspot.com/--OjCyKsSf0Q/W4bBcx9lWsI/AAAAAAAABK4/gX4nwYOvUPQEKxHImvL9TU6vKOyeNt20ACLcBGAs/s1600/tax%2Blaw2.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="1067" data-original-width="1600" height="213" src="https://4.bp.blogspot.com/--OjCyKsSf0Q/W4bBcx9lWsI/AAAAAAAABK4/gX4nwYOvUPQEKxHImvL9TU6vKOyeNt20ACLcBGAs/s320/tax%2Blaw2.jpg" width="320" /></a></td></tr>
</tbody></table>
<br />
<span style="color: #222222; font-family: Georgia, Utopia, Palatino Linotype, Palatino, serif;"><div style="text-align: center;">
<i style="font-size: 12.32px;">Tax practitioners who are not registered with SARS approved controlling body </i></div>
<div style="text-align: center;">
<i style="font-size: 12.32px;">will not be able to answer taxpayers' queries.</i></div>
</span><span style="background-color: white;"><div style="text-align: center;">
<i><span style="color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 12.32px;">Image bought from i-Stock </span><span style="color: #222222; font-family: Georgia, Utopia, Palatino Linotype, Palatino, serif;"><span style="font-size: 12.32px;">Stock photo ID:475765167</span></span><span style="color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 12.32px;"> </span><span style="background-color: transparent; color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 12.32px;">CreativaImages </span></i></div>
</span><div class="MsoNormal" style="text-align: left;">
<span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal" style="text-align: left;">
<span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;">Before
selecting a tax practitioner, taxpayers should check with SARS, via the SARS
website, that the tax practitioner they are dealing with is duly registered as
required by the law. If the person is not registered with SARS, that fact
should be reported to SARS so that appropriate action can be taken by SARS
against the offender. <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: left;">
<span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;"><br /></span></div>
<div class="MsoNormal" style="text-align: left;">
<span lang="EN-ZA" style="font-size: 14.0pt; line-height: 107%;">Also, where a tax practitioner guarantees the
taxpayer a tax refund, and wants a share of that refund, the taxpayer should be
concerned about the integrity of the tax practitioner and immediately check
whether that person is, in fact, a duly registered tax practitioner.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: left;">
<br /></div>
<div class="MsoNormal" style="text-align: left;">
<i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.4px; line-height: 21.56px;"><span style="font-family: georgia, "times new roman", serif;"><b>Dr Beric Croome</b> is a Tax Executive at ENSafrica. This article first appeared in Business Day, Business Law and Tax Review, September 2018.</span></i></div>
<div style="text-align: left;">
<br /></div>
Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.com0tag:blogger.com,1999:blog-6744933880439989452.post-15972025583198941032018-08-13T07:30:00.000+02:002018-08-13T07:30:04.309+02:00SARS Commits to Service Charter<br />
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, "Times New Roman", serif;">SARS finally released the SARS Service Charter on 1 July 2018, the day
on which filing season for 2018 commenced. One important use of the Charter is
to allow the Office of the Tax Ombud to evaluate SARS’ actual levels of service
against the level of service prescribed in the Charter. SARS faced calls from
the Office of the Tax Ombud to release the Charter, but it remained outstanding
for a number of years.</span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">The Charter sets out what SARS does and how it seeks to meet its mandate
under the South African Revenue Service Act, 34 of 1997. The document sets out taxpayers’
rights and obligations, but does not create any new rights. The rights in the
document flow from the Bill of Rights in the Constitution and the obligations
flow from the fiscal statutes.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">The rights and obligations set out in the Charter are as follows:<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">‘<b>SARS will:<o:p></o:p></b></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<b><span style="font-family: Georgia, Times New Roman, serif;">Help you by providing<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• Courteous and professional service at all times<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• Clear, accurate and helpful responses<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• Instructions that are clear and concise on the actions you need to
take and by when<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• Access to SARS via eFiling, the SARS Contact Centre, SARS branches and
Mobile Tax Units<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• Self-explanatory leaflets and booklets on the SARS website <u><span style="color: blue;"><a href="http://www.sars.gov.za/"><span style="color: blue;">www.sars.gov.za</span></a></span></u>
and in branches<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<b><span style="font-family: Georgia, Times New Roman, serif;">Be fair to you by<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• Expecting you to pay only what is due under law<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• Treating everyone equally<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• Ensuring everyone pays their fair share<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• Informing you if and when prescribed timeframes cannot be met<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<b><span style="font-family: Georgia, Times New Roman, serif;">Respect your constitutional rights and privacy by<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• Keeping your tax affairs strictly confidential<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• Furnishing you with reasons for decisions taken regarding your tax and
customs affairs<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• Applying the law consistently and impartially<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<b><span style="font-family: Georgia, Times New Roman, serif;">If you are not satisfied, you may<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• Exercise your right to request reasons for decisions and outcomes
regarding your personal tax affairs<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• Exercise your right to object and appeal against an assessment or
qualifying decision<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• Lodge an administrative complaint via eFiling, at a SARS branch or via
the SARS Contact Centre<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• After having exhausted all administrative complaints processes within
SARS, lodge a complaint with the Office of the Tax Ombud<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<b><span style="font-family: Georgia, Times New Roman, serif;">In return, your obligations are to</span></b></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• Be honest<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• Submit full and accurate information on time<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• Comply with all prescribed administrative processes and timeframes<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• Pay your tax and/or duties on time and in full, using the correct
payment reference number(s)<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• Encourage others to pay their tax and/or duties on time and in full<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• Not encourage or be party to any corrupt activity or fraud in any form<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• Ensure that SARS has your correct personal information and payment
details<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• Take responsibility for your tax affairs, even if you have authorised
someone to act on your behalf.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 18.0pt; margin-bottom: 12.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;">• Show our staff respect just as they are expected to respect you. If
someone else acts on your behalf, we expect the same respect from them.’<o:p></o:p></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://4.bp.blogspot.com/-orbYCkhr5eA/W27VQsMkdcI/AAAAAAAABKk/BQu_KaAPZJscebhX6CZx5e8rtwc-vlkQgCLcBGAs/s1600/iStock_000046927890_Double.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="1600" data-original-width="1593" height="320" src="https://4.bp.blogspot.com/-orbYCkhr5eA/W27VQsMkdcI/AAAAAAAABKk/BQu_KaAPZJscebhX6CZx5e8rtwc-vlkQgCLcBGAs/s320/iStock_000046927890_Double.jpg" width="318" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i>The SARS Service Charter sets out what SARS does and how it seeks to meet its mandate <br />under the South African Revenue Service Act, 34 of 1997</i><br style="background-color: white; color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 12.32px;" /><span style="background-color: white; color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 12.32px;">Image bought from i-Stock "Compliance" by </span><span style="color: #222222; font-family: Georgia, Utopia, Palatino Linotype, Palatino, serif;"><span style="font-size: 12.32px;">almagami</span></span></td></tr>
</tbody></table>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;">From a review of the Charter it appears
that SARS want taxpayers to encourage other taxpayers to pay their tax and or
duties on time and in full. Whilst the sentiment for this statement is
understood it has no legal basis and cannot be legally enforced.</span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">The Charter also sets out the levels of
service taxpayers can expect when interacting with SARS. It deals with the
following types of interactions with SARS:<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Engagement<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Registration<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Returns/Declarations<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Inspection, audit and
verification<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Refunds<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Payments<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Debt<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Disputes in terms of the Tax
Administration Act<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-ZA"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span lang="EN-ZA">Disputes in terms of the
Customs and Excise Act<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">Where SARS fails to adhere to the time
frames specified in the Charter, the taxpayer would have to complain to SARS
and adhere to the prescribed complaints process or lodge a complaint with the
Tax Ombud in the prescribed manner.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">It must be noted that the Charter is not a
legal document and is only a statement of intent on the part of SARS.<span style="mso-spacerun: yes;"> </span>The Charter does not address the question of
taxpayers recovering wasted costs from SARS which is catered for in a number of
other countries.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;">In the United States, the Taxpayer
Advocate, an office similar to the Tax Ombud, can issue Taxpayer assistance
orders directing the Internal Revenue Service to refrain from taking action
against taxpayers in certain well-defined cases. It is unfortunate that, in
South Africa, the Tax Ombud does not, at this stage, have a similar power.</span></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;">Another problem that still needs to be
addressed is the issue of legal assistance for indigent taxpayers. In the
United States, taxpayers can go to Low Income Taxpayer Clinics for assistance
with their tax affairs. It is hoped that in time something similar will be
introduced in South Africa.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;">Hopefully, SARS will meet the timeframes
stated in the SARS Service Charter and, whilst the Charter may not be perfect,
it is hoped that it will encourage enhanced tax compliance and result in a
better relationship between taxpayers and SARS.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;">Taxpayers need to be aware of their rights
and obligations in the tax arena and the Charter should assist in this regard.
Likewise, SARS needs to be mindful of taxpayers’ rights and must uphold those
rights as stated in the newly released Service Charter.</span></div>
<div class="MsoNormal">
<span lang="EN-ZA"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.4px; line-height: 21.56px;"><span style="font-family: georgia, "times new roman", serif;"><b>Dr Beric Croome</b> is a Tax Executive at ENSafrica. This article first appeared in Business Day, Business Law and Tax Review, August 2018.</span></i></div>
Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.com0tag:blogger.com,1999:blog-6744933880439989452.post-85172356189971702452018-05-14T07:00:00.000+02:002018-05-14T07:00:06.728+02:00E-filing and Submission of Tax Returns<br />
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Until
2007 taxpayers had no choice but to file paper-based tax returns with SARS.
This required the completion of a paper-based return and also the submission of
the taxpayers’ supporting documents and tax certificates. SARS then introduced
e-filing, whereby taxpayers could register for e-filing and submit their tax
returns electronically. With e-filing it is not possible to submit supporting documents
when, for example, an individual files their tax return, the ITR12.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;">Furthermore,
taxpayers have a choice to register for e-filing personally and file their
returns themselves or they can appoint a registered tax practitioner to act on
their behalf and file their returns. The Tax Administration Act (‘the Act’) sets
out who must register as a tax practitioner, as well as the statutory
obligations arising where a person is a registered tax practitioner.</span></div>
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<span style="font-family: Georgia, "Times New Roman", serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;">A
registered tax practitioner must be a member of a SARS Recognised Controlling
Body or a body recognised by the Act. All registered tax practitioners must
adhere to the code of professional conduct prescribed by their controlling
body. If the practitioner does not comply with their code of conduct or the provisions
of the Act, SARS can lodge a complaint against the practitioner.</span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://3.bp.blogspot.com/-1cu_4phHU2U/Wu1E101Q_DI/AAAAAAAABJI/tojT-T6LaNU_HKqsrwATzTZWeY-pr124ACLcBGAs/s1600/iStock_000042562554_Full.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="1200" data-original-width="1600" height="480" src="https://3.bp.blogspot.com/-1cu_4phHU2U/Wu1E101Q_DI/AAAAAAAABJI/tojT-T6LaNU_HKqsrwATzTZWeY-pr124ACLcBGAs/s640/iStock_000042562554_Full.jpg" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: small;"><i>The failure to file returns on time can give rise to action being taken by SARS<br />against the taxpayer or tax practitioner.</i></span><br />Image bought from i-Stock "Compliance Diagram" by stuartmiles99</td></tr>
</tbody></table>
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<span style="font-family: Georgia, "Times New Roman", serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;">Although
a taxpayer appoints a tax practitioner to submit tax returns on their behalf,
the taxpayer retains the legal obligations imposed by the Act. Thus, if the tax
practitioner fails to submit a tax return at all or on time, the taxpayer can
be subjected to the administrative penalties for late submission of returns, which
can range from R 250 per month to R 16 000 per month that the return remains
outstanding. The penalty amount depends on the taxpayer’s level of income.</span></div>
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<span style="font-family: Georgia, "Times New Roman", serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;">The
failure by a tax practitioner to file returns on time can give rise to action
being taken by SARS against the tax practitioner. However, this does not
detract from the taxpayer’s personal liability for the failure to lodge a
return. SARS can still subject the taxpayer to the administrative penalty and
prosecute the taxpayer for non-submission of a return.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;">Should
a taxpayer be dissatisfied with the service received from a tax practitioner,
they should terminate the agreement with the tax practitioner. The taxpayer may
have a basis on which to lodge a formal complaint with the practitioner’s
controlling body or with SARS itself where the practitioner has violated the
Act.</span><span style="font-family: Georgia, "Times New Roman", serif;"> </span><span style="font-family: Georgia, "Times New Roman", serif;">If a practitioner delays the submission
of a return they can face action by SARS itself. In addition, the taxpayer must
remember that the e-filing profile belongs to the taxpayer and can be retrieved
from the tax practitioner at any time.</span><span style="font-family: Georgia, "Times New Roman", serif;"> </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;">SARS
indicated recently that it will use the National Prosecuting Authority to
prosecute taxpayers in the Tax Court for the failure to submit tax returns. It
must be remembered that the failure to submit a return when required to do so
constitutes a criminal offence, which can give rise to a fine or a period of
imprisonment. This will, on a successful prosecution, result in the taxpayer
having a criminal record.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;">Taxpayers
using e-filing must ensure that they do not allow unauthorised persons to
obtain their login and password details. The Office of the Tax Ombud has in its
various annual reports indicated that there have been too many cases of
identity theft where taxpayers have been duped into making</span><span style="font-family: Georgia, "Times New Roman", serif;"> </span><span style="font-family: Georgia, "Times New Roman", serif;">their passwords available to unauthorised
third parties.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;">Once
a return is filed via e-filing, SARS will often request that the taxpayer
submits the documents to support the filed return. The taxpayer should receive
notice of such verification requests via e-mail or SMS. The taxpayer is
entitled to receive proper notice of SARS requests and, in my opinion, it is
not sufficient for SARS to merely post a letter on the taxpayer’s e-filing
profile.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;">E-filing
has allowed SARS to enhance its data matching processes to ensure that
taxpayers properly declare all income derived by them. Should a taxpayer choose
not to declare all income received or accrued they will be subject to the
understatement penalty, which can range from 10% to 200% of the income tax
underpaid.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;">E-filing
has its advantages to both taxpayers and SARS in that returns can be processed
far more quickly than paper-based returns. </span><span style="font-family: Georgia, "Times New Roman", serif;"> </span><span style="font-family: Georgia, "Times New Roman", serif;">However, taxpayers must still submit their tax
returns on time. Where a tax practitioner is appointed, that person must act
professionally and should not delay the filing of returns without a good
reason. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;">Whether returns are filed via e-filing or manual submission, or managed
by a tax practitioner or the taxpayers personally, the taxpayer remains liable
for the failure to submit a tax return on time. </span><span style="font-family: Georgia, "Times New Roman", serif;"> </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.4px; line-height: 21.56px;"><span style="font-family: georgia, "times new roman", serif;"><b>Dr Beric Croome</b> is a Tax Executive at ENSafrica. This article first appeared in Business Day, Business Law and Tax Review, May 2018.</span></i></div>
<br />Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.com0tag:blogger.com,1999:blog-6744933880439989452.post-31750054220944757192018-04-09T07:00:00.000+02:002018-04-11T06:07:12.566+02:00SARS has Legal Powers to Seize Your Income<span style="font-family: "georgia" , "times new roman" , serif;">After a taxpayer has filed their tax return they will receive an assessment from SARS which will reflect either a refund due to the taxpayer or an amount of tax payable to SARS. The assessment will reflect the date by which the tax must be paid, failing which SARS will use its recovery powers to enforce collection of the tax due.</span><br />
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span>
<span style="font-family: "georgia" , "times new roman" , serif;">This article deals with SARS’ powers contained in section 179 of the Tax Administration Act (‘the Act’), whereby SARS can appoint a third party holding any funds of the taxpayer, such as a bank, the taxpayer’s debtors or the taxpayer’s employer, to pay the funds to SARS and not to the taxpayer. The power is draconian but has been held to be lawful under the Constitution.</span><br />
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span>
<span style="font-family: "georgia" , "times new roman" , serif;">Before SARS may use section 179 it is legally required to issue a final demand to the taxpayer reminding them of the tax due to SARS. The law requires that the final demand must be issued ten business days before the letter appointing the third party is issued. SARS is not required to issue the final demand where the collection of the tax will be prejudiced.</span><br />
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span>
<span style="font-family: "georgia" , "times new roman" , serif;">It must be noted that SARS can appoint the taxpayer’s bank as a third party under section 179 and this will have the result that any funds in the taxpayer’s account must be to SARS and not the taxpayer until the tax debt is settled. </span><br />
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span>
<span style="font-family: "georgia" , "times new roman" , serif;">In the case of an employee, SARS can instruct the employer to deduct the amount from the taxpayer’s salary and pay that to SARS instead of to the employee. The Act recognises that an employee needs funds to live on and if the third party appointment or garnishee is too onerous the taxpayer can, within five business days of the appointment, request that the monthly amount deducted is reduced to take account of the taxpayer’s basic living costs.</span><br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://4.bp.blogspot.com/-zlzZH8dN5DY/Ws2JDMNMI6I/AAAAAAAABIo/wO0pdhq7SL4Su2jb-ny55RsfrRIFup8XwCLcBGAs/s1600/iStock_000014402697_Full.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="1600" data-original-width="1063" height="400" src="https://4.bp.blogspot.com/-zlzZH8dN5DY/Ws2JDMNMI6I/AAAAAAAABIo/wO0pdhq7SL4Su2jb-ny55RsfrRIFup8XwCLcBGAs/s400/iStock_000014402697_Full.jpg" width="265" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><i>Failure to engage will result in SARS using its powers to ensure collection of tax due.</i></span><span style="font-family: "georgia" , "times new roman" , serif; font-size: 12.8px;"><i><span style="font-size: small;"><br /></span></i><span style="background-color: white; font-size: x-small;"><span style="color: #222222;">Image purchased iStock </span></span></span><span style="font-size: 12.8px;">ID:157682422</span><span style="font-family: "georgia" , "times new roman" , serif; font-size: x-small;"><span style="background-color: white;"><span style="color: #222222;"> "Money Squeeze" by </span></span>sekulicn </span></td></tr>
</tbody></table>
<span style="font-family: "georgia" , "times new roman" , serif;">In the case of a taxpayer other than a natural person, SARS may vary the third party instruction on the basis that it will cause serious financial hardship if the SARS instruction is not revised.</span><br />
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span>
<span style="font-family: "georgia" , "times new roman" , serif;">If the person appointed is unable to comply with the third party appointment instruction they must inform SARS thereof, as well as the reasons therefore. SARS may then withdraw or amend the instruction.</span><br />
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span>
<span style="font-family: "georgia" , "times new roman" , serif;">The person appointed as the third party by SARS must adhere fully to the instructions set out in the letter appointing the bank, employer or other person as the third party. Failure to comply with SARS’ instructions can result in the third party becoming personally liable to SARS for the amount of the tax debt. In addition, the failure to comply with section 179 as required can give rise to a criminal offence under section 234(n) of the Act. If convicted, the third party can face either a fine or a period of imprisonment.</span><br />
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span>
<span style="font-family: "georgia" , "times new roman" , serif;">It is important that taxpayers pay their tax debts as and when they fall due. If they are unable to settle the amount due to SARS they should talk to SARS and make arrangements with SARS to pay the tax due over a period of time. The failure to engage with SARS will result in SARS using the powers it has in the Act to ensure collection of the tax due. </span><br />
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span>
<span style="font-family: "georgia" , "times new roman" , serif;">It is clear that SARS can appoint the taxpayer’s bank or employer or any other person as a third party under section 179 of the Act. It is critical that the person appointed by SARS complies with section 179 and pays the specified amount of tax to SARS, failing which the third party can be held personally liable for the amount due to SARS by the taxpayer and worse still could face prosecution under section 234 of the Act.</span><br />
<br />
<i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.4px; line-height: 21.56px;"><span style="font-family: "georgia" , "times new roman" , serif;"><b>Dr Beric Croome</b> is a Tax Executive at ENSafrica. This article first appeared in Business Day, Business Law and Tax Review, April 2018.</span></i><br />
<div>
<br /></div>
Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.com2tag:blogger.com,1999:blog-6744933880439989452.post-50415736779436348962018-03-12T08:00:00.000+02:002018-03-12T08:00:18.552+02:00Tax Court decides that SARS must issue a letter of audit findings<br />
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">In Tax Case IT
13726, as yet unreported, the Tax Court in Port Elizabeth had to determine if
the 2012 assessment issued to the taxpayer was valid. The taxpayer claimed
farming expenditure amounting to R 1 781 604 and reflected an amount of some R
7 million as a retrenchment payment which the taxpayer contended should have
been taxed not at the normal marginal rate of tax but at the special rate
applicable to retrenchment lump sums.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;">SARS issued an
additional assessment for 2012 on 31 January 2013 disallowing the farming
expenditure and treating the retrenchment lump sum as normal income. The
taxpayer lodged objections to the adjustments made to the assessment by SARS.
The objections were disallowed and the taxpayer filed an appeal against SARS’
decision to disallow the objections.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;">On 25 May 2017 the
Registrar of the Tax Court was informed that the parties would only argue the
following points:<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span style="mso-list: Ignore;">·<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span style="mso-fareast-language: EN-GB;">As a
point in limine, whether the audit conducted by SARS before the issue of the
additional assessment was valid and if the additional assessment was itself
valid;<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span style="mso-list: Ignore;">·<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span style="mso-fareast-language: EN-GB;">Whether
the lump sum received by the taxpayer upon his termination of employment
constituted a ‘severance benefit’ as envisaged in the Income Tax Act.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;">The taxpayer argued
that the amount of R 7 million should have been taxed according to the tax
tables applicable to retrenchment and retirement lump sums. SARS contended that
it conducted a personal income tax audit on the taxpayer during January 2013
and came to the conclusion that the amount was incorrectly reflected in the
2012 tax return as a retrenchment lump sum on the basis that the amount was
paid because the taxpayer was dismissed and not retrenched.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;">The court indicated
that if the taxpayer’s point in limine is upheld and the assessment is held to
be invalid that will resolve the dispute without needing to determine if the
payment was a retrenchment lump sum or not.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://2.bp.blogspot.com/-d3ye8iyIK7Q/WqK_hJJet9I/AAAAAAAABIA/MzgeeKfQkjQgBx9ef-ama-KXakKSxi0WwCLcBGAs/s1600/iStock_000025943036_Large.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="1600" data-original-width="1068" height="400" src="https://2.bp.blogspot.com/-d3ye8iyIK7Q/WqK_hJJet9I/AAAAAAAABIA/MzgeeKfQkjQgBx9ef-ama-KXakKSxi0WwCLcBGAs/s400/iStock_000025943036_Large.jpg" width="266" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i><span style="font-size: small;">Employees with tax problems are distracted and unhappy employees. </span></i><br style="background-color: white; color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 12.32px;" /><span style="background-color: white;"><span style="font-size: xx-small;"><span style="color: #222222; font-family: Georgia, Utopia, Palatino Linotype, Palatino, serif;">Image purchased iStock_000031119668 "Knowledge of the law is crucial for a fair trial - PeopleImages"</span></span></span></td></tr>
</tbody></table>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;">The court decided
that SARS could not rely on a procedurally flawed audit conducted without the
taxpayer’s knowledge as a new ground in its Rule 31 statement and is thus mpermissible
as this would violate the principle of legality.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;">The court stated
that the issue of an additional assessment is administrative action as dealt
with in section 33 of the Constitution<span style="mso-spacerun: yes;">
</span>which confers the right of just administrative action on taxpayers. That
section also requires that any person whose rights have been adversely affected<span style="mso-spacerun: yes;"> </span>by administrative action is entitled to be
supplied<span style="mso-spacerun: yes;"> </span>written reasons for the
decision made. The court indicated that an assessment was issued<span style="mso-spacerun: yes;"> </span>and SARS’ failure to provide reasons
therefore offends the principle of legality as dealt with in various court
decisions.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;">Section 40 of the
Tax Administration Act (‘TAA’) provides that SARS may select a taxpayer for
inspection, verification or audit. Section 42 of the TAA places a legal
obligation on SARS to keep the taxpayer informed as to the status of the audit.
Furthermore, upon conclusion of the audit SARS must, within 21 business days, <span style="mso-spacerun: yes;"> </span>issue a document which is generally referred
to as the letter of audit findings whereby SARS should advise the taxpayer of
the adjustments to be made to the taxpayer’s assessment and provide reasons in
writing for those adjustments.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;">In the case at hand
SARS failed to provide a report on the status of the audit and also did not
provide reasons as required by the TAA. Thus, the court decided that SARS had
violated section 42(2)(b) of the TAA and as a result the taxpayer was denied
the opportunity to respond to the issues raised by SARS, especially regarding
the circumstances giving rise to the lump sum of R 7 million.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;">The court also
reviewed the law dealing with severance benefits in order to establish if the
lump sum of R 7 million was in fact a retrenchment lump sum. Revelas J stated
in the judgment that had SARS granted the taxpayer the opportunity to explain
the nature of the payment it would have satisfied SARS that the lump sum was
related to a retrenchment process as required by the Income Tax Act.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;">SARS argued that
the taxpayer had not been retrenched but that the payment related to the
taxpayer’s dismissal which meant the lump sum would be taxed as normal income.
SARS relied on a letter issued by the taxpayer’s employer that the payment was
for dismissal and not retrenchment. The court stated that SARS reliance on the
letter in question was selective and decided that the payment was made for
termination of employment as a result of retrenchment.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;">The court was also
critical of the manner in which SARS decided to disallow the farming
expenditure. The judgment states that had SARS conducted a proper audit there
would have been a different result, that is, the expenditure would not have
been disallowed.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;">Revelas J decided
that the audit was invalid and SARS non-compliance with section 40 and 42 of
the TAA offends the Constitution and <span style="mso-spacerun: yes;"> </span>the
principle of legality. Thus, the court set the additional assessment aside as
it did not comply with the law.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;">In the result the
entire 2012 additional assessment was set aside and the interest levied on the
tax reflected as due was remitted. Furthermore, the court ruled that SARS must
pay the taxpayer’s cost of the appeal. It must be noted that in the Tax Court,
costs are not always awarded to the successful part as is the case in other
courts. Section 130 of the TAA prescribes when costs should be awarded by the
Tax Court but the court did not refer to those requirements. Costs can be
awarded where, for example, the taxpayer’s grounds of appeal are unreasonable
or SARS grounds of assessment are unreasonable.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><span style="font-family: Georgia, Times New Roman, serif;">This case is
important for taxpayers as it serves as a useful reminder of the rights
taxpayers have when SARS conducts an audit into their affairs. Taxpayers are
entitled, by law, to be advised as to the status of an audit and more
importantly when an audit is completed they are entitled to a letter of audit
findings setting out the adjustments made to the taxpayers assessment as well
as the reasons for those assessments. If SARS fails to adhere to its statutory
obligations the court will set any such additional assessment aside and more
likely than not award costs against SARS for not complying with the law.</span><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="mso-fareast-language: EN-GB;"><br /></span></div>
<div class="MsoNormal">
<i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.4px; line-height: 21.56px;"><span style="font-family: georgia, "times new roman", serif;"><b>Dr Beric Croome</b> is a Tax Executive at ENSafrica. This article first appeared in Business Day, Business Law and Tax Review, March 2018.</span></i></div>
Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.com0tag:blogger.com,1999:blog-6744933880439989452.post-91149088232022363282018-02-06T17:30:00.001+02:002018-02-06T17:48:22.561+02:00Employer and employees’ tax obligations<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Any employer paying
remuneration to an employee is required, under the provisions of the Fourth
Schedule to the Income Tax Act, 58 of 1962, (‘the Act’), to deduct and withhold
Pay As You Earn (‘PAYE’) or employees’ tax from the remuneration paid. </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The
employer must pay the tax collected over
to the Commissioner: South African Revenue Service (‘SARS”). </span><span style="font-family: "georgia" , "times new roman" , serif;">It does not matter
whether the remuneration is paid in cash or in kind. Certain payments may be
exempt from tax, but those fall outside of the scope of this article.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The employer must
deduct the tax from the remuneration and pay that over to SARS by the 7</span><sup style="font-family: Georgia, "Times New Roman", serif;">th</sup><span style="font-family: "georgia" , "times new roman" , serif;">
of the month following the month in which the tax was deducted. If the 7</span><sup style="font-family: Georgia, "Times New Roman", serif;">th</sup><span style="font-family: "georgia" , "times new roman" , serif;">
falls on a weekend or public holiday, the PAYE must, together with the other
employment related taxes, be paid on the preceding business day.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The tax year for
natural persons commences on 1 March of each year and ends on the last day of
February of the following year. The employer is required by law to provide
their employees with a tax certificate, the IRP5 certificate, reflecting the
amount of remuneration paid to the employee and the PAYE deducted from that remuneration.
The IRP5 must cover the full tax year or, if the employee only worked for a
part of the tax year, only that part.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The employee will
receive the tax certificate around July and then has the personal obligation to
complete and submit an income tax return to SARS, subject to certain
exceptions.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">If the employee
fails to file their tax return within the prescribed period SARS will impose
administrative penalties on the employee for the late filing of the return. </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The
penalty is determined by taking account of the level of taxable income
reflected by the taxpayer and can range from R 250</span><span style="font-family: "georgia" , "times new roman" , serif;"> to R 16 000 per month until the tax return is
filed. Where SARS is aware of the taxpayer’s latest address the penalty can be
imposed for up to 36 months and where SARS does not have the taxpayer’s latest
details the penalty can be levied for up to 48 months. </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">In addition, SARS can
institute criminal proceedings against a taxpayer for the failure to submit a
tax return in time and has indicated that in future it intends to use the Tax
Court to expedite the prosecution of defaulting taxpayers. In such cases, the
taxpayer will remain liable to pay the administrative penalty to SARS as well
as whatever fine the court may impose.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Thus, where a
taxpayer is required to submit a tax return and fails to do so the penalty will
be imposed and can add up to a substantial amount due to SARS. It is critical
therefore that taxpayers file their tax returns timeously.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The first time a
taxpayer may become aware of a debt due to SARS is when they receive a letter
of demand from SARS or if SARS instructs the taxpayer’s employer to withhold
amounts of the taxpayer’s salary to settle the debt due to SARS by way of a
garnishee.</span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://4.bp.blogspot.com/-xu2iukjWVDo/Wnb4YGhOifI/AAAAAAAABHs/hmvG7SyGfsU3h9iBvwTr34W_2-lc4d_AACLcBGAs/s1600/iStock_000031119668_XXXLarge.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="1067" data-original-width="1600" height="425" src="https://4.bp.blogspot.com/-xu2iukjWVDo/Wnb4YGhOifI/AAAAAAAABHs/hmvG7SyGfsU3h9iBvwTr34W_2-lc4d_AACLcBGAs/s640/iStock_000031119668_XXXLarge.jpg" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: small;"><i>Employees with tax problems are distracted and unhappy employees. </i></span><br />
Image purchased iStock_000031119668</td></tr>
</tbody></table>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Employers do not
have a legal obligation under the Act to assist or inform their employees that
they must complete and submit an annual income tax return to SARS. However, in
practice it appears that employees are not always aware of the obligation to
file an income tax return. </span><span style="font-family: "georgia" , "times new roman" , serif;"> </span><span style="font-family: "georgia" , "times new roman" , serif;">This is
especially true of school leavers or graduates who may be employed for the
first time and are not aware of the tax rules in the country.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Those schools that
do not teach basic financial skills, including basic tax rules, to their pupils
should do so, thereby enabling pupils to be properly equipped to become
compliant tax paying citizens when they embark on a business venture for their
own account or enter into employment and receive remuneration.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Whilst employers
may not have a statutory duty to advise their employees to register and submit
an annual income tax return, many employers do assist their employees in this
regard. When a new employee commences employment with an employer the employer
should remind the employee of the obligation to register and submit annual tax
returns to SARS.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Ideally, the
employer should arrange for tax information sessions whereby employees are reminded
of the obligation to file a tax return and are taught how to do so. </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Most people
fear SARS and are loathe to deal with their tax affairs. </span><span style="font-family: "georgia" , "times new roman" , serif;"> </span><span style="font-family: "georgia" , "times new roman" , serif;">This is often as a result of ignorance of how
the tax system in the country works and how a tax return should be completed.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Employers should
empower their employees by educating them on the need to submit tax returns and
furthermore assist employees by providing information as to how tax returns
should be completed. This will alleviate employees receiving a nasty shock at
the end of the month when they receive their pay slip and, for the first time,
become aware of an amount deducted on behalf of SARS for the failure to pay an
income tax debt on time and/or as a result of </span><span style="font-family: "georgia" , "times new roman" , serif;"> </span><span style="font-family: "georgia" , "times new roman" , serif;">an administrative penalty imposed for late or
non-submission of a tax return.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Employees who have
debts due to SARS will be distracted and may not be as efficient as they could
be if their tax affairs are in order and up to date. </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">It is contended that if an
employer assists its staff in attending to their personal tax obligations that
will contribute to a content work force and encourage tax compliance in the
country.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.4px; line-height: 21.56px;"><span style="font-family: "georgia" , "times new roman" , serif;"><b>Dr Beric Croome</b> is a Tax Executive at ENSafrica. This article first appeared in Business Day, Business Law and Tax Review, February 2018.</span></i></div>
Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.com0tag:blogger.com,1999:blog-6744933880439989452.post-36537652555559465472017-09-16T10:21:00.002+02:002017-09-18T06:10:05.399+02:00Street Smart Taxpayers: A Practical Guide to Your Rights in South Africa<div style="text-align: left;">
<span style="font-family: "georgia" , "times new roman" , serif;">I have always felt that my PhD thesis and legal text </span><i style="font-family: Georgia, "Times New Roman", serif;">Taxpayers' Rights in South Africa</i><span style="font-family: "georgia" , "times new roman" , serif;"> (Juta Law, 2010) should be made available as a less technical guide to educate the ordinary South African taxpayers of their rights. For years I tried to find the right person to translate my legal text into a fun and easily understandable text that would make the complex tax laws of South Africa more accessible to the ordinary South Africa taxpayer. In 2013 my wife, author and poet, Judy Croome approached Juta Law with the proposal that we work together on this book. The journey to publication was at times as challenging as it was exhilirating but, finally, after four and a half years <a href="https://juta.co.za/products/street-smart-taxpayers/" target="_blank">"STREET SMART TAXPAYERS: A Practical Guide to Your Rights in South Africa"</a> was revealed for the first time at the Tax Indaba 2017. </span></div>
<div>
<div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://3.bp.blogspot.com/-FEtu1mBA68Q/WbzTp6KTOhI/AAAAAAAABGI/n21paDpOmQgIzj4gPSssyiv4zkuZupoDgCEwYBhgL/s1600/SST%2BFULL%2BFINAL.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="847" data-original-width="1285" height="420" src="https://3.bp.blogspot.com/-FEtu1mBA68Q/WbzTp6KTOhI/AAAAAAAABGI/n21paDpOmQgIzj4gPSssyiv4zkuZupoDgCEwYBhgL/s640/SST%2BFULL%2BFINAL.jpg" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><b style="font-family: georgia, "times new roman", serif; font-size: medium;"><span style="color: red; font-size: large;"><a href="https://juta.co.za/products/street-smart-taxpayers/" target="_blank">You can order your copy of Street Smart Taxpayers from Juta Law by clicking here</a></span></b></td></tr>
</tbody></table>
<div style="background-color: white; box-sizing: border-box; line-height: 1.5; margin-bottom: 10px; padding: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif;">Simplifying complex legal language and tax terminology, the book attempts to reduce the fear factor and frustrations that many taxpayers experience when dealing with tax matters.</span></div>
<div style="background-color: white; box-sizing: border-box; line-height: 1.5; margin-bottom: 10px; padding: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif;"><em style="box-sizing: border-box; margin: 0px; padding: 0px;">Street Smart Taxpayers</em> explains the processes SARS must follow when working with taxpayers throughout the various stages of the tax process, and identifies the remedies available to taxpayers. Together with interesting tax stories and a useful glossary for taxpayers to better understand tax lingo, Street Smart Taxpayers explores the following taxpayers’ rights:<br style="box-sizing: border-box; margin: 0px 0px 10px; padding: 0px; width: auto;" /><br style="box-sizing: border-box; margin: 0px 0px 10px; padding: 0px; width: auto;" />• the right to property<br style="box-sizing: border-box; margin: 0px 0px 10px; padding: 0px; width: auto;" />• the right to equality<br style="box-sizing: border-box; margin: 0px 0px 10px; padding: 0px; width: auto;" />• the right to privacy<br style="box-sizing: border-box; margin: 0px 0px 10px; padding: 0px; width: auto;" />• the right of access to information<br style="box-sizing: border-box; margin: 0px 0px 10px; padding: 0px; width: auto;" />• the right to administrative justice<br style="box-sizing: border-box; margin: 0px 0px 10px; padding: 0px; width: auto;" />• the right to remain silent<br style="box-sizing: border-box; margin: 0px 0px 10px; padding: 0px; width: auto;" />• the right of access to courts<br style="box-sizing: border-box; margin: 0px 0px 10px; padding: 0px; width: auto;" /><br style="box-sizing: border-box; margin: 0px 0px 10px; padding: 0px; width: auto;" />Combining humour, expert knowledge and anecdotes about the troubles taxpayers encounter in their dealings with SARS, the authors also investigate taxpayers’ obligations, how tax and religion intersect and the important question of ethics from the point of view of both SARS and the taxpayer. It is hoped that this book will enable taxpayers to be street smart and competent in handling their tax affairs.</span></div>
</div>
<div>
<div>
<ul style="background-color: white; box-sizing: border-box; margin: 10px 0px; padding: 0px;"><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://4.bp.blogspot.com/-039GQBDWSkU/WbzTmJDDigI/AAAAAAAABFI/aDt5Nbi9Iao84S18VWrXnFBgMFL9N7l3gCLcBGAs/s1600/2017_09_TaxIndaba2017%2B%25281%2529.jpg" imageanchor="1" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="960" data-original-width="720" height="400" src="https://4.bp.blogspot.com/-039GQBDWSkU/WbzTmJDDigI/AAAAAAAABFI/aDt5Nbi9Iao84S18VWrXnFBgMFL9N7l3gCLcBGAs/s400/2017_09_TaxIndaba2017%2B%25281%2529.jpg" width="300" /></a><br />
<i style="font-family: times, "times new roman", serif;">With Judge Bernard Ngoepe the Tax Ombud before joining him in panel discussion </i><br />
<i style="font-family: times, "times new roman", serif;">on "The Psychology of Tax Behaviour in Times of Recession" Tax Indaba 2017</i></td></tr>
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<span style="font-family: "georgia" , "times new roman" , serif;"><b><br /></b></span></div>
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<span style="background-color: white; font-family: "georgia" , "times new roman" , serif;"><b>Contents Include:</b></span><br />
<ul style="background-color: white; box-sizing: border-box; margin: 10px 0px; padding: 0px;"><div class="separator" style="clear: both; text-align: center;">
</div>
<a href="https://3.bp.blogspot.com/-DdIsF7swuIY/WbzTohhcI_I/AAAAAAAABFg/X8YJ5jp6f7w1LuDYXUyTM0R895pK9DnzgCLcBGAs/s1600/SST%2BFINAL.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"></a>
<li style="box-sizing: border-box; line-height: 28px; margin-bottom: 10px !important; margin-left: 18px; margin-right: 0px; margin-top: 0px; padding: 0px;"><span style="font-family: "georgia" , "times new roman" , serif;">A history of South African taxation</span></li>
<li style="box-sizing: border-box; line-height: 28px; margin-bottom: 10px !important; margin-left: 18px; margin-right: 0px; margin-top: 0px; padding: 0px;"><span style="font-family: "georgia" , "times new roman" , serif;">Taxpayers and the tax process</span></li>
<li style="box-sizing: border-box; line-height: 28px; margin-bottom: 10px !important; margin-left: 18px; margin-right: 0px; margin-top: 0px; padding: 0px;"><span style="font-family: "georgia" , "times new roman" , serif;">Seeking help as a taxpayer</span></li>
<li style="box-sizing: border-box; line-height: 28px; margin-bottom: 10px !important; margin-left: 18px; margin-right: 0px; margin-top: 0px; padding: 0px;"><span style="font-family: "georgia" , "times new roman" , serif;">What are your taxpayer rights?</span></li>
<li style="box-sizing: border-box; line-height: 28px; margin-bottom: 10px !important; margin-left: 18px; margin-right: 0px; margin-top: 0px; padding: 0px;"><span style="font-family: "georgia" , "times new roman" , serif;">Taxpayers’ right to property</span></li>
<li style="box-sizing: border-box; line-height: 28px; margin-bottom: 10px !important; margin-left: 18px; margin-right: 0px; margin-top: 0px; padding: 0px;"><span style="font-family: "georgia" , "times new roman" , serif;">Taxpayers’ right to equality</span></li>
<li style="box-sizing: border-box; line-height: 28px; margin-bottom: 10px !important; margin-left: 18px; margin-right: 0px; margin-top: 0px; padding: 0px;"><span style="font-family: "georgia" , "times new roman" , serif;">Taxpayers’ right to privacy</span></li>
<li style="box-sizing: border-box; line-height: 28px; margin-bottom: 10px !important; margin-left: 18px; margin-right: 0px; margin-top: 0px; padding: 0px;"><span style="font-family: "georgia" , "times new roman" , serif;">Taxpayers’ right to access to information</span></li>
<li style="box-sizing: border-box; line-height: 28px; margin-bottom: 10px !important; margin-left: 18px; margin-right: 0px; margin-top: 0px; padding: 0px;"><span style="font-family: "georgia" , "times new roman" , serif;">Taxpayers’ right to administrative justice</span></li>
<li style="box-sizing: border-box; line-height: 28px; margin-bottom: 10px !important; margin-left: 18px; margin-right: 0px; margin-top: 0px; padding: 0px;"><span style="font-family: "georgia" , "times new roman" , serif;">Taxpayers’ right to remain silent</span></li>
<li style="box-sizing: border-box; line-height: 28px; margin-bottom: 10px !important; margin-left: 18px; margin-right: 0px; margin-top: 0px; padding: 0px;"><span style="font-family: "georgia" , "times new roman" , serif;">Taxpayers’ right of access to courts</span></li>
<li style="box-sizing: border-box; line-height: 28px; margin-bottom: 10px !important; margin-left: 18px; margin-right: 0px; margin-top: 0px; padding: 0px;"><span style="font-family: "georgia" , "times new roman" , serif;">Taxpayers’ obligations</span></li>
<li style="box-sizing: border-box; line-height: 28px; margin-bottom: 10px !important; margin-left: 18px; margin-right: 0px; margin-top: 0px; padding: 0px;"><span style="font-family: "georgia" , "times new roman" , serif;">The ethics of paying tax</span></li>
<li style="box-sizing: border-box; line-height: 28px; margin-bottom: 10px !important; margin-left: 18px; margin-right: 0px; margin-top: 0px; padding: 0px;"><span style="font-family: "georgia" , "times new roman" , serif;">Taxpayers’ rights — an international work in progress</span></li>
<li style="box-sizing: border-box; line-height: 28px; margin-bottom: 10px !important; margin-left: 18px; margin-right: 0px; margin-top: 0px; padding: 0px;"><span style="font-family: "georgia" , "times new roman" , serif;">Taxpayers’ remedies in South Africa</span></li>
<li style="box-sizing: border-box; line-height: 28px; margin-bottom: 10px !important; margin-left: 18px; margin-right: 0px; margin-top: 0px; padding: 0px;"><span style="font-family: "georgia" , "times new roman" , serif;">The future of taxpayers’ rights</span></li>
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</div>
<li style="box-sizing: border-box; line-height: 28px; margin-bottom: 10px !important; margin-left: 18px; margin-right: 0px; margin-top: 0px; padding: 0px;">Glossary </li>
</ul>
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<tr><td class="tr-caption" style="text-align: center;"><span style="font-family: "times" , "times new roman" , serif; font-size: small;"><i>At Tax Indaba 2017 - panel discussion on "The Psychology of Tax Behaviour in Times of Recession" Speakers from left to right: </i></span><br />
<span style="font-family: "times" , "times new roman" , serif; font-size: small;"><i>Dr Beric John Croome (ENSafrica), Dr Randall Carolissen (SARS), Judge Bernard Ngoepe (Tax Ombud SA<span style="background-color: white; color: #1d2129;">) </span><span style="background-color: white; color: #1d2129;">and Patricia Williams (Bowmans)<br />(Photograph courtesy of Thyann Delport of </span><a data-ft="{"tn":"-U"}" data-lynx-mode="async" data-lynx-uri="https://l.facebook.com/l.php?u=https%3A%2F%2Fwww.payspace.com%2F&h=ATPV5cuWTS7BjtkNkak5UaKsQ2Nm8rdi_bT9AX3EIqmtyhNaAPs2vx-h55bAGwmpHRjqMwgr9o95iX9TEwI2Gl9oMGQa1XVYJ8EnsiATOPvmJuwC54cis7_63VGSMtAYL3JcmLucDsDffVCP9JySeODd-mAJqBE0-pip6Dy6WVQkPYETWbNGnqOK7DPwsnmf6aNiCA4ian5ZkVDvCT3Tr53F73-9ktPxpfpPYImvU2x0cxV4FnyrMa4P69WoI-E-3EDBTHzLVyJQbQSDx2gM3eNec36HRWssHSJ5Zck" href="https://www.payspace.com/" rel="noopener" style="background-color: white; color: #365899; cursor: pointer; text-align: start; text-decoration-line: none;" target="_blank">https://www.payspace.com/</a><span style="background-color: white; color: #1d2129;">)</span></i></span></td></tr>
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Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.com0tag:blogger.com,1999:blog-6744933880439989452.post-47670760366761553552017-08-14T07:00:00.000+02:002017-08-14T07:00:14.107+02:00SARS must provide grounds for Assessments issued<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;">The Eastern Cape High Court
was recently required to adjudicate a dispute between a taxpayer and the
Commissioner: South African Revenue Service regarding the manner in which the
Commissioner: SARS had dealt with the taxpayer.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">In the case of <i>V Z Nondabula v The Commissioner: SARS &
Another (case no. 4062/2016 </i>Eastern
Cape Local Division: Mthatha, as yet unreported), the taxpayer applied for an
interdict preventing SARS from invoking the provisions of section 179 of the
Tax Administration Act (“the Act”) pending the final determination of the
taxpayer’s objection to his additional income tax assessment. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">SARS had issued a
notice to a third party under section 179 of the Act directing that the party had
to pay whatever funds it held for the taxpayer to SARS in settlement of the tax
allegedly due.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://4.bp.blogspot.com/-4Vdptkf0rcc/WYaoSgkO9bI/AAAAAAAABEc/5hXfuh_1a-UlNxupwULrSB3Cy3osbbqwACLcBGAs/s1600/iStock_000036017552_Full.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="1067" data-original-width="1600" height="425" src="https://4.bp.blogspot.com/-4Vdptkf0rcc/WYaoSgkO9bI/AAAAAAAABEc/5hXfuh_1a-UlNxupwULrSB3Cy3osbbqwACLcBGAs/s640/iStock_000036017552_Full.jpg" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i style="background-color: white; text-align: start;"><span style="color: #313131; font-family: Georgia, Utopia, Palatino Linotype, Palatino, serif; font-size: x-small;">Image purchased www.iStock.com ©iStock.com/Devonyu "Taxpayer"</span></i></td></tr>
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<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The taxpayer conducted
business as a sole proprietor of a service station and received various
assessments for the 2014 tax year. The assessments issued to the taxpayer were paid
timeously in respect of the assessments issued in 2015. Subsequently, SARS issued
a further assessment to the taxpayer reflecting a debt allegedly due amounting
to R1 422 637.83. The first time that the taxpayer became aware of the tax debt
was by way of a letter dated 29 September 2016 demanding payment of the tax
within ten days, failing which, further action would be taken.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">It would appear that SARS
provided a statement of account reflecting the amount payable, but did not
inform the taxpayer as to how the amount due was arrived at.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The taxpayer called on SARS
to provide details regarding the additional assessment issued for the 2014 tax
year and how the amount of the tax debt was arrived at.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">In the papers before the court,
SARS did not explain how the additional assessment issued to the taxpayer was
arrived at. The taxpayer objected to the additional assessment through the
offices of his accountants and SARS responded to the objection by advising that
the objection did not comply with the rules.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The accountant submitted a
further objection challenging the assessments issued by SARS but the objection
filed by the accountants were not responded to, and even where there was a
response the court indicated that it was not a substantive response to the
taxpayer’s objection.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The court pointed out that
SARS is a creature of statute and is therefore required to operate within the
statutory provisions which empower it.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The court reviewed the statement
of account provided by SARS to the taxpayer and other documents provided and
reached the conclusion that SARS had not provided the taxpayer with a statement
of the grounds for assessment as required in terms of section 96(2)(a) of the
Act. The court pointed out that SARS is an organ of state and SARS exercises a
public power or performs a public function in terms of the Act. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Under section
195 of the Constitution SARS must be accountable and must comply with the Constitution.
At paragraph 25, Acting Judge Jolwana stated: <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><i>“There is no doubt the first respondent
dealt with the applicant in an arbitrary manner contrary not only to the Act
but most importantly the values enshrined in the Constitution were not observed
by the first respondent. The applicant is a business man and employs quite a
number of people in our country where the unemployment rate is alarmingly high.
The first respondent’s actions had the potential to close down applicant’s
business with catastrophic results not only for the applicant and his family
but also for all of his employees in a situation in which unemployment is
rampant and reaching crises proportions.”</i><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The court concluded that SARS
must comply with its own empowering legislation and most importantly it must
promote the values of the Constitution of the Republic of South Africa when
exercising its powers. The court further concluded that SARS has failed to do so and
particularly failed to provide the taxpayer with information prescribed in
section 96 of the Act. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The court therefore decided that SARS acted unlawfully
and unconstitutionally and thus set the third party notice aside and also
directed SARS to pay the taxpayer’s legal costs.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Unfortunately there are too
many instances where SARS issues an assessment to a taxpayer without explaining
the basis of that assessment and then proceeds to collect the tax on that
additional assessment. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Furthermore, SARS often fails to properly deal with
objections lodged to an assessment, rejecting the objection as invalid.
Taxpayers must be aware of the right that they have to be informed of the
details of the assessment issued to them and failing SARS’s adherence to the
Act they can either lodge a complaint with the office of the Tax Ombud, or
alternatively, approach the court for relief.</span><span style="font-size: 11pt;"><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.4px; line-height: 21.56px;"><span style="font-family: georgia, "times new roman", serif;"><b>Dr Beric Croome</b> is a Tax Executive at ENSafrica. This article first appeared in Business Day, Business Law and Tax Review, August 2017.</span></i></div>
Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.com0tag:blogger.com,1999:blog-6744933880439989452.post-12286960825819545182017-07-10T07:00:00.000+02:002017-07-10T07:00:31.534+02:00The Lawfulness of Retrospective Amendments in Tax Law<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">On
29 May 2017 Judge Fabricius delivered judgment in the Gauteng High Court in the case of <i>Pienaar Brothers (Pty) Ltd vs Commissioner for the South African Revenue
Service</i> <i>and the</i> <i>Minister of Finance,</i> as yet unreported
87760/2014 [2017] ZAGPPHC231 (29 May 2107) in a case dealing with The Taxation
Laws Amendment Act No. 8 of 2007 (“the Amending Act”) which inserted section
44(9A) into the Income Tax Act (“the Act”)</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The taxpayer sought an order
declaring that section 34(2) of the Amending Act is inconsistent with the Constitution
and invalid to the extent that it provides that section 44 (9A) of the Act
shall be deemed to have come into operation on 21 February 2007 and to be
applicable to any reduction or redemption of the share capital or share premium
of a resultant in company, including the acquisition by that company of its shares
in terms of section 85 of the Companies Act, on or after that date.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Pienaar Brothers approached
the Court seeking a declaration that the
amendment to section 44, the so-called amalgamation section in the Act was
unconstitutional and invalid on the basis that the amendment was retrospective. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The company concluded an amalgamation transaction in terms of section 44 of the
Act in which it acquired all of the assets of the company then known as Pienaar
Brothers (Pty) Ltd on 16 March 2007 with effect from 1 March 2007 in terms of
the sale of business agreement. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Later, on 3 May 2007 the Board of Directors of
the Company resolved under the Companies Act to make a distribution to its
shareholder’s pro-rata to their shareholding of an amount of R29 500 000.00 out
of the taxpayers’ s share premium account. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">On the date of the resolution the tax
law excluded from its ambit any amount distributed out of a company’s share
premium account. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The company therefore argued that on 3 May 2007 when the
distribution was made it did not constitute a dividend as defined in the Act
and thus no secondary tax in companies was due and payable on the distribution
on the basis that it was made out of the share premium account. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The Commissioner,
however assessed the amount of R29 500 000.00 to secondary tax on companies on
the basis that the amount fell within the amendments introduced to section 44
by way of the Amending Act which was only promulgated on 8 August 2007.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The Court examined the process whereby section 44 of the
Act was amended. It was pointed out that in the 2007 Budget Speech presented on 20 February 2007 that the then Minister of
Finance indicated the intention to pass retrospective legislation to deal with anti-avoidance
arrangements relating to STC. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Subsequently, on 21 February 2007 the Commissioner
issued a press-release stating that the STC exemption for amalgamation transactions
contained in section 44(9) of the Tax Act was to be withdrawn with immediate
effect, that is, from 21 February 2007. On 27 February 2007, SARS and National
Treasury released for public comment the Draft Taxation Laws Amendment Bill
2007. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">That Bill proposed the amendment of section 44 addressing the concerns
raised by the Minister in his Budget Speech. As pointed out above, the amalgamation
transaction, the distribution as well as the introduction of the BEE partner in
the company was completed in early May 2007. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://4.bp.blogspot.com/-x_4Hv2AFfMU/WVtp_xsmjQI/AAAAAAAABEI/pIPOsSuARgAkShoZomswd6XzBuiZtrk1wCLcBGAs/s1600/iStock_000011729389_Full.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="1145" data-original-width="1600" height="458" src="https://4.bp.blogspot.com/-x_4Hv2AFfMU/WVtp_xsmjQI/AAAAAAAABEI/pIPOsSuARgAkShoZomswd6XzBuiZtrk1wCLcBGAs/s640/iStock_000011729389_Full.jpg" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="-webkit-tap-highlight-color: rgb(2, 163, 136); background: transparent; border: 0px; box-sizing: border-box; color: #028a71; display: inline-block; font-family: "iStock Maquette", Helvetica, Arial, sans-serif; font-size: 12px; line-height: 4.25em; margin: 0px 3px 0px 0px; outline: none; padding: 0px 0px 0px 0.6em; text-align: start; text-decoration-line: none; transition: all 0.2s ease-in-out; vertical-align: baseline;"><i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: small;">Image purchased www.iStock.com ©iStock.com/Pgiam "Law Book"</i></span></td></tr>
</tbody></table>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Thereafter, on 7 June 2007, the
2007 Taxation Laws Amendment Bill was published but instead of proposing the
deletion of sections 44(9) and (10) of the Act, it proposed the insertion of a
new subsection (9A). </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The Bill also indicated that the amendment would be retrospective
to 21 February 2007. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The company contended that it concluded the amalgamation
transaction in May and only later in June 2007 did it become aware that the
transaction concluded by it could be covered by the amendment.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">On 8 August 2007 The Taxation Laws Amendment
Act 2007 was promulgated giving effect to the amendments announced in the
February 2007 Budget Speech. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The company argued that the amendment was invalid
under the Constitution because it was retrospective and offended against the
principle of legality of the rule of law. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The company contended that when it
completed the transaction in May it was not possible to know that the amount
would be subject to secondary tax on companies by virtue of the fact that there
was no law in place and that it could not be held liable for interest for this
reason and similarly could not be subject to penalties or criminal prosecution
for not having submitted an STC return reflecting the reduction of share
premium as a dividend liable to STC. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The judgment deals with both the legal
arguments of the company and the Commissioner at length and refers to the position
in South African law as well as a number of other countries.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The case is a very useful
summary of the legal position regarding retroactive amendments, not only in the
tax arena.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The Commissioner’s counsel
contended that the taxpayer was given notice of a proposal to amend the law and
that it was not correct to argue that there was no prior notification of the
proposed amendment to plug the perceived loophole in the STC legislation. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The Commissioner’s
counsel referred to the process whereby the amendment was given effect to and
the Court made it clear that the history
of the amendment made it clear that the Minster, SARS and Parliament were
determined to close the STC loophole with effect from 21 February 2007. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The Court
analysed the rule of law in the Constitution
and various academic writings dealing with that topic. The Court referred to the general principle that an
amendment to a law should only apply prospectively, that is from a future date
unless the amendment makes it clear that it applies from an earlier date. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The Court
reviewed the position of retroactive
amendments in the United States, United Kingdom, Canada and other countries and
came to the view that those constitutional democracies do not specifically
prohibit retroactive amendments to tax laws. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The Court indicated that it is also necessary to weigh
up the public interest and the needs of the Treasury when considering retroactive
amendments to legislation even though such amendments may adversely effect
particular taxpayers. At paragraph 63 the judge stated as follows:<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><i>“I am not aware of any
authority or legislative provision that provides that a fairly precise warning
needs to be given before the legislature can pass retrospective legislation,
whether in general, or in the case of a tax statute. In the latter instance,
economic demands must be considered in the context of the purpose and effect of
an intended statute. If the tax statute is rationally connected to a legitimate
purpose, no precise warning is required, if one at all.”</i><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The court pointed out that
the Constitution itself does not contain a provision prohibiting retrospective
legislation. The court accepted that Parliament
may not legislate with retrospective effect as it pleases but to do so must
meet the standard required for the constitutional validity of retrospective
amendments. It indicated that reference must be made to the rationality test
and the second standard relating to reasonableness or proportionality.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The court referred to various
judicial decisions and came to the conclusion that in the particular instance
the standards set by the court had not
been violated and therefore decided that the amendment to section 44 was lawful
and the taxpayer was liable to the STC as assessed by the Commissioner.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The taxpayer also argued that
its right to property had been violated as a result to the manner in which the
amendment was enacted and the court dismissed
this contention on the basis that the amendment did not constitute the unlawful
deprivation of property. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The court came to the conclusion that it is not
necessary that exceptional circumstances must exist for Parliament to pass
retrospective legislation. The court decided
that there was no overriding duty to give notice of intended legislation. It
was decided in the present case that there was sufficient notice of general
impact and that there is no over-riding duty to give notice that indicates
precisely what the intended legislation will encompass.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"> In the result the court dismissed the company’s application to find
that the amendment was unlawful under the Constitution. By virtue of the fact
that the case related to constitutional issues it made no orders as to costs.
It remains to be seen if the case will proceed on appeal to a higher court . </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The judgment is important in that it sets out clearly for the first time the
consequences of retrospective amendments to legislation in the tax arena and
taxpayers and advisors are well advised to study the comprehensive judgment
which is a good summary of the law in South Africa and around the world. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.4px; line-height: 21.56px;"><span style="font-family: georgia, "times new roman", serif;"><b>Dr Beric Croome</b> is a Tax Executive at ENSafrica. This article first appeared in Business Day, Business Law and Tax Review, July 2017.</span></i></div>
Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.com0tag:blogger.com,1999:blog-6744933880439989452.post-42699885216923192482017-06-12T07:00:00.000+02:002017-06-12T07:00:07.499+02:00Tax Ombud To Investigate Alleged Delays In Payment Of Refunds By Sars<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;">On 27 March this year the Tax
Ombud, namely, Judge B. M. Ngoepe, confirmed that he had requested and secured
the approval of the Minister of Finance to review the alleged delays in the
payment of refunds by the South African Revenue Service (“SARS”) to taxpayers.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The Office of the Tax Ombud
was created by Part F of chapter 2 of the Tax Administration Act (“TAA”) which
took effect on 1 October 2012. The Tax Ombud was created to deal with taxpayers’
complaints of an administrative nature and is an office independent of SARS
which reports directly to the Minister of Finance.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The TAA was recently amended conferring
greater autonomy on the Office of the Tax Ombud and specifically to enhance the
mandate of the Tax Ombud and the power to request that the Minister of Finance
approves a request made by the Tax Ombud to investigate any systemic and
emerging issue relating to a service matter or the application of the
provisions of the TAA or procedural or administrative provisions of the a tax
Act. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The approval granted to investigate the alleged delays in the payment of
refunds to taxpayers is the first review to be conducted under section 16(1)(b)
of the TAA which came into operation on 18 January 2017.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left; margin-right: 1em; text-align: left;"><tbody>
<tr><td style="text-align: center;"><a href="https://2.bp.blogspot.com/-sXRmHGoqu0c/WT1WecMXsXI/AAAAAAAABDo/EsWQpmiwFb4Gf0Z91DC7CIhz6HfNcybfACLcB/s1600/oto.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="497" data-original-width="484" height="320" src="https://2.bp.blogspot.com/-sXRmHGoqu0c/WT1WecMXsXI/AAAAAAAABDo/EsWQpmiwFb4Gf0Z91DC7CIhz6HfNcybfACLcB/s320/oto.jpg" width="311" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i>Image from www.taxombud.gov.za</i></td></tr>
</tbody></table>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The Tax Ombud’s review will
encompass all categories of tax refunds.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The Tax Ombud approached the
Minister for approval to investigate the apparent delay in the payment of
refunds to taxpayers because of the volume of complaints received by the office
of the Tax Ombud from taxpayers regarding the delay in refunds.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The Office of the Tax Ombud
has accordingly advised both SARS and external stakeholders, comprising
professional bodies representing tax practitioners and others of the investigation
into the delays in refunds. SARS indicated that it will cooperate with the
office of the Tax Ombud during the course of the investigation. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The Office of
the Tax Ombud has confirmed that it will engage both SARS and concerned
taxpayers regarding the delays in payment of refunds to taxpayers.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The Office of the Tax Ombud
will investigate the question of refunds due to taxpayers and make
recommendations to the extent necessary.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">In my capacity as chairman of
the TAA sub-committee of the South African Instituted of Chartered Accountants (“SAICA”),
we have received various representations from members of SAICA regarding the delay
in refunds being paid to taxpayers.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Many delays are experienced
by taxpayers claiming VAT refunds and whilst it is accepted that SARS must
ensure that refunds are in order and prevent payment of fraudulent claims,
taxpayers have experienced unnecessary delays in the payment of refunds. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">In many
cases taxpayers have submitted VAT returns reflecting a refund payable and then
suddenly SARS takes a decision reversing all input credits claimed by the
taxpayer eliminating the refund without due process being followed which
requires that SARS informs the taxpayer of reasons for adjustments made in assessments
issued to the taxpayer. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">There have been a number of complaints that VAT vendors
have submitted VAT refund claims only to discover that the refund has been
eliminated on the basis that SARS requests the documents which it has not
apparently received. Unfortunately, taxpayers often submit documents to SARS
which are not property receipted and despite having submitted documents on more
than one occasion encounter problems in dealing with SARS such that the refunds
are eliminated without proper notice being given relating thereto.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">In the case of income tax
SARS will often summarily disallow all expenses claimed by a taxpayer despite
the fact that the taxpayer’s expenses had been allowed in the past and will not
properly consider the documents submitted by a taxpayer on multiple occasions.
In some cases the documents submitted by taxpayers are voluminous and
difficulties are encountered by taxpayers in filing the documents through the
e-filling system because of constraints on the SARS system. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Taxpayers have also
encountered difficulties in securing refunds from SARS after the successful
conclusion of alternative dispute resolution procedures or after successfully prosecuting
a tax appeal in the tax court. Once the tax court has delivered a judgment and
SARS has decided not to appeal it and the taxpayer has paid the tax in dispute,
the taxpayer is entitled to a tax refund together with interest thereon. In
some cases taxpayers may secure the payment of their tax previously paid under
protest but encounter further difficulties in securing the payment of the interest
to which they are entitled under the provisions of the TAA.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<br />
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Taxpayers who have
encountered unreasonable delays in the payment of any tax refund from SARS
should inform the Office of the Tax Ombud so that their case can be considered
as part of the general review being conducted by the Office of the Tax Ombud
into the alleged delay of refunds payable by SARS to taxpayers. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Professional
bodies have also made submissions to the Office of the Tax Ombud to assist it in
its investigation into the delays faced by taxpayers in securing refunds from
SARS.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">It is hoped that the investigation into the delays in refunds will result
in substantive proposals being made by the Office of the Tax Ombud to ensure
that the undue delay in payment of refunds does not occur in future which adversely
affects taxpayers’ business operations in South Africa. </span><span style="font-size: 11pt;"><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.4px; line-height: 21.56px;"><span style="font-family: georgia, "times new roman", serif;"><b>Dr Beric Croome</b> is a Tax Executive at ENSafrica. This article first appeared in Business Day, Business Law and Tax Review, June 2017.</span></i></div>
Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.com0tag:blogger.com,1999:blog-6744933880439989452.post-56487430652861512772017-05-19T11:17:00.000+02:002017-05-19T11:20:51.877+02:00South Africa Provides Guidance on Withholding Tax on Royalties<div class="MsoNormal">
<i><span style="font-family: "helvetica" , sans-serif; font-size: 10.0pt;">Below article reproduced with
permission from BNAI European Tax </span><span style="font-family: "helvetica" , sans-serif; font-size: 10pt;">Service Monthly
Digest, Bloomberg BNA, 05/31/2017. </span><span style="font-family: "helvetica" , sans-serif; font-size: 10pt;">Copyright </span><span style="font-family: Universal-NewswithCommPi; font-size: 10pt;">_ </span><span style="font-family: "helvetica" , sans-serif; font-size: 10pt;">2017 by The Bureau of National Affairs, Inc. </span><span style="font-family: "helvetica" , sans-serif; font-size: 10pt;">(800-372-1033)
http://www.bna.com</span></i><br />
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Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.com0tag:blogger.com,1999:blog-6744933880439989452.post-17835764601241245302017-04-10T06:00:00.000+02:002017-04-10T06:00:00.155+02:00Increase in the rate of Dividends Tax<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The Minister of
Finance introduced his budget to parliament on 22 February 2017. During the
course of the budget it was announced that the dividends tax would be increased
from 15% to 20%.</span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">In the case of
foreign dividends the rate of tax will increase to 20% with effect from 1 March
2017. </span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">This is by virtue of the fact that foreign dividends are not subject to
withholding tax and it is only possible for taxpayers to report foreign
dividends in the tax return to be filed by them which will, in most cases, cover
the period 1 March 2017 to 28 February 2018. Thus, the new tax rate will apply
in respect of foreign dividends received by affected taxpayers on or after 1
March 2017.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">However, in the case
of dividends from which dividends tax must be withheld, the adjusted rate will
apply in respect of dividends paid on or after 22 February 2017. <o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">The Draft Rates and
Monetary Amounts and Amendment of Revenue Laws Bill, 2017 was released on 22
February 2017 and that legislation contains amendments giving effect to the various
adjustments in tax rates announced in the National Budget. Clause 11 of the draft
Bill makes it clear that the adjustment in the dividend withholding tax is
deemed to have come into operation 22 February 2017 and applies in respect of
any dividend paid on or after 22 February 2017.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">Section 64E of the
Income Tax Act 58 of 1962, as amended, provides that in the a case of a
dividend, other than an award of an asset <i>in
specie</i>, declared by a company that is a listed company, is deemed to be
paid on the date on which the dividend is paid. In the case of a company which
is not listed it is deemed to be paid on the earlier of the date on which the
dividend is paid or becomes due and payable.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">It is therefore
important to consider what is meant by the date on which a dividend can be said
to have been paid in the case of an unlisted company.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">In ITC1688 [1999],62
SATC 478 the Tax Court was required to determine whether the dividends declared
by a company were liable to the erstwhile secondary tax on companies (STC). In
ITC 1688 the company declared a dividend on 2 March 1992 and a further dividend
on 5 March 1993, that is prior to 17 March 1993, the date on which STC took
effect. In neither case was the payment of the dividend made in cash or by
cheque.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">Mr A left the money
on loan with the company and his loan account in the company’s was simply
credited. In the case of both dividends the actual crediting of the loan
account was only effected on 31 July 1993 which was after the introduction of
STC. The Commissioner: SARS contended that payment took place on the date on
which Mr A’ s loan account was in fact credited. That is to say on 31 July
1993, that is after the introduction of STC and thus issued STC’s assessments
to the company reflecting tax payable.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">Galgut J reached the
conclusion that based on the wording of the company’s two resolutions and based
on a proper construction of all the facts that it had been intended to record
that the dividends concerned would not be paid in cash or by cheque but would be
retained by the company as a loan. The court therefore reached the conclusion
that the dividend was paid as required even though it was not in cash or by
cheque, before the introduction of STC.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">Subsequently, in the Supreme Court of Appeal case of <i>Commissioner</i>: <i>SARS v Scribante Construction (Pty) Ltd</i> ([2002], 64 SATC 379) in
which judgment was delivered on 14 May 2002 Heher AJA delivering judgment for the
unanimous court stated as follows:<br />
<br />
“ I have already referred to the uncontested practice of the shareholders in
using the company as a banker. In that context the crediting of the loan
accounts constituted an actual payment as if the dividends had been deposited
into an account held by a shareholder at a banking institution”.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">The Supreme Court of Appeal has therefore decided that dividends will
be regarded as paid when those amounts are credited to a shareholder’s loan
account making it clear that it is not necessary to pay a dividend in cash.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">Clearly, with the dividends tax rate being increased from 15% - 20%
SARS has a concern that unscrupulous taxpayers may seek to backdate dividends
to escape the increased rate of tax. Where taxpayers seek to fabricate
resolutions purportedly giving effect to
decisions which were not actually made prior to 22 February 2017, such conduct
constitutes tax evasion and will face the full might of the law and the imposition
of penalties.</span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://3.bp.blogspot.com/-aQaXtN5Xs-A/WOnCO8_e3II/AAAAAAAABAw/eOUZ2j-6w5Uku8uiG8nE4LnhLTFwI4wcwCLcB/s1600/iStock_000041797156_Double.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="301" src="https://3.bp.blogspot.com/-aQaXtN5Xs-A/WOnCO8_e3II/AAAAAAAABAw/eOUZ2j-6w5Uku8uiG8nE4LnhLTFwI4wcwCLcB/s320/iStock_000041797156_Double.jpg" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: small; text-align: -webkit-left;">Image purchased www.iStock.com ©iStock.com</i></td></tr>
</tbody></table>
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<span style="font-family: Georgia, Times New Roman, serif;">SARS has indicated that it will audit all dividends paid shortly before
the increase in rate to ensure the lawfulness thereof. Where, however, the
shareholders of a company passed a proper resolution declaring a dividend,
having satisfied themselves as to the solvency and liquidity of the company as
required under the Companies Act, the shareholders have a claim against the
company for such dividend and will be entitled, based on the case law, to pay
the dividends tax at the rate of 15% where such resolution was properly adopted
prior to 22 February 2017. </span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">Based on ITC 1688 it does not appear that the dividend
must have been recorded in the books of account prior to 22 February 2017. The
courts require that the resolution must have been properly passed giving the
shareholder an unconditional right to claim the dividend against the company
which would confirm that the dividend has been paid as required under section
64E of the Act.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">National Treasury indicated at the Standing Committee on Finance
hearings on the National Budget that it may seek to amend section 64E such that
it will be required that the dividend must in fact be paid in cash and not only
credited to a shareholder’s loan account. Such an amendment would be
retrospective and should be resisted on the basis that it violates the rule of
law and the certainty required under the Constitution of the Republic of South
Africa. </span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">Taxpayers need to consider their position and seek appropriate advice
knowing that SARS will no doubt audit and investigate dividends declared
particularly in February and credited to loan accounts before 22 February 2017 in
light of the substantial increase in the rate of dividends tax from 15% – 20 %.
</span><o:p></o:p></div>
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<i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.4px; line-height: 21.56px;"><span style="font-family: georgia, "times new roman", serif;"><b>Dr Beric Croome</b> is a Tax Executive at ENSafrica. This article first appeared in Business Day, Business Law and Tax Review, April 2017. </span></i><i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: small;">Image purchased www.iStock.com ©iStock.com/</i><i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: small;"> </i></div>
Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.com0tag:blogger.com,1999:blog-6744933880439989452.post-17602509340474327852017-03-13T06:30:00.000+02:002017-03-13T06:30:27.600+02:00Interest-free Loans made available to trusts<span style="font-family: Georgia, Times New Roman, serif;">In the 2016 National Budget, the Minister of Finance indicated that legislation would be introduced to deal with interest-free loans made available by natural persons to trusts. Legislation was subsequently drafted and was promulgated on 19 January 2017 as section 7C of the Income Tax Act, No. 58 of 1962, as amended (‘the Act”) by way of section 12 of the Taxation Laws of Amendment Act No. 15 of 2016.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">It must be noted that the new section will apply in respect of any loan or advance made by a natural person or at the behest of such person by a company in relation to which a natural person is a connected person under the definition of connected person contained in section 1 of the Act to a trust. </span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">It must be noted that the new section applies in respect of all loans made on, after, or before 1 March 2017 and therefore applies in respect of pre-existing loans on which no interest is charged.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">The legislation provides that where a natural person makes an interest-free loan to a trust, the non-charging of interest will be regarded as a donation subject to donations tax at the rate of 20%.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">The benchmark to be used for purposes of ascertaining whether the section applies is the so-called official rate of interest as defined in paragraph 1 of the Seventh Schedule to the Act which currently amounts to 8% per annum. Thus, where a natural person makes an advance or loan available to a trust to acquire assets and no interest is charged, that person will be liable to donations tax on an amount of 8 % of the loan advanced to the trust for each year during which the loan is in existence.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">Should interest be charged at a rate lower than the official rate, the difference will attract donations tax in the hands of the natural person.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">Thus, where a natural person advanced funds to a trust in an amount of R10 000 000.00 and chooses not to charge interest thereon from 1 March 2017, that will constitute a donation of R 800 000.00 for the 2018 tax year which will result in a liability of donations tax amounting to R 160 000.00 per annum, ignoring for the moment the fact that the first R100 000.00 of donations are exempt from donations tax. Where a loan advanced to a trust does not exceed an amount of R1 250 000.00, 8% thereof amounts to R 100 000.00 and the taxpayer would be entitled to rely on the exemption of donations tax, which exempts the first R100 000.00 from donations tax.</span><br />
<br />
<span style="font-family: Georgia, Times New Roman, serif;">The donation will be regarded as having been made to the trust by the natural person on the last day of the year of assessment of the trust and donations tax will be payable by the end of the month following the month during which the donation takes effect. Thus the donations tax will be payable by 31 March 2018. The new rules also apply where, for example, a natural person makes a loan to a company to which the natural person is connected and that company in turn, directly or indirectly provides those funds to a trust.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">Section 7C(5) provides that no donations tax will arise in respect of loans or advances where:</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">•<span class="Apple-tab-span" style="white-space: pre;"> </span>the trust is a public benefit organisation approved by the Commissioner under section 30(3) of the Act or a small business funding entity approved by the Commissioner under section 30C;</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">•<span class="Apple-tab-span" style="white-space: pre;"> </span>the trust is a special trust as defined in paragraph (a) of the definition of special trust;</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">•<span class="Apple-tab-span" style="white-space: pre;"> </span>the trust used the loan wholly or partly for purposes of funding the acquisition of an asset and the natural person or their spouse used that asset as a primary residence as envisaged in the definition of primary residence in the Eighth Schedule to the Act and the amount owed relates to the part of that loan that funded the acquisition of that residence;</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">•<span class="Apple-tab-span" style="white-space: pre;"> </span>that loan or advance was provided to that trust in terms of an arrangement that would have been regarded as asharia compliant financing arrangement as referred to in section 24JA of the Act.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">•<span class="Apple-tab-span" style="white-space: pre;"> </span>that loan or advance is subject to the provisions of section 64 E(4) relating to deemed dividends under the dividends tax rules;</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">•<span class="Apple-tab-span" style="white-space: pre;"> </span>that loan or advance comprises an affected transaction as referred to in section 31(1) which is subject to the provisions of that section;</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">•<span class="Apple-tab-span" style="white-space: pre;"> </span>that loan or advance was provided to that trust by a person as a result of the vested interest held by that person in the receipts and accruals of the assets of that trust and the conditions specified in section 7C (5)(b) of the Act are complied with.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">Where the natural person makes a loan to a foreign trust and does not charge interest thereon, that loan is subject to the provisions of section 31 and on that basis section 7C should not apply. It is important that where a loan is made available by a South African tax resident to a foreign trust that interest is charged at a rate that would have been charged by person’s dealing at arms’ length thereby complying with the provisions of section 31 of the Act.</span><br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://4.bp.blogspot.com/-lL6oz_ibrF4/WL1iUyCG1rI/AAAAAAAABAU/t9j7iaQuHX0URu2_f_xmrENUViexFSH3wCLcB/s1600/iStock_000023707390.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://4.bp.blogspot.com/-lL6oz_ibrF4/WL1iUyCG1rI/AAAAAAAABAU/t9j7iaQuHX0URu2_f_xmrENUViexFSH3wCLcB/s400/iStock_000023707390.jpg" width="266" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i>Should interest be charged at a rate lower than the official rate, <br />the difference will attract donations tax in the hands of the natural person.</i></td></tr>
</tbody></table>
<span style="font-family: Georgia, "Times New Roman", serif;">Unfortunately, the legislature decided not to provide any relief to taxpayers wishing to unwind their trust structures in order to do away with loans advanced by natural persons a trust as was the case when a concession was introduced allowing natural persons to remove primary residences from trust structures when capital gains tax was introduced. Taxpayers were allowed to transfer their homes from a trust for a limited period without paying capital gains tax and transfer duty.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">Thus, where a natural person has advanced funds to a trust, it is necessary to review the annual financial statements of the trust to decide what to do and where the trust owns an asset producing income, it may make financial sense to charge interest on the loan which would then ensure that the trust receives a deduction for interest payable to the natural person but remembering that the interest paid will be taxable in the hands of the natural person. It is not possible to generalise and state what course of action a person should follow where they have made an advance available to a trust as it does depend on the totality of the circumstances and it will be necessary to review the taxpayer’s personal situation as well as that of the trust to determine what should be done to alleviate the donations tax that would otherwise become payable if no interest is charged on the loan due by the trust to the natural person.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">The question often that arises is whether an amount payable to a beneficiary as a result of an award or distribution made by a trust but not actually paid in cash to the beneficiary will also be subjected to the rules contained in section 7C. </span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">The Explanatory Memorandum on the Taxation Laws Amendment Bill published by Natural Treasury on 15 December 2016 indicates that an amount which is vested irrevocably by a trustee in a trust beneficiary, which is used or administered for their benefit will not qualify as a loan or credit provided by that beneficiary to the trust where the vested amount may, in accordance with the trust deed, not be distributed to that beneficiary for example before the beneficiary reaches a specific age, or that the trustee has the sole discretion in terms of the trust deed regarding the timing of and extent of any distributions to that beneficiary of such vested amount.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">The Explanatory Memorandum points out that where an amount vested by a trust in a trust beneficiary, which is actually distributed to the beneficiary will qualify as a loan under section 7C where the non-distribution results from an election made by that beneficiary or request by the beneficiary that the amount not be distributed or paid over. It will therefore be necessary to review the trust deed to establish whether awards made, other than cash, to a beneficiary fall within the rules of section 7C or not.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">It must be noted that section 7C will apply so long as the loan remains in place between the trust and the natural person which can become expensive when one considers that donations tax at the rate of, currently, 20% will be paid on the interest foregone on the loan made by the natural person to the trust for so long as the loan is in existence. Persons who have interest-free loans in place with a trust should review their position as a result of section 7C.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.4px; line-height: 21.56px;"><span style="font-family: georgia, "times new roman", serif;"><b>Dr Beric Croome</b> is a Tax Executive at ENSafrica. This article first appeared in Business Day, Business Law and Tax Review, March 2017. </span></i><i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: small;">Image purchased www.iStock.com ©iStock.com/"Retirement Savings" by </i><span style="color: #313131; font-family: Georgia, Utopia, Palatino Linotype, Palatino, serif; font-size: x-small;"><i>michellegibson</i></span><i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: small;"> </i>Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.com0tag:blogger.com,1999:blog-6744933880439989452.post-38718789968569072832017-02-17T19:50:00.004+02:002017-02-17T19:50:49.708+02:00SARS rules on the PAYE and VAT implications of non-executive directors’ remuneration<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">National Treasury
indicated in the 2016 Budget Review that there are differing views as to
whether the remuneration paid to a non-executive director (NED) is subject to employees’
tax, that is, pay-as-you-earn (PAYE)
and whether a NED should register for value added tax (VAT). </span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">It was suggested that these issues be
investigated to provide clarity. In its
final response document on the Taxation Laws Amendment Bill, 2016, National
Treasury and the South African Revenue Service (SARS) proposed that SARS address
the uncertainties relating to VAT and PAYE in relation to NED remuneration in
an Interpretation Note.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">On 10 February 2017
SARS issued Binding General Ruling (Income Tax) 40 (BGR 40) and Binding General
Ruling (VAT) 41 (BGR 41) in which it sets out its interpretation of the Income
Tax Act (the Act) and the Value Added Tax Act (the VAT Act) in relation to NED
remuneration. Unlike what has become
common practice by SARS to publish binding general rulings in draft format for
public comment first, BGR 40 and BGR 41 were issued as final documents without
inviting public comment.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<b><span style="font-family: Georgia, Times New Roman, serif;">Binding General Ruling
40<o:p></o:p></span></b></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">This BGR sets out SARS‘s interpretation of the employees’
tax consequences of fees derived by non-executive directors as well as the
impact of section 23(<i>m</i>) of the Act on
non-executive directors claiming deductions against fees derived by them.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">SARS points out that since the introduction of the so-called
statutory test contained in paragraph (ii)<i>
</i>of the exclusions to the definition of remuneration contained in the Fourth
Schedule to the Act, there has been uncertainty over the nature of amounts paid
to non-executive directors and whether they should be subject to employees’
tax.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The Act does not define the term non-executive director. The
King III Report on Governance for South Africa 2009, commissioned by the
Institute of Directors of Southern Africa stated that the crucial elements of a
non-executive director’s role in a company are that a non-executive director:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo2; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">·<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->must provide objective judgement independent of management
of a company;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo2; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">·<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->must not be involved in the management of the
company; and<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo2; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">·<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->is independent of management on issues such as,
amongst others, strategy, performance, resources, diversity, etc.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo2; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">SARS points out that for the purposes of the BGR it is considered
that a non-executive director is to be a director who is not involved in the
daily management or operations of a company but attends and provides objective
judgment on the company’s affairs and voted board meetings.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The BGR makes it clear that SARS accepts that the nature of
the duties performed by a non-executive director mean that they are not
regarded as common-law employees. Thus, the only basis on which a non-executive
director could be subject to employees’ tax is if the so-called statutory tests
apply. Those tests provide that, notwithstanding an amount is paid for services
rendered to a person carrying on an independent trade, the recipient is
regarded as an employee if two requirements are satisfied, namely, the
‘premises’ test and the ‘control or supervision’ test. <o:p></o:p></span></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://3.bp.blogspot.com/-ZdQ_3Qw_fFQ/WKc3PLAwNmI/AAAAAAAAA_o/Ntlr7MGOw2oHc7vI7lY_yIW-rHPa87LowCLcB/s1600/SARS1.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="190" src="https://3.bp.blogspot.com/-ZdQ_3Qw_fFQ/WKc3PLAwNmI/AAAAAAAAA_o/Ntlr7MGOw2oHc7vI7lY_yIW-rHPa87LowCLcB/s320/SARS1.jpg" width="320" /></a></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">These tests comprise the following:<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l2 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">·<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> t</span>he ‘premises’ test requires that the services
must be performed mainly at the premises of the client. Mainly is regarded as
meaning a quantitative measure in excess of 50% based on the judgment of <i>Sekretaris van Binnelandse Inkomste vs
Lourens Erasmus (Eindoms) Bpk </i>1966(4) South African 434 (A).<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l2 level1 lfo3; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l2 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">·<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->the ‘control or supervision’ test envisages
either control or supervision which must be exercised over one of the
following:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l2 level1 lfo3; text-indent: -18.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div align="left" class="Clause2Sub">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">1.1.<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->the manner in which the duties are required to
be performed, or<o:p></o:p></span></div>
<div align="left" class="Clause2Sub">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">1.2.<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->the hours of work<o:p></o:p></span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: Georgia, Times New Roman, serif;">It is required that both of the above tests must be met, that
is both the ‘premises test’ and the ‘control or supervision’ test must be
fulfilled before the recipient will be regarded as not carrying on an
independent trade and therefore receiving remuneration subject to employees’
tax. However, if only one of the above mentioned tests is fulfilled, or
neither, the deeming rules cannot apply.<o:p></o:p></span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: Georgia, Times New Roman, serif;">Where the non-executive director is not deemed to be an
employee and also is not a common law employee the amounts payable to the
non-executive directors will not constitute remuneration.<o:p></o:p></span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: Georgia, Times New Roman, serif;">The BGR makes reference to the fact that it has been
suggested that payment made by a company to a non-executive director for time
spent preparing for board meetings, for example, which result in payment of an
hourly rate for a specified number of hours before each meeting creates some
form of control or supervision of the hours of work performed by the
non-executive director. SARS indicates that this is not the correct manner in
which to apply the ‘control or supervision’ test. </span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: Georgia, Times New Roman, serif;">The fact that there may be a
contractual relationship regulating the number of hours for which preparation
time may be billed does not result in ‘control or supervision’ being exercised
over the hours during which a non-executive director’s duties are performed.
Thus, such payments will not satisfy the test in question. It must be noted
though that this rule does not apply to non-resident independent contractors.<o:p></o:p></span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: Georgia, Times New Roman, serif;">Section 23(<i>m</i>)
prohibits employees and office holders from claiming the deduction of certain
expenses. The section requires that expenditure must relate to an office held
by the taxpayer and, furthermore, that the taxpayer must derive remuneration
from that office.<o:p></o:p></span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: Georgia, Times New Roman, serif;">SARS accepts that directors are holders of an office and thus
if they do receive remuneration, section 23(<i>m</i>)
will result in the prohibition from claiming deductions applying to that
director. Where, however, the non-executive director does not receive
remuneration, SARS accepts that section 23(<i>m</i>)
cannot apply and the ordinary rules for deductibility of expenditure set out in
the Act will apply.<o:p></o:p></span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: Georgia, Times New Roman, serif;">For purposes of the ruling published by SARS, SARS accepts
that the non-executive director does not constitute a common law employee. SARS
further accepts that no control or supervision is exercised over the manner in
which a non-executive director performs his or her duties or their hours of
work.<o:p></o:p></span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: Georgia, Times New Roman, serif;">As a result, the director’s fees received by a non-executive
director for services rendered in that capacity on a company’s board do
not constitute remuneration and are not subject to the deduction of
employees’ tax. The non-executive director must reflect the income received for
services rendered as a non-executive director for tax purposes and pay tax
thereon via the provisional tax system.<o:p></o:p></span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: Georgia, Times New Roman, serif;">In addition, SARS accepts that because the amounts received
by a non-executive director do not constitute remuneration, the prohibition of
claiming expenses under section 23(<i>m</i>)
will not apply in relation to the fees received by such persons. The ruling
does not apply in respect of fees received by non-resident non-executive
directors, in which case the company paying the fees will be required to
withhold and deduct employees’ tax. The ruling is published as a BGR in
accordance with section 89 of the Tax Administration Act which means that
taxpayers are entitled to rely thereon. It must be noted that the ruling has
been published such that it will apply from 1 June 2017 until it is withdrawn,
amended or the relevant legislation is amended. The terms of the ruling further
provide that any ruling and decision issued by the Commissioner which is
contrary to BGR 40 is withdrawn with effect from 1 June 2017.<o:p></o:p></span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: Georgia, Times New Roman, serif;">When reference is made to the BGR referred to, the question
arises as to what companies should do from the date of publication of the
ruling until the date of application thereof, that is, 1 June 2017.<o:p></o:p></span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: Georgia, Times New Roman, serif;">Where, based on an analysis of the law the company is
satisfied that it does not exercise supervision or control over the
non-executive director and the director is resident, there is a basis in law
for the company not to deduct employees’ tax from the fees paid to that
director from 10 February 2017 until 31 May 2017. </span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: Georgia, Times New Roman, serif;">Clearly, this does not mean
that the amount is not taxable. The ruling and the law merely regulates the
manner in which the tax is to be paid by the non-executive director. Where
employees’ tax is not withheld by the company, the director has an obligation
to include that income for provisional tax purposes and comply with the
provisions of the Fourth Schedule, failing which penalties will be imposed for
either the late payment or under- payment of provisional tax. Where employees’
tax has been deducted historically in the past, non-executive directors should
ensure, if not yet registered for provisional tax purposes that are so
registered with effect from 1 June 2017 so that they can adhere to the BGR published
by SARS<o:p></o:p></span></div>
<div class="Clause2Sub" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<br /></div>
<div class="MsoNormal">
<b><span style="font-family: Georgia, Times New Roman, serif;">Binding General Ruling
41<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">In BGR 41 SARS
refers to its conclusion in BGR 40 that an NED is not considered to be a common
law employee and that the remuneration paid to an NED is therefore not subject
to PAYE. SARS ruled that for VAT
purposes an NED is treated as an independent contractor as contemplated in
proviso (iii)(bb) to the definition of “enterprise” in section 1(1) of the VAT
Act, in respect of the NED’s activities.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">BGR 41 further
stipulates that an NED that carries on an enterprise in South Africa is
required to register and charge VAT where the value of the remuneration exceeds
R1 million in any consecutive 12-month period, and that this applies to
ordinary residents of South Africa and to non-resident NED’s.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">BGR 41 is made
effective from 1 June 2017. SARS
indicated in a media statement issued on 14 February 2017 that where the
remuneration paid by the NED was subject to PAYE, the NED would not be required
to register for VAT prior to 1 June 2017.
This would allow NED’s who are affected by BGR 41 then approximately
three months to register for VAT with effect from 1 June 2017.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">In terms of section
66(8) of the Companies Act, 2008, a company may pay remuneration to its
directors for their services as directors.
However, such remuneration may be paid only in accordance with a special
resolution approved by the shareholders within the previous two years. In terms of section 64 of the VAT Act any
price charged by any vendor for the taxable supply of goods or services is
deemed to include VAT. Therefore, where
the NED’s remuneration is not increased by the VAT rate by a special resolution
of the shareholders before 1 June 2017, the NED’s remuneration will be deemed
to be inclusive of VAT.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="separator" style="clear: both; text-align: center;">
</div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"> <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The question arises
as to whether SARS is correct in its interpretation of the VAT Act as set out
in BGR 41. SARS considers an NED to be
an independent contractor “as contemplated in proviso (iii)(bb) to the
definition of “enterprise” in section 1(1) of the VAT Act”. However, proviso (iii)(bb) only applies to
services rendered by employees or office holders as contemplated by proviso
(iii)(aa) where the remuneration payable constitutes ‘remuneration” as defined
in the Fourth Schedule to the Act. SARS
has ruled in BGR 40 that the remuneration paid to an NED does not comprise
“remuneration” as defined in the Fourth Schedule, and therefore proviso
(iii)(bb) is not applicable as contended by SARS.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The question that
remains is whether an NED is carrying on an “enterprise” as contemplated by
that definition. BGR 40 stipulates that
SARS considers an NED to be a director who is not involved in the daily
management or operations of the company, but simply attends, provides objective
judgment and votes at board meetings.
The question is whether such activities of attending and voting at board
meetings comprise the supply of “services” as contemplated by the definition of
that term as defined in the VAT Act, or whether they are merely the fulfilment
of the statutory duties of the NED. In
addition, an NED is elected to that position in his or her personal capacity as
contemplated by section 68 of the Companies Act to serve for a specified term,
unlike an independent contractor who is appointed under a contract to provide
specific services, and who is entitled to delegate the performance of the
services. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The independency of
an NED from the management of a company should further not be confused with
independency from the company itself. The
company, being a legal entity, cannot on its own make any decision or take any
actions. A company’s mind and soul has
been considered by our courts to be that of its board of directors, which
includes the NED’s. It therefore seems
that it could be argued that the activities of an NED do not fall within the
ambit of the definition of “enterprise” as defined in the VAT Act as contended
by SARS in BGR 41. However, in the
absence of a court ruling to the contrary, an NED may be held liable for the
VAT, penalties and interest if he or she does not comply with BGR 41.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b>Gerhard Badenhorst</b> <b>Beric
Croome </b></div>
<div class="MsoNormal">
Tax Executive Tax
Executive<o:p></o:p></div>
Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.com0tag:blogger.com,1999:blog-6744933880439989452.post-23991666786975749022017-02-13T06:30:00.000+02:002017-02-13T06:30:01.878+02:00Penalties on Underpayment of Provisional Tax<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Under paragraph 20(1) of the Fourth
Schedule to the Income Tax Act 58 of 1962, amended </span><span style="font-family: "georgia" , "times new roman" , serif;">(“the Act”), if the actual taxable income of a provisional taxpayer, as finally
determined under the Act, exceeds R1 000 000 and the estimate made in the
return for the payment of provisional tax, that is the so-called second
provisional tax payment, is less than 80% of the amount of the actual taxable
income, the Commissioner is obliged to levy a penalty, which is regarded as a
percentage based penalty imposed under chapter 15 of the Tax Administration Act
28 of 2011 (“TAA”).</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The penalty, in the case of a
company, amounts to 20% of the difference between the amount of normal tax
calculated using the corporate tax rate of 28% in respect of the taxable income
amounting to 80% of the actual taxable income and the amount of provisional tax
in respect of that year of assessment
paid by the end of the year of assessment.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Paragraph 20(2) of the Fourth
Schedule to the Act confers a discretion on the Commissioner to remit the penalty
or a part thereof where he is satisfied that the estimate of taxable income was
seriously calculated with due regard to the factors as having a bearing thereon
and was not deliberately or negligently understated.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The Port Elizabeth Tax Court
was recently required to adjudicate a matter relating to the imposition of a
penalty on the underpayment of provisional tax in Case No. IT14027, as yet
unreported, where judgment was delivered on 7 December 2016.<o:p></o:p></span></div>
<div class="separator" style="clear: both; text-align: center;">
</div>
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://1.bp.blogspot.com/-VMOE7DDQGCs/WJVbxvjYwlI/AAAAAAAAA_M/MXQkJ-L_vWI3gBqwW6UuVt27oT9fo-YDACLcB/s1600/iStock_000006158745_Large.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="524" src="https://1.bp.blogspot.com/-VMOE7DDQGCs/WJVbxvjYwlI/AAAAAAAAA_M/MXQkJ-L_vWI3gBqwW6UuVt27oT9fo-YDACLcB/s640/iStock_000006158745_Large.jpg" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: small;">The Tax Court had to consider whether the company could lawfully amend its grounds of objection even though the matter was already on appeal </span><i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: x-small; text-align: start;">©iStock.com/ "Alert Judge</i><span style="background-color: white; color: #313131; font-family: "georgia" , "utopia" , "palatino linotype" , "palatino" , serif; font-size: xx-small;"><i>" by j</i></span><span style="color: #313131; font-family: "georgia" , "utopia" , "palatino linotype" , "palatino" , serif; font-size: xx-small;"><i>unial</i></span></td></tr>
</tbody></table>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">ABC (Pty) Ltd was a
provisional taxpayer which delivered its return for payment of provisional</span><span style="font-family: "georgia" , "times new roman" , serif;"> </span><span style="font-family: "georgia" , "times new roman" , serif;">tax for the 2010 year of
assessment on 30 June 2011. In its return of provisional tax it estimated the
taxable income for the year of assessment and made payment in accordance with
its estimate. Sometime later it appeared that the actual income received
exceeded the estimate made by the company substantially. As a result the South
African Revenue Service (“SARS”) imposed an underestimation penalty in terms of
paragraph 20 of the Fourth Schedule to the Act.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The company lodged an
objection which was rejected by SARS and resulted in an appeal which was
decided in its favour by the Tax Board. SARS subsequently appealed the decision
of the Tax Board to the Tax Court for a hearing <i>de novo </i>and subsequently filed a statement of grounds of assessment
and opposing the appeal.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">In reply, ABC (Pty) Ltd filed
its statement of grounds of appeal according to the Tax Court rules. In its
grounds of appeal the company abandoned all of the grounds raised in its
original objection and in its notice of appeal and sought to rely only on the
procedural ground raised for the first time by the chairperson of the Tax Board
upon which he had found in favour of the company.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">SARS subsequently filed a
notice of exception arguing that the company could not rely on a new ground of
objection not previously contained in its grounds of objection.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The company originally
estimated its income for the 2011 year of assessment in an amount of R431 638,00 and made payment of provisional tax amounting to R64 905,54. Later,
on 30 September 2011 the company made a further payment of R1 377 466,22. Subsequently,
the company filed its income tax return reflecting a taxable income for the
year of assessment amounting to R5 050 076,00.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">By virtue of the large
difference between the tax actually due per the final taxable income and the
provisional tax paid, SARS imposed the underestimation penalty under the
provisions of the Act. SARS considered the objection lodged by the company on
the basis that the company did not seriously calculate its tax income as
required.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The TAA had not yet come into
force by the time that the company’s objection had been disallowed and its
notice of appeal lodged. The Tax Board decided that the Commissioner was
correct in rejecting the company’s objection and that the appeal should be
dismissed on its merits. </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">However, the chairperson of the Tax Board </span><i style="font-family: Georgia, "Times New Roman", serif;">mero motu </i><span style="font-family: "georgia" , "times new roman" , serif;">raised a procedural issue
under the TAA which had since come into force and decided in favour of the
company. The chairperson of the Tax Board reached the view that the manner in
which SARS had dealt with the imposition of the penalty was in conflict with
chapter 15 of the TAA, especially sections 214 and 215 thereof. </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The Tax Court
had to consider whether the company could lawfully amend its grounds of
objection even though the matter was already on appeal. </span><span style="font-family: "georgia" , "times new roman" , serif;">Tax Court Rules do not
provide for an amendment to the taxpayers’ grounds of objection and the Court
therefor referred to the rules of the High Court.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The Tax Court considered the
various provisions of the TAA and made the decision that SARS’s exception to
the company’s application should be upheld and that the application for the
amendment of the company’s grounds of objection should be dismissed. The Court
therefore dismissed the company’s appeal and confirmed the penalty imposed on
the understatement of provisional tax.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Based on the judgment it is
concluded that taxpayers need to exercise extreme caution in calculating
taxable income for purposes of provisional tax, failing which they will become
liable to the 20% underpayment penalty. </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Furthermore, when a taxpayer disputes
the imposition of a penalty, or in fact any assessment, it is important that
the grounds of objection are properly formulated as it is not possible to
subsequently amend the grounds of objection.</span><br />
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span>
<span style="font-family: "georgia" , "times new roman" , serif;"><i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.4px; line-height: 21.56px;"><span style="font-family: georgia, "times new roman", serif;"><b>Dr Beric Croome</b> is a Tax Executive at ENSafrica. This article first appeared in Business Day, Business Law and Tax Review, February 2017. </span></i><i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: small;">Image purchased www.iStock.com ©iStock.com/"Alert Judge" by junial </i></span></div>
Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.com0tag:blogger.com,1999:blog-6744933880439989452.post-90653721280994439452016-11-15T17:53:00.001+02:002017-02-05T19:19:51.137+02:00Final Changes to the Special Voluntary Disclosure Programme<div class="MsoNormal" style="text-align: center;">
<span style="color: red; font-family: "arial" , "helvetica" , sans-serif; font-size: large;"><b>IMPORTANT NOTICE: </b></span></div>
<div class="MsoNormal" style="text-align: center;">
<span style="color: red; font-family: "arial" , "helvetica" , sans-serif; font-size: large;"><b>These changes must be read together with my primary article on the Special VDP (Updated 1/2/2017)</b></span></div>
<div class="MsoNormal" style="text-align: center;">
<span style="color: red; font-family: "arial" , "helvetica" , sans-serif; font-size: large;"><b><a href="http://www.bericcroome.com/2016/08/2016-special-voluntary-disclosure.html" target="_blank">Click on this link to read</a> </b></span></div>
<div align="left" class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div align="left" class="MsoNormal">
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">On 26 October 2016 the
Minister of Finance tabled the Rates and Monetary Amounts and Amendment of
Revenue Laws Bill, Bill 19 of 2016 in Parliament when he introduced the
so-called Mini Budget. This Bill contains the legislation regulating the Special
Voluntary Disclosure Programme (“SVDP”) which commenced on 1 October 2016 and was
to end on 30 June 2017. The Bill, as tabled confirms that the SVDP will run for
nine months as opposed to the originally announced period of six months. Subsequently,
on 24 November 2016, the Finance Standing Committee extended the deadline to 31
August 2017.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div align="left" class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><o:p></o:p></span></div>
<div align="left" class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Under the SVDP,
qualifying applicants must include in their 2015 tax income an amount equal to
40 per cent of the highest amount of the Rand value of the unauthorised foreign
assets at the end of each year of assessment ending on or after 1 March 2010 but
not ending on or after 1 March 2015. Thus, the Bill gives effect to the
Treasury’s announcement in September that the inclusion rate has been reduced
from 50 per cent to 40 per cent.<o:p></o:p></span></div>
<div align="left" class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">In addition, the Bill contains a provision whereby the base
cost of the unauthorised foreign assets for which an application is lodged
under the SVDP will be deemed to have been acquired on 28 February 2015 a cost
equal to the highest market value, in foreign currency, of that asset as
determined under clause 16 of the Bill. Clause 16 refers to the manner in which
the amount to be included in the applicant’s taxable income in 2015 is to be
determined. </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">This is based on the market value of the unauthorised foreign
assets in the relevant foreign currency and translated into South African Rands
at the spot rate on the last business day in South Africa at the end of each
year of assessment in question, namely, 28 February 2011, 29 February 2012, 28
February 2013, 28 February 2014 and 28 February 2015. </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">This is a concession to
taxpayers in that the base cost of the foreign assets is effectively increased when
determining the capital gain that will be liable to tax when the foreign assets
are ultimately disposed of. Instead of relying on the historic cost of the
foreign assets taxpayers will be entitled to rely on the market value used to
determine the tax payable on those foreign assets under clause 16 of the Bill.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">It must be noted that if the proceeds received on the sale
of the foreign assets is less than the adjusted base cost, the cost will be
limited to the proceeds received. Thus no capital loss will be allowed to be
carried forward to a future year in such cases.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Furthermore, the SVDP legislation makes it clear that where
any amounts exempt from tax under the SVDP legislation were received or accrued
by way of an inheritance or donation, that inheritance or donation must be exempt
from estate duty under the Estate Duty Act or donations tax under the Income
Tax Act in the hands of the estate or the donor. </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Where, for example an applicant
seeks relief under the SVDP in respect of unauthorised foreign assets held by a
deceased relative on which estate duty was not paid the estate duty that should
have been paid by the deceased effectively falls away. </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Similarly, where an
applicant donated assets to a foreign trust on which donations tax should have
been paid that donations tax is effectively waived where the donor makes the election
available under the SVDP legislation to treat the assets owned by the foreign
trust as belonging to them for income tax and estate duty purposes.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The SVDP legislation also deals with controlled foreign
companies subject to the provisions of section 9D of the Income Tax Act. Where,
for example, an applicant transferred funds from South Africa and invested that
in a controlled foreign company and that company is located in a low tax
jurisdiction, the income derived by the controlled foreign company should have
been declared as part of the income of the applicant. </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">In such a case the income
that should have been attributed in favour of the applicant will not be liable
to tax but the applicant can apply for SVDP relief on the basis that 40 per
cent of the highest market value of the controlled foreign company at the end
of 2011 – 2015 tax years must be included in the applicant’s income in the 2015
year of assessment.</span></div>
<br />
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The SVDP legislation was promulgated in the Government
Gazette on 19 January 2017. Prospective applicants must collate the information
required to apply for SVDP relief and start submitting applications to the
South African Revenue Service (“SARS”) and the South African Reserve Bank
(“SARB”) on the basis that applications for SVDP relief must be submitted via
the SARS e-filing system, both for tax and exchange control purposes.</span><o:p></o:p><br />
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span>
<span style="font-family: "georgia" , "times new roman" , serif;"><i style="background-color: white; color: red; font-size: 15.4px;"><b>It is important that applicants start obtaining the required information as the timeframe to submit application is short, namely from 1 October 2016 to 31 August 2017.</b></i></span></div>
</div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="background-color: white; color: #313131; font-family: "georgia" , "times new roman" , serif; font-size: 15.4px;">Dr Beric Croome </span><br />
<span style="background-color: white; color: #313131; font-family: "georgia" , "times new roman" , serif; font-size: 15.4px;">Tax Executive</span><br />
<span style="background-color: white; color: #313131; font-family: "georgia" , "times new roman" , serif; font-size: 15.4px;">ENSafrica</span></div>
Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.com0tag:blogger.com,1999:blog-6744933880439989452.post-59239367972117338002016-11-14T06:30:00.000+02:002016-11-14T06:30:27.744+02:00Reviewing the Tax Ombud’s Annual Report 2015/16<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;">The Tax Administration Act (“TAA”) no 28 of 2011 created the
office of the Tax Ombud as an office to deal with complaints by taxpayers which
SARS has failed to resolve. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;">The Tax Ombud, namely, Judge B. Ngoepe took office
in October 2013 and recently released his annual report for 2015/16. From a
review of that report it is clear that the number of complaints made by
taxpayers to the office is increasing which indicates that taxpayers are
becoming aware of the existence of the office and its purpose.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The Tax Ombud identified the delay on the part of SARS in
finalising complaints as a cause for concern. From a review the summary of
complaints outstanding, which the Tax Ombud is unable to finalise as a result
of delays on the part of SARS, too many complaints remain outstanding for an
extended period of time.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Furthermore, the Tax Ombud has identified challenges facing
its office regarding the fact that the office cannot employ its own staff
directly and can only do so in consultation with SARS. The Tax Ombud made
representations that the TAA should be amended to allow for his office to
employ staff directly without having to consult SARS. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://1.bp.blogspot.com/-yjFbNekrbeQ/WCGtIR4m_vI/AAAAAAAAA7c/N1LqpGU9BuQP-fBZcVmbaMmZOMNQiKCdQCLcB/s1600/iStock_000001666842_Full.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://1.bp.blogspot.com/-yjFbNekrbeQ/WCGtIR4m_vI/AAAAAAAAA7c/N1LqpGU9BuQP-fBZcVmbaMmZOMNQiKCdQCLcB/s400/iStock_000001666842_Full.jpg" width="270" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-family: Georgia, Times New Roman, serif; font-size: small;">The Tax Ombud recently launched his Annual Tax Ombud Report 2015/16</span><br /><span style="font-size: x-small;"><i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; text-align: start;">©iStock.com/ "</i><span style="color: #313131; font-family: Georgia, Utopia, Palatino Linotype, Palatino, serif; text-align: start;"><i>Executive Research" by sdominick</i></span></span></td></tr>
</tbody></table>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">In addition, currently
the office of the Tax Ombud’s expenditure is paid out of the funds of SARS
which means that the office of the Tax Ombud does not have financial
independence from SARS. It has been proposed that in future the funding of the
office of the Tax Ombud will be by way of a budget allocated by the National
Treasury and not out of the funds of SARS which should enhance the financial
independence of the office.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The proposals to enhance the independence of the office of
the Tax Ombud are contained in the tax bills to be tabled in parliament on 26
October.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">A further difficulty facing the office of the Tax Ombud is that
SARS has failed to update the SARS Service Charter which was last done in 2009.
The Tax Ombud’s annual report indicates that the office provided SARS with a
draft Taxpayer Bill of Rights for consideration. The Commissioner for SARS
indicated recently that an updated taxpayer’s service charter would be released
before the end of 2016 and that taxpayers would be able to submit comments
before the documents is finalised and adopted.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Taxpayers must remember that the mission of the office of
the Tax Ombud is to be an efficient, independent, impartial and fair redress
channel for taxpayers who have had complaints against SARS which have not been satisfactorily
resolved. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">It must be noted that the office of the Tax Ombud is unable to
intervene in legal disputes but is there to assist those taxpayers who have
encountered poor service from SARS or other administrative problems in their
dealings with SARS. In the 2015/16 period the office of the Tax Ombud received
5904 contacts from taxpayers, not all of those constituted complaints, but also
included enquiries received from taxpayers as to the purpose and function of
the office of the Tax Ombud. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">A summary of the contacts received by the office
of the Tax Ombud is set out below.</span><o:p></o:p></div>
<div class="MsoNormal">
<o:p> </o:p><o:p> </o:p> </div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184; width: 518px;">
<tbody>
<tr>
<td style="border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 253.15pt;" valign="top" width="338">
<div class="MsoNormal">
<b>Contacts received<o:p></o:p></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 93.05pt;" valign="top" width="124">
<div class="MsoNormal">
<b>No. of Contacts <o:p></o:p></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.95pt;" valign="top" width="56">
<div class="MsoNormal">
<b>%<o:p></o:p></b></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 253.15pt;" valign="top" width="338">
<div class="MsoNormal">
Queries received<o:p></o:p></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 93.05pt;" valign="top" width="124">
<div class="MsoNormal">
3 771<o:p></o:p></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.95pt;" valign="top" width="56">
<div class="MsoNormal">
64%<o:p></o:p></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 253.15pt;" valign="top" width="338">
<div class="MsoNormal">
Complaints not falling within OTO mandate – rejected<o:p></o:p></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 93.05pt;" valign="top" width="124">
<div class="MsoNormal">
938<o:p></o:p></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.95pt;" valign="top" width="56">
<div class="MsoNormal">
16%<o:p></o:p></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 253.15pt;" valign="top" width="338">
<div class="MsoNormal">
Complaints falling within OTO mandate – accepted<o:p></o:p></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 93.05pt;" valign="top" width="124">
<div class="MsoNormal">
961<o:p></o:p></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.95pt;" valign="top" width="56">
<div class="MsoNormal">
16%<o:p></o:p></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 253.15pt;" valign="top" width="338">
<div class="MsoNormal">
Terminated complaints<o:p></o:p></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 93.05pt;" valign="top" width="124">
<div class="MsoNormal">
234<o:p></o:p></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.95pt;" valign="top" width="56">
<div class="MsoNormal">
4%<o:p></o:p></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 253.15pt;" valign="top" width="338">
<div class="MsoNormal">
<b>TOTAL<o:p></o:p></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 93.05pt;" valign="top" width="124">
<div class="MsoNormal">
<b>5 904<o:p></o:p></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 41.95pt;" valign="top" width="56">
<div class="MsoNormal">
<b>100%<o:p></o:p></b></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">From the table set out above, it would appear that out of
the 5904 contacts received from taxpayers just under 1000 of complaints received
fell within the mandate of the office. During the presentation of the Tax Ombud’s
annual report for 2015/16 it was indicated that 87% of all complaints where
resolved in favour of taxpayers. Complaints received by taxpayers related
predominantly in respect of assessments, dispute resolution, refunds and
account maintenance and a host of other issues.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Complaints were received from taxpayers both in South Africa
and those outside of the country. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">It is disturbing that out of the 961 complaints regarded as
falling within the mandate of the office of the Tax Ombud, 460 thereof were
unresolved by SARS and 86% of those complaints were already outside the
turnaround time available to SARS. It is clear therefore that the level of
service which taxpayers can receive from the office of the Tax Ombud is to a
large extent dependent upon the turnaround time provided by SARS in dealing
with complaints received by the office of the Tax Ombud.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">64% of all complaints accepted by the office were service
related, with 21% being procedural in nature and 15% administrative in nature.
In 2014/15 the office only accepted 409 complaints and this increased to 961 in
2015/16. The annual report contains a summary of the types of complaints
received by the office from taxpayers and the time period for which those
complaints have been outstanding with SARS. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">It is unacceptable that so many
complaints remain outstanding for an extended period of time which would
indicate that SARS does not appear to take the resolution of taxpayers’s
complaints seriously.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">This does not enhance tax compliance as international
research has shown that where taxpayers believe they have been treated fairly
compliance levels are enhanced.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">There were many complaints from taxpayers regarding the
delays in payment of refunds which unfortunately continues to be a problem
nationally and this has received ongoing coverage in the media. It remains to
be seen if the office of the Tax Ombud will regard the delay in finalising refunds
as a systemic issue which he will investigate of his own accord to understand
the reasons therefore. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Other complaints identified related to:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">·<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->Delays in issuing tax clearance certificates;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">·<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->Incorrect allocation of payments made by SARS;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">·<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->Victims of identity theft;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">·<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->Non-adherence by SARS to dispute resolution
timeframes;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">·<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->Failure by SARS to respond to requests for
reasons for assessments;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">·<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->SARS taking collection steps when legally barred
from doing so;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">·<span style="font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->Hijacking of e-filing profiles. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">It would appear that taxpayers are becoming aware of the
existence of the office of the Tax Ombud and where they have exhausted SARS’s
internal complaints procedures they are resorting to the office of the Tax
Ombud in an attempt to seek resolution of their complaints.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">It is hoped that
the Taxpayer’s Service Charter will be released by the end of the year so the
taxpayers know and understand what levels of service they can expect in their
dealings of SARS. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Furthermore, it is important that SARS attends to taxpayers
complaints timeously and that in subsequent Ombud’s annual reports, the turnaround
time for complaints resolution by SARS will improve.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.4px; line-height: 21.56px;"><span style="font-family: georgia, "times new roman", serif;"><b>Dr Beric Croome</b> is a Tax Executive at ENSafrica. This article first appeared in Business Day, Business Law and Tax Review, November 2016. </span></i><i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: small;">Image purchased www.iStock.com ©iStock.com/ "</i><span style="color: #313131; font-family: Georgia, Utopia, Palatino Linotype, Palatino, serif; font-size: x-small;"><i>Executive Research" by sdominick</i></span></div>
Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.com0tag:blogger.com,1999:blog-6744933880439989452.post-67173919880019445542016-11-11T09:18:00.001+02:002016-11-11T16:11:03.643+02:00Bloomberg's European Tax Services Volume 18, Issue 10 : Publication<div style="text-align: center;">
<span style="font-family: Georgia, Times New Roman, serif;"><span style="background-color: white; white-space: pre-wrap;">My article on the special Voluntary Disclosure Programme</span><span style="white-space: pre-wrap;">. </span></span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><span style="white-space: pre-wrap;">This article first appeared in European Tax Service, published by Bloomberg BNA, </span></span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><span style="white-space: pre-wrap;">October 2016, volume 18, issue 10. #VDP www.bna.com</span><span style="background-color: white; white-space: pre-wrap;">. </span></span><br />
<span style="font-family: "georgia" , "times new roman" , serif;"><span style="background-color: white; font-family: Georgia, Times New Roman, serif; white-space: pre-wrap;">You can subscribe to Bloombergs on-line magazine at www.bna.com. </span></span><br />
<span style="font-family: "georgia" , "times new roman" , serif;"><span style="background-color: white; font-family: Georgia, Times New Roman, serif; white-space: pre-wrap;">Here is the article: </span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif;"><span style="background-color: white; white-space: pre-wrap;"><br /></span></span>Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.com0tag:blogger.com,1999:blog-6744933880439989452.post-67889412242853628642016-10-10T06:30:00.000+02:002016-11-08T12:37:56.860+02:00Davis Tax Committee: Final Report on Estate Duty<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">On 24 August 2016, with the consent of the Minister of
Finance, the Davis Tax Committee (“DTC”) published its final report on macro
analysis of the tax system, small and medium enterprises and estate duty.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The committee advised that it would conduct a further investigation into wealth taxes and that this would be dealt with in a separate report.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The estate duty report dealt with estate duty and trusts, and
contains a number of recommendations which need to be evaluated by the
National Treasury with a view to amending the tax laws.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The DTC recommends that the estate duty regime should be reviewed
in order to establish an effective and equitable package of major abatements
and rates of duty.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The retirement fund abatement
currently available should be retained, while the
maximum threshold for tax deductible retirement fund contributions should be
increased from the current cap of R350 000.00 per year to take account of
inflation.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The DTC recommends that the inter-spousal estate duty deduction
under section 4(q) of the Estate Duty Act should be withdrawn and replaced with
a substantial increased primary abatement thus ensuring consistent and
equitable treatment for all taxpayers regardless of marital status.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The report recommended that the primary abatement for estate
duty should be increased to R15 000 000 for all taxpayers. Furthermore, it has
been proposed that the rate of estate duty be increased from 20% - 25% of the
dutiable value of an estate exceeding R30 000 000.</span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://1.bp.blogspot.com/-6cHxpeCe8xg/V_NiBcx5s2I/AAAAAAAAA4s/lYAnJIzH4v4DQ6O8jBlYkOWcP1j0KkcqACLcB/s1600/iStock_000012927006_Double.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><i><img border="0" height="278" src="https://1.bp.blogspot.com/-6cHxpeCe8xg/V_NiBcx5s2I/AAAAAAAAA4s/lYAnJIzH4v4DQ6O8jBlYkOWcP1j0KkcqACLcB/s400/iStock_000012927006_Double.jpg" width="400" /></i></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><h4>
Final Davis Tax Committee report tackles marital status discrimination and <br />primary abatements in estate duty tax law</h4>
<h4 style="text-align: center;">
<i style="background-color: white; text-align: -webkit-left;"><div style="display: inline !important; text-align: center;">
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<i style="text-align: -webkit-left;"><i style="text-align: -webkit-left;"><span style="color: #222222; font-family: "georgia" , "utopia" , "palatino linotype" , "palatino" , serif;"><span style="font-size: xx-small; font-weight: normal;">Troels Graugaard</span><span style="font-size: 12.8px; font-weight: normal;"> </span></span></i></i></div>
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<span style="font-family: "georgia" , "times new roman" , serif;">There has been some discussion regarding the imposition of estate
duty and capital gains tax on death and whether that amounts to double
taxation. The DTC indicated that Capital Gains Tax (“CGT ”) is regarded as an income
tax on capital and not a wealth tax and that estate duty and donations tax are
wealth taxes and therefore the DTC does not agree with the contention that estate
duty and CGT amounts to double taxation and does therefore not support the call
for estate duty to be removed.</span><br />
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">It has also been recommended that the current roll-over
provisions available relating to inter-spousal bequests under the CGT rules should
be repealed and replaced with a generous exemption available on death of R 1 000 000.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Whilst proposing the removal of the inter-spousal exemption for estate duty
and CGT the DTC recommends that the inter-spousal exemption
within the donations tax system should also be removed. It proposes an exemption from donations tax that should be
provided for the reasonable maintenance of the taxpayer and their family.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">It has been suggested that the transfer of assets in
accordance with a divorce order should be subject to exemption similar to the
death benefit for estate duty and CGT such that the taxpayer’s death benefit
reductions would be reduced by the quantum of any allowances available or
utilised during the taxpayer’s lifetime.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">National Treasury has been urged to consider the possibility
of extending the deeming provisions of section 3(3)(d) of the Estate duty Act to contain deeming provisions such that where
an interest-free loan is made available by a person to a trust, the assets
attributable to that loan should be included in the deceased’s estate for estate
duty purposes. This is in addition to the recent proposal that where a funder
makes an interest-free loan available to a trust, the funder be subject to donations tax thereon
using the official rate of interest, currently 8% per year.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">SARS has been urged to examine all trusts on registration and
to investigate the transfer of assets into trusts to ensure the reduction of aggressive
tax planning and to provide a level of assurance to taxpayers that their
affairs are in order. The DTC proposed that donors and beneficiaries of all
vested trusts should be subject to strict disclosure requirements and enforcement
measures.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The DTC also recommended that SARS should concentrate on the
examination of any trusts in which a deceased person may have enjoyed a vested
interest thereby ensuring that all income and capital has been brought to
account for both income tax estate and estate duty purposes.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Insofar as the taxation of discretionary trusts is concerned
the DTC has recommended that the revenue income must be taxed in the trust in
accordance with the definition of the gross income definition contained in section 1 of the Income Tax Act and that
capital gains realised by the discretionary trust should be taxed in the hands
of the trust itself prior to those assets or gains vesting in the beneficiary.
The DTC agreed that the current flat rate of tax applicable to trusts should be
retained and subject to adjustment in line with any changes made in the maximum
personal income tax rate.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The DTC recommended that SARS should establish a separate
investigations unit to thoroughly comprehensively examine foreign trust
arrangements.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The DTC recommended that the estates with a net value of
less that R15 000 000 should be exempt from estate duty and that the estates with
a value exceeding R15 000 000 should be subject to estate duty at a progressive
rate. The report proposes that SARS should establish comprehensive records of
all bare dominium and trust arrangements utilised for estate duty purposes and that
all holders of a part interests in property should be required to submit tax returns
regardless of their income derived.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">As indicated above the DTC proposes that where an interest-
free loan is made available to a trust the deeming provisions of section 3(3)(d)
of the Estate Duty Act should be amended to include deeming provisions such
that the asset acquired by the trust as a result of an interest-free loan
should be added to the estate when the funder passes away. This would ensure
that the interest-free loan no longer confers an estate duty advantage on the
funder as a result of the deeming provisions set out in section 3(3)(d) of the Estate
Duty Act.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The DTC </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
</div>
<ul>
<li><span style="font-family: "georgia" , "times new roman" , serif;">considers that the inclusion of a general anti-avoidance
rule in the Estate Duty Act has little prospect of success and therefore does
not propose such a measure</span></li>
<li><span style="font-family: "georgia" , "times new roman" , serif;">has advised that it will conduct a further
investigation into the implementation of wealth taxes in South Africa and that
this will be dealt with in a separate report to be compiled by the DTC.</span></li>
<li><span style="font-family: "georgia" , "times new roman" , serif;">did not agree with proposals that trusts should be
regarded as corporates for tax purposes as that would mean that trusts would be
liable to tax 28% without being subject to dividends tax as is the case with a
company. </span></li>
<li><span style="font-family: "georgia" , "times new roman" , serif;">therefore recommended that the flat rate of tax applicable to
trusts be retained at the current level but subject to adjustment from time to
time in accordance with any changes made in the personal income tax rate.</span></li>
<li><span style="font-family: "georgia" , "times new roman" , serif;">identified various issues relating to the treatment
of foreign trusts and particularly the consequences of paragraph 80 of the
Eighth Schedule and section 25B of the Income Tax Act. </span></li>
<li><span style="font-family: "georgia" , "times new roman" , serif;">recommended that
SARS and National Treasury review the legislation applicable to foreign trusts
to address the deficiencies noted in the DTC’ s report.</span></li>
</ul>
<br />
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Furthermore, the DTC points out that many foreign trust arrangements may in fact be
managed from South Africa and as a consequence constitute South African
resident taxpayers. Thus, taxpayers with foreign trust arrangements need to
ensure that those are properly managed abroad and cannot be said to be tax resident
in South Africa.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The DTC recommended that offshore retirement funds be further
investigated by SARS to establish the nature of those funds and whether the
South African resident contributing to such funds has made a donation to that
fund. </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The concerns raised by the DTC in this regard relate to the non-payment
of donations tax and investments made into the offshore retirement fund and
that upon the taxpayer’s death the accumulated investment would not appear to
be required to be included in the South African taxpayer’s estate on the basis
that no vested right exists in respect of the trust’s accumulated capital income
of the foreign trust.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">In conclusion,<b> i</b>t
must be noted that the DTC makes recommendations to the Minister of Finance who
will take into account the DTC’s report and will make any appropriate
announcements in the course of the normal budget and legislative process. </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Thus,
as is the case with all tax policy proposals they will be subject to the normal
consultative processes and parliamentary oversight once announced by the
Minister but that does not mean that the DTC is entitled to make firm policy
proposals which must be accepted by government.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.4px; line-height: 21.56px;"><span style="font-family: "georgia" , "times new roman" , serif;"><b>Dr Beric Croome</b> is a Tax Executive at ENSafrica. This article first appeared in Business Day, Business Law and Tax Review, October 2016. </span></i><i style="font-size: small;">Image purchased www.iStock.com ©iStock.com/"Senior couple checking their accounts at home" by Troels Graugaard </i></div>
Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.com0tag:blogger.com,1999:blog-6744933880439989452.post-77540009448044025052016-09-12T07:00:00.000+02:002016-09-12T07:00:27.078+02:00Last Chance to Regularise Foreign Assets not known to SARS and South African Reserve Bank<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">During the course of the 2016 Budget Review the Minister of
Finance announced a last opportunity for those South Africans holding funds
abroad which are not known to the South African Revenue Service or the South
African Reserve Bank to regularise those assets. </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">A revised Draft Bill
regulating the Special Voluntary Disclosure programme (“SVDP”) was published on
20 July and that Bill is fast approaching finalisation. On 13 July the South African Reserve Bank issued a comprehensive circular dealing
with the Exchange Control aspects of the SVDP.</span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">It must be remembered that the Tax Administration Act No 28
of 2011 currently contains the so-called Permanent Voluntary Disclosure
Programme (“Permanent VDP”) which does not contain any date by which an
application must be lodged. </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Those taxpayers wishing to regularise their foreign
assets will need to evaluate whether to do so utilising the Permanent VDP or
SVDP as the methodology for submitting and applications is quite different. The
SVDP will commence on 1 October 2016 and will terminate on 31 March 2017. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The revised Draft Bill makes it clear that the amounts of
receipts and accruals not previously declared to SARS as required by the Income
Tax Act No 58 of 1962 (‘the Act”) or the Estate Duty Act for tax purposes,
excluding employees’ tax purposes, held outside during the period 1 March 2010
to 28 February 2015 will be exempt from tax. </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Thus, no donations tax, estate duty
or income tax will be payable on the undeclared foreign assets up to 28
February 2015. Clearly with effect from 1 March 2015 taxpayers must account for
income tax on income received on the foreign assets and donations tax on assets
donated thereafter. Furthermore, they will be subject to estate duty where the
person holding the foreign assets passes away after 1 March 2015.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Any person who held a foreign asset wholly or partly derived
from receipts and accruals not previously declared to SARS as required by the
Act or the Estate Duty Act, which was disposed of before 1 March 2010, other than
by way of donation or disposal on loan account to a Trust may elect that the
asset is deemed to have been held for the period 1 March 2010 to 28 February
2015 on the basis that the value for the period in question will be equal to
its highest value whilst actually held by the applicant. If the applicant is
unable to establish the amount with certainty SARS may agree to accept a
reasonable estimate of that value from the taxpayer.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The revised Draft Bill requires that an applicant must
include in their taxable income in the 2015 tax year an amount equal to 50% of
the highest amount determined in respect of the aggregate value of all foreign
assets referred to above as at the end of each year of assessment ending on or
after 1 March 2010 but not ending on or after March 2015. </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Thus, taxpayers will
need to determine the market value of all foreign assets held, not previously
declared to SARS and to convert the foreign market value into Rands at the spot
rate at the end of each year of assessment.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Assume that a taxpayer held foreign assets on which foreign
income such as interests, dividends and capital gains had not previously been
reported to SARS for the tax year set out below:<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
<td style="border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 240.7pt;" valign="top" width="321"><div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Year of Assessment <o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 240.7pt;" valign="top" width="321"><div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Market Value of foreign assets in Rands<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 240.7pt;" valign="top" width="321"><div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">28 February 2011<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 240.7pt;" valign="top" width="321"><div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">R1 000 000<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 240.7pt;" valign="top" width="321"><div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">29 February 2012<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 240.7pt;" valign="top" width="321"><div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">R1 200 000<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 240.7pt;" valign="top" width="321"><div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">28 February 2013<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 240.7pt;" valign="top" width="321"><div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">R1 500 000<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 240.7pt;" valign="top" width="321"><div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">28 February 2014<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 240.7pt;" valign="top" width="321"><div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">R1 600 000<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 240.7pt;" valign="top" width="321"><div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">28 February 2015<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 240.7pt;" valign="top" width="321"><div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">R1 400 000<o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">By virtue of the fact that the market value of the foreign
assets at 28 February 2014 was the highest in the amount of R1 600 000, 50% thereof,
that is, R800 000 will be added to the taxpayer’s income in the 2015 tax year
and taxed at that person’s marginal rate for that year which in most cases will
be 41%. The tax charge will therefore amount to R 328 000. Interest will no
doubt be payable from 1 September 2015 until the date on which the tax is paid.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The Draft Bill deals
with foreign trusts whereby either the donor or the deceased’s estate of the
donor or a beneficiary of a foreign trust may elect that any asset located
outside South Africa which was held by the discretionary trust from 1 March
2010 to 28 February 2015 will be regarded as being held by that person for
purposes of all tax Acts. </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://3.bp.blogspot.com/-syRtJXkKjG8/V8gXwP15LwI/AAAAAAAAA4I/xe34ROVf_08JnJb5saw_K2pKJRdiZB-NgCLcB/s1600/iStock_000020862760_Full.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="426" src="https://3.bp.blogspot.com/-syRtJXkKjG8/V8gXwP15LwI/AAAAAAAAA4I/xe34ROVf_08JnJb5saw_K2pKJRdiZB-NgCLcB/s640/iStock_000020862760_Full.jpg" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i style="background-color: white; color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; line-height: 17.248px; text-align: -webkit-left;"></i><br />
<div style="line-height: 17.248px; text-align: center;">
<i style="background-color: white; color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; line-height: 17.248px; text-align: -webkit-left;"><span style="font-size: x-small;">2016/2017 Voluntary Disclosure Programme is the last chance to regularise </span></i></div>
<i style="background-color: white; text-align: -webkit-left;">
<div style="color: #222222; font-family: georgia, utopia, "palatino linotype", palatino, serif; line-height: 17.248px; text-align: center;">
<span style="font-size: x-small;">foreign assets unknown to SARS and the South African Reserve Bank</span></div>
<div style="text-align: center;">
<div style="color: #222222; font-family: georgia, utopia, "palatino linotype", palatino, serif; font-size: 12.32px; line-height: 17.248px;">
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<div style="color: #222222; font-family: georgia, utopia, "palatino linotype", palatino, serif; font-size: 12.32px; line-height: 17.248px;">
<i style="line-height: 17.248px; text-align: -webkit-left;"><span style="font-size: xx-small;"><i></i></span></i></div>
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<span style="font-size: xx-small;"><i style="text-align: -webkit-left;"><i><i style="color: #222222; font-family: georgia, utopia, "palatino linotype", palatino, serif; line-height: 17.248px;"><span style="line-height: 17.248px;">Image purchased from www.iStock.com ©iStock.com/</span></i></i></i></span><br />
<span style="font-size: xx-small;"><i style="text-align: -webkit-left;"><i><i style="color: #222222; font-family: georgia, utopia, "palatino linotype", palatino, serif; line-height: 17.248px;"><span style="line-height: 17.248px;">"</span></i><span style="font-size: 12.32px; line-height: 17.248px;"><span style="font-size: xx-small; line-height: 17.248px;"><i><span style="color: #222222; font-family: georgia, utopia, palatino linotype, palatino, serif;"><span style="line-height: 17.248px;">Global shares investment flow chart concept</span></span>" by </i></span></span></i></i></span><i style="font-size: 12.8px; text-align: -webkit-left;"></i><br />
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<span style="font-family: "georgia" , "times new roman" , serif;">As a result the foreign assets owned by the foreign
trusts will be regarded as forming part of the estate of the applicant for
purposes of Estate Duty upon their death. The election available for foreign
trusts applies in respect of foreign assets where such assets were acquired by
the foreign trust by way of a donation and which has been wholly or partly
derived from any amount not declared to SARS as required by the Estate Duty Act
or the Act.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Prospective applicants need to ascertain market values of
foreign assets held at the end of February of each year for 2011 to 2015 so
that they may ascertain which value was the highest in the five years in
question. </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Where a person applies for SVDP no understatement penalties will be
imposed and SARS will not pursue a criminal prosecution for a tax offence when
application under the SVDP is successful. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Where a person holds assets contrary to the Exchange Control
Regulations they may apply for relief from 1 October 2016 until 31 March 2017. </span></div>
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<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">It has been proposed that applications for
Exchange Control relief will be filed electronically utilising the SARS
e-filing system. For Exchange Control Relief the applicant must hold the
foreign assets on or before 29 February 2016 and application for relief must be
made within the prescribed period. </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The
applicant is required to make full disclosure of all unauthorised foreign
assets in which the applicant stipulates the source of all unauthorised foreign
assets and includes details of the manner in which such assets where
transferred and retained abroad. </span></div>
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<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">To submit an application for Exchange Control relief
the applicant must submit proof of the market value of the foreign asset as at
29 February 2016 as well as a description of the identifying characteristics and
location of such foreign asset supported by a valuation certificate by valuator
the country where the foreign authorised asset is located. </span></div>
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<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Furthermore, the
applicant must submit a sworn affidavit or sworn declaration setting out
details of the contravention. The Financial Surveillance Department of the SARB
has indicated that a levy of 5 % will be payable on the value of the
unauthorised foreign assets where those assets are repatriated to South Africa. </span></div>
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<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">The 5% levy must be paid from foreign sourced funds. If the applicant chooses
to retain the foreign assets abroad, a levy of 10% is required to be paid and
that must be sourced from foreign sourced funds. Where, however, the applicant
is unable to pay the 10% levy from foreign sourced funds because the foreign
assets are illiquid, the levy may be increased to an amount of 12% of the value
of the unauthorised foreign assets.<o:p></o:p></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Applicants will need to ascertain the nature of the funds held
abroad and whether those funds are held contrary to the Exchange Control
Regulations in which cases the levy referred to above will be payable. </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Where
the foreign funds relate to technical violations of Exchange Control
Regulations such that the applicant failed to declare foreign earnings or
foreign inheritances a disclosure should be made to the applicant’s authorised
dealer and in most cases no levy will be required to be paid. </span></div>
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<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">Furthermore,
those persons who immigrated to South Africa and who failed to place their
foreign assets on record upon their immigration can now do so without
attracting any levy and can retain the assets abroad which they held prior to
immigration to South Africa.<o:p></o:p></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">In summary, those taxpayers holding assets in contravention
of either the Exchange Control Regulations or income tax provisions are
encouraged to apply for VDP relief and will need to evaluate whether to apply
for relief under the Permanent VDP or SVDP. </span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "georgia" , "times new roman" , serif;">It is important to remember that
applications must be submitted during the period 1 October 2016 to 31 March
2017.</span><o:p></o:p></div>
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<i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; line-height: 21.56px;"><span style="font-family: "georgia" , "times new roman" , serif;">Dr Beric Croome is a Tax Executive at ENSafrica. This article first appeared in Business Day, Business Law and Tax Review, September 2016</span></i></div>
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Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.com0tag:blogger.com,1999:blog-6744933880439989452.post-47468874243958301832016-08-27T17:41:00.003+02:002017-02-01T08:28:12.236+02:002016 Special Voluntary Disclosure Programme: Tax and Exchange Control Relief<div class="MsoNormal">
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<span style="color: red; font-family: "arial" , "helvetica" , sans-serif; font-size: large;"><b>IMPORTANT NOTICE: </b></span></div>
<div class="MsoNormal" style="text-align: center;">
<span style="font-size: large;"><span style="color: red; font-family: "arial" , "helvetica" , sans-serif;"><b>This is a primary article on the Special VDP, </b></span><b style="color: red; font-family: arial, helvetica, sans-serif;">and must be read together </b></span><br />
<span style="font-size: large;"><b style="color: red; font-family: arial, helvetica, sans-serif;">with the article detailing the changes tabled by the Minister of Finance on 26 October 2016 and 19 January 2017</b></span></div>
<div class="MsoNormal" style="text-align: center;">
<span style="color: red; font-family: "arial" , "helvetica" , sans-serif; font-size: large;"><b><a href="http://www.bericcroome.com/2016/11/final-changes-to-special-voluntary.html" target="_blank">Click on this link to read </a></b></span></div>
<i><span style="color: red; font-family: "arial" , "helvetica" , sans-serif;"><br /></span></i>
<i><span style="color: red; font-family: "arial" , "helvetica" , sans-serif;">Updated 01/02/2017</span></i></div>
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<i><span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></i></div>
<div class="MsoNormal">
<i><span style="font-family: "arial" , "helvetica" , sans-serif;">The last opportunity to come
clean</span></i></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;"> </span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;"><b>Introduction</b></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">During the course of the February 2016 National Budget
presented to Parliament, the Minister of Finance announced a last opportunity
for those South African resident taxpayers holding funds abroad which are not known to the South
African Revenue Service or the South African Reserve Bank to regularise those assets.
Draft legislation was released during February and a subsequent draft was
released during the course of April for public comment and on 20 July the
National Treasury released a further revised draft of the legislation dealing
with the income tax aspects of the Special Voluntary Disclosure Programme (“SVDP”).
Furthermore, on 13 July the South African Reserve Bank issued a Circular
dealing with the exchange control aspects of the SVDP.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"> </span><span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">On 7 September the
National Treasury announced further changes to the SVDP which are dealt with
below.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">It is important for those prospective applicants to be aware
of the implications and requirements relating to the SVDP and indeed whether
that VDP is suited to their needs as opposed to the existing current Permanent
Voluntary Disclosure Programme (“Permanent VDP”) contained in the Tax
Administration Act No 28 of 2011 (“TAA”)</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">Before
turning to the specific details contained in the draft SVDP legislation and
Exchange Control Circular it is worthwhile setting out the requirements for the
Permanent VDP contained in the TAA. Applicants need to weigh up whether the SVDP
is preferable to applying under the current rules set out in the Permanent VDP.
Generally the SVDP may be the preferred option but where the tax default
relates to the non-disclosure, for a limited period, of foreign income derived
by the taxpayer the Permanent VDP may be less costly. It depends on the
applicant’s particular facts and circumstances.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><b>Permanent
VDP contained in the Tax Administration Act</b></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">The Permanent VDP came into force on 1 October 2012, which is
the date on which the TAA took effect. It must be noted that the Permanent VDP
does not have a termination date and is thus open-ended and will exist so long
as the provisions are contained in the TAA.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">To qualify for relief under the Permanent VDP a person may
apply, whether in a personal, representative, withholding or other capacity for
VDP relief unless that person is aware of a pending audit or investigation into
the affairs of the person seeking relief or an investigation or audit which has
commenced has not yet been concluded.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">The law allows for SARS to direct that even though a person
may be under an audit or investigation they may still apply for VDP relief
where the default in respect of which a person wishes to apply for VDP relief
would not otherwise have been identified during the audit or investigation and
the application for Voluntary Disclosure relief is in the interest of good
management of the tax system and the best use of SARS resources.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">It must be remembered that a person is deemed to be aware of a
pending audit or investigation if a representative of the prospective
applicant, or in the case of a company, an officer or shareholder or member
thereof has become aware of the audit or an investigation, or that the audit or
investigation has commenced.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">To apply for VDP relief under the TAA it is essential that
the prospective applicant has committed a default which comprises the
submission of inaccurate or incomplete information to SARS or has failed to
submit information or has adopted a tax position where such submission, non-submission
or adoption of a tax position resulted in the taxpayer not being assessed for
the correct amount of tax or the correct amount of tax was not paid by the
taxpayer or the taxpayer received a refund which they should not have received.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">Section 227 of the TAA specifies the requirements for Permanent
VDP relief and those are that the disclosure made by the prospective applicant
must:</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause2Sub" style="mso-line-height-alt: 3.0pt; mso-list: l3 level1 lfo2; tab-stops: 36.0pt; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: "georgia" , "times new roman" , serif;">·<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->be voluntary;<o:p></o:p></span></div>
<div class="Clause2Sub" style="mso-line-height-alt: 3.0pt; mso-list: l3 level1 lfo2; tab-stops: 36.0pt; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: "georgia" , "times new roman" , serif;">·<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->involve a default which has not previously been disclosed
by the prospective applicant;<o:p></o:p></span></div>
<div class="Clause2Sub" style="mso-line-height-alt: 3.0pt; mso-list: l3 level1 lfo2; tab-stops: 36.0pt; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: "georgia" , "times new roman" , serif;">·<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->be full and complete in all material respects;<o:p></o:p></span></div>
<div class="Clause2Sub" style="mso-line-height-alt: 3.0pt; mso-list: l3 level1 lfo2; tab-stops: 36.0pt; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: "georgia" , "times new roman" , serif;">·<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->involve the potential imposition of an
understatement penalty in respect of the
default;<o:p></o:p></span></div>
<div class="Clause2Sub" style="mso-line-height-alt: 3.0pt; mso-list: l3 level1 lfo2; tab-stops: 36.0pt; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: "georgia" , "times new roman" , serif;">·<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->not result in a refund due by SARS and<o:p></o:p></span></div>
<div class="Clause2Sub" style="mso-line-height-alt: 3.0pt; mso-list: l3 level1 lfo2; tab-stops: 36.0pt; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: "georgia" , "times new roman" , serif;">·<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->be made in the prescribed form and manner.</span></div>
<div class="Clause2Sub" style="mso-line-height-alt: 3.0pt; mso-list: l3 level1 lfo2; tab-stops: 36.0pt; text-indent: -18.0pt;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif;">It must be noted that SARS requires the prospective of applicant to make a full and proper disclosure of defaults committed by the prospective applicant. It must be remembered that South Africa migrated to a worldwide or residence tax system with effect from 1 March 2001, which is with effect from the 2002 tax year. Thus, where a person holds foreign assets and they have failed to declare the foreign income derived on those assets SARS will insist that the income and capital gains relating to those foreign assets are disclosed with effect from 1 March 2001. </span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif;">It must be pointed out that the income tax on the previously undisclosed foreign income will always remain payable together with interest thereon which can become significant particularly where the default goes back to the 2002 tax year. It must be noted that the Permanent VDP does not contain any cut-off period relieving prospective applicants from making disclosure regarding prior tax years. Thus, prospective applicants cannot only make disclosure for the last five years but are required to make full and proper disclosure going back to when the default first occurred, which could be as long ago as 1 March 2001.</span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif;">The advantages of applying for VDP relief under the Permanent VDP and pursuant to the conclusion of a voluntary disclosure agreement are the following:</span></div>
<div>
<br /></div>
<div class="Clause2Sub" style="mso-list: l0 level2 lfo3; tab-stops: 36.0pt; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: "georgia" , "times new roman" , serif;">·<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->no criminal prosecution for any tax offence
relating to the default committed by the prospective applicant;<o:p></o:p></span></div>
<div class="Clause2Sub" style="mso-list: l0 level2 lfo3; tab-stops: 36.0pt; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: "georgia" , "times new roman" , serif;">·<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->in most cases the waiver of any understatement
penalty that would otherwise have been imposed under the TAA. <o:p></o:p></span></div>
<div class="Clause2Sub" style="mso-list: l0 level2 lfo3; tab-stops: 36.0pt; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: "georgia" , "times new roman" , serif;">·<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->100% relief in respect of an administrative non-compliance
penalty that was or may have been imposed under Chapter 15 of the TAA or a
penalty imposed under a tax Act, excluding a penalty imposed under that Chapter,
or in terms of a tax Act for the late submission of a return. Thus, a penalty
which would otherwise have been imposed for the late payment of any tax may be
waived under the Permanent VDP.</span></div>
<div class="Clause2Sub" style="mso-list: l0 level2 lfo3; tab-stops: 36.0pt; text-indent: -18.0pt;">
<br /></div>
<div class="Clause2Sub">
<span style="font-family: "georgia" , "times new roman" , serif;">The Permanent VDP contains a mechanism whereby a prospective applicant may seek a non-binding private opinion as to whether they qualify for relief under the TAA. Thus, prospective applicants may apply anonymously via the offices of a tax practitioner whether the person in question qualifies for VDP relief.</span></div>
<div class="Clause2Sub">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif;">The prospective applicant will be required to be registered for e-filing as the application form for VDP purposes must be submitted utilizing e-filing. It will be necessary to quantify the amounts of income which previously should have been reflected and a covering letter is normally submitted together with the application motivating why the prospective applicant qualifies for the relief in question.Once the prospective applicant has filed the VDP application form they will receive confirmation of receipt from SARS which will then review the information submitted.</span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif;">Thereafter SARS will require the taxpayer to complete the so-called VDP tax returns which amends the income tax returns previously submitted by the taxpayer. Once those returns have been submitted they will be assessed by SARS and those assessments will reflect the income tax and interest payable by the taxpayer pursuant to the VDP arrangement. </span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif;">To conclude the VDP process the taxpayer and SARS must conclude a Voluntary Disclosure agreement as envisaged in the TAA. The agreements utilised by SARS must comply with the provisions of the TAA setting out the material facts of the default on which the Voluntary Disclosure relief is based as well as the amount of tax payable by the person which must separately reflect the understatement penalty which would otherwise have been payable as well as arrangements and dates of payment and any other relevant undertakings made by the taxpayer and SARS.</span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">SARS is entitled to withdraw the Voluntary Disclosure relief
if it subsequently discovers after conclusion of the Voluntary Disclosure
agreement that the applicant failed to disclose a matter that was material for
making a Voluntary Disclosure under the TAA. In such a case the relief that was
granted under the VDP rules will be withdrawn and any amount paid will
constitute part payment of any additional tax debt which may arise in respect
of the defaults disclosed and furthermore, the taxpayer may be pursued criminally.
Furthermore, SARS is compelled to issue assessments to give effect to the
Voluntary Disclosure agreement concluded by the taxpayer and SARS.</span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><b>Special VDP
– tax aspects</b></span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">On 20 July National Treasury
issue a media statement dealing with the revised draft tax bills which will
regulate the SVDP. The SVDP is contained in the Rates And Monetary Amounts And Amendments
of the Revenue Laws Bill as well as the Rates And Monetary Amounts And
Amendment of Revenue Laws (Administration) Bill. The public had until 8 August
time in which to make further representations regarding the legislation but in
principle it does not appear that further significant changes will be made at
this late stage taking account of the fact that the SVDP is intended to
commence on 1 October 2016 and proposed to terminate on 30 June 2017.</span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">The income tax aspects of the SVDP are primarily contained in
the Rates And Monetary Amounts And Amendment of the Revenue Laws Bill at part 2
thereof, namely clauses 14 – 17.</span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">It is specifically provided that the SVDP will include a
trust as defined in section 1 of the Income Tax Act (“the Act”) and will
include any similar arrangement formed or established under the laws of any
foreign country.</span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">Clause 15 of the revised draft bill provides that the amount
of receipts and accruals not previously declared to SARS as required by the Act
or the Estate Duty Act for tax purposes, excluding for employees’ tax purposes,
held outside South Africa during the period 1 March 2010 to 28 February 2015
will be exempt from tax. Thus no donations tax, estate duty or income tax will
be payable on the undeclared foreign assets up to 28 February 2015. From 1
March 2015 taxpayers must account for income tax on the foreign assets and donations
tax on assets donated thereafter. In addition, they will be subject to estate
duty where the person holding the foreign assets passes away after 1 March
2015.</span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">Any person who held an asset wholly or partly derived from
receipts and accruals not previously declared to SARS as required by the Act or
the Estate Duty Act which was disposed of before 1 March 2010, other than by
way of a donation or disposal on loan
account to a trust may elect that the asset is deemed to have been held for the
period 1 March 2010 to 28 February 2015 on the basis that the value for the period
in question will be equal to its highest value whilst actually held by the
applicant. Where the applicant is unable to establish the amount with certainty
SARS may agree to accept a reasonable estimate of that value from the taxpayer.</span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">Clause 16 of the revised draft
bill provides that an applicant must include in their taxable income in the
first year of assessment ending on or after 1 March 2014, that is in the 2015
tax year an amount equal to 50% of the highest amount determined in respect of
the aggregate value of all foreign assets referred to above, as at the end of
each year of assessment ending on or after 1 March 2010 but not ending on or
after 1 March 2015. National Treasury has proposed that the 50% inclusion rate
be reduced to 40%.</span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">It will therefore be necessary for taxpayers to ascertain the
market value of all foreign assets held, not previously declared to SARS and to
convert the foreign market value into Rands at the spot rate at the end of each
year of assessment. SARS publishes the rates of exchange which should be used
for these purposes.</span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://1.bp.blogspot.com/-4lw_LyDknww/V_N6DGs37-I/AAAAAAAAA48/zE_1Yhjv3JU-aGeHIttgtXLaUG8X5sm5wCLcB/s1600/iStock_000057981170_Double.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="283" src="https://1.bp.blogspot.com/-4lw_LyDknww/V_N6DGs37-I/AAAAAAAAA48/zE_1Yhjv3JU-aGeHIttgtXLaUG8X5sm5wCLcB/s400/iStock_000057981170_Double.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i style="background-color: white; color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 12.32px;"><span style="font-size: 12.8px;">One requirement for relief under the SVDP for exchange control</span><span style="font-size: 12.8px;"> </span><span style="font-size: 12.8px;">is that </span></i><br />
<i style="background-color: white; color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 12.32px;"><span style="font-size: 12.8px;">the unauthorised foreign assets </span><span style="font-size: 12.8px;">for which administrative relief is required </span><span style="font-size: 12.8px;">were held </span></i><br />
<i style="background-color: white; color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 12.32px;"><span style="font-size: 12.8px;">by the applicant on or before 29 February 2016</span></i><br />
<i style="background-color: white; color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 12.8px; text-align: -webkit-left;"><i><i><span style="font-family: "georgia" , "utopia" , "palatino linotype" , "palatino" , serif;"><span style="font-size: xx-small; line-height: 17.248px;"> Image purchased from www.iStock.com ©iStock.com/</span></span></i></i></i><br />
<div style="background-color: white; color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 12.32px;">
<div style="display: inline;">
<i style="text-align: -webkit-left;"><i><i><span style="font-family: "georgia" , "utopia" , "palatino linotype" , "palatino" , serif;"><span style="font-size: xx-small; line-height: 17.248px;">"</span></span></i><i><span style="font-family: "georgia" , "utopia" , "palatino linotype" , "palatino" , serif;"><span style="font-size: xx-small; line-height: 17.248px;">International currencies on businessman's hand" illustration by</span></span></i></i></i><i style="font-size: 12.8px; text-align: -webkit-left;"><i><i> <i><span style="font-family: "georgia" , "utopia" , "palatino linotype" , "palatino" , serif;"><span style="font-size: xx-small; line-height: 17.248px;">shutter_m </span></span></i></i></i></i></div>
</div>
</td></tr>
</tbody></table>
<div class="Clause2Sub" style="text-indent: 0px;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">Assume a taxpayer held foreign
assets on which foreign income such as interest and dividends and capital gains
had not previously been reported to SARS for the tax years set out below:</span></div>
<div align="left" class="Clause2Sub" style="margin-left: 36pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">
<!--[if !supportLineBreakNewLine]--><br />
<!--[endif]--><o:p></o:p></span></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; margin-left: 54.0pt; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
<td style="border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 206.9pt;" valign="top" width="276"><div class="Clause2Sub" style="margin-left: 18.0pt; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">Year of assessment<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 213.75pt;" valign="top" width="285"><div align="left" class="Clause2Sub" style="margin-left: 18pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">Market Value of foreign assets
in Rands<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 206.9pt;" valign="top" width="276"><div class="Clause2Sub" style="margin-left: 18.0pt; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">28 February 2011<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 213.75pt;" valign="top" width="285"><div class="Clause2Sub" style="margin-left: 18.0pt; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">R1 000 000<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 206.9pt;" valign="top" width="276"><div class="Clause2Sub" style="margin-left: 18.0pt; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">29 February 2012<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 213.75pt;" valign="top" width="285"><div class="Clause2Sub" style="margin-left: 18.0pt; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">R1 200 000<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 206.9pt;" valign="top" width="276"><div class="Clause2Sub" style="margin-left: 18.0pt; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">28 February 2013<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 213.75pt;" valign="top" width="285"><div class="Clause2Sub" style="margin-left: 18.0pt; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">R1 500 000<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 206.9pt;" valign="top" width="276"><div class="Clause2Sub" style="margin-left: 18.0pt; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">28 February 2014<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 213.75pt;" valign="top" width="285"><div class="Clause2Sub" style="margin-left: 18.0pt; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">R1 600 000<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 206.9pt;" valign="top" width="276"><div class="Clause2Sub" style="margin-left: 18.0pt; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">28 February 2015<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 213.75pt;" valign="top" width="285"><div class="Clause2Sub" style="margin-left: 18.0pt; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">R1 400 000<o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<o:p><span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></o:p></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<o:p><span style="font-family: "georgia" , "times new roman" , serif;">B</span></o:p><span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">y virtue of the fact that the market value of the foreign
assets at 28 February 2014 was the highest in the amount of R1 600 000, 40%
thereof, that is, R640 000 will be added to the taxpayer’s income in the 2015
tax year and taxed at the person’s marginal rate for that year which in most cases
will be 41%. The tax charge will therefore amount to R262 400. Interest will no
doubt be payable from 1 October 2015 until the date on which the tax is paid.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">The draft legislation deals with foreign trusts whereby
either a donor or the deceased estate of the donor or a beneficiary may elect
that any asset located outside South Africa which was held by the discretionary
trust from 1 March 2010 to 28 February 2015 be regarded as having been held by
that applicant for purposes of all tax acts.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">This means that the assets owned by the foreign trust will be
regarded as forming part of the estate of the applicant for purposes of estate
duty upon their death. The election available for foreign trusts applies in
respect of foreign assets where such assets were acquired by the foreign trust
by way of a donation and has been wholly or partly derived from any amount not
declared to SARS as required by the Estate Duty Act or the Act and has not
vested in any beneficiary of the foreign trust at the time that the election is
made.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">The legislation provides that where a person makes the
election in respect of a foreign trust that person is deemed to hold the asset
in question from the date on which the foreign trust acquired the asset and to
have received the same income and incurred
the same expenditure in respect of the foreign asset which was received by the
trust and deemed to have dealt with the asset in the same manner as dealt with
by the trust. </span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">The deeming provisions set out in the draft bill operate until the
asset is disposed of by the trust or alternatively the person would be treated
as having disposed of the asset under the Act or in the case of a deceased
estate, company or other juristic person the day before the person ceases to
exist by operation of law. Where the deeming provisions cease to apply the
applicant is regarded as having disposed of the foreign asset for consideration
equal to the market value of that asset on the date of disposal. The draft
legislation makes it clear that the deeming provisions set out in section 7(5),
section 7(8) and 25B of the Act and the equivalent rules for capital gains,
namely, paragraphs 70, 72 and 80 of the Eighth Schedule to the Act will not
apply in respect of any income or expenditure or capital gain during the time
that the asset is deemed to be held by the applicant.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">Prospective applicants must obtain details of market values
of the foreign assets held by them as at the end of February of each year for
2011 to 2015 so that they may undertake the calculation required under the
draft legislation. Where, for example, a person received an inheritance from a deceased
relative abroad and failed to declare the income derived therefrom over many
years it would appear that should that person apply for SVDP relief they will
be required to disclose the full amount of the market value of the assets such
that the highest market value thereof in the five year period will be subject
to tax on the basis that 40% thereof will be included in the applicant’s income
in 2015. </span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">There is therefore unfortunately an element of double taxation that
may arise in certain cases or the taxation of amounts which should in principle
not be taxed where applicants choose to apply for relief under the SVDP. This
is on the basis that the draft bill does not permit an applicant to apportion
the foreign asset into its constituent parts of those amounts which may be
inherently non-taxable and that which is income and thus taxable. An applicant
must determine whether SVDP or the Permanent VDP is more appropriate in their
particular circumstances.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">It must be noted that any non-compliance in regard to value-added
tax, employees’ tax, unemployment insurance fund contributions and skills
development levies do not fall into the SVDP and relief for penalties relating
to these taxes would need to be applied for under the Permanent VDP referred to
above.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">The SVDP will commence on 1 October 2016 and applications are
required to be lodged no later than 30 June 2017. The application process for
the existing Permanent VDP will be extended to the SVDP.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">Applicants may also apply to
SARS for a non-binding opinion on the same basis as the Permanent VDP.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">As in the case of the Permanent VDP a person will not be able
to apply for the SVDP if they are aware of a pending audit or investigation in
respect of their foreign assets. Where the audit relates to domestic assets
they would still qualify for relief under the SVDP.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">No understatement penalties will be imposed and SARS will not
pursue a criminal prosecution for a tax offence where an application under the SVDP
is successful.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">The Rates And Monetary Amounts And Amendment of Revenue Laws (Administration)
Bill of 2016 makes it clear that in all cases the understatement penalty will
be reduced to nil where a person applies for SVDP relief. Under the Permanent
VDP there was a risk, depending on the circumstances, that the taxpayer may face
a penalty of 5% or 10 % where SARS believes that the taxpayer was guilty of
gross negligence or intentional tax evasion. However, in all cases applicants
for SVDP will not on any basis face an understatement penalty.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><b>Exchange
Control aspects of the SVDP</b></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">The Financial Surveillance
Department of the South African Reserve Bank (“FinSurv) has confirmed that
persons who wish to regularise any foreign assets held in contravention of the Exchange
Control Regulations may apply for relief from 1 October 2016 until 30 June 2017.
It is intended that the applications for exchange control relief will be filed
electronically utilising the SARS </span><span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">e-filing system. </span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">The requirements for relief under the SVDP for exchange control
are as follows:</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div align="left" class="Clause2Sub" style="margin-left: 54pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: "georgia" , "times new roman" , serif;">§<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->the unauthorised
foreign assets for which administrative relief is required was held by
the applicant on before 29 February 2016;<o:p></o:p></span></div>
<div align="left" class="Clause2Sub" style="margin-left: 54pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: "georgia" , "times new roman" , serif;">§<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->applications are made within the prescribed
period;<o:p></o:p></span></div>
<div align="left" class="Clause2Sub" style="margin-left: 54pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: "georgia" , "times new roman" , serif;">§<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->the declaration made by the applicant is made
voluntarily;<o:p></o:p></span></div>
<div align="left" class="Clause2Sub" style="margin-left: 54pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: "georgia" , "times new roman" , serif;">§<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->the applicant makes full disclosure of all
unauthorised foreign assets in which the applicant stipulates the source of all
unauthorised foreign assets and includes details of the manner in which such
assets were transferred and retained abroad;<o:p></o:p></span></div>
<div align="left" class="Clause2Sub" style="margin-left: 54pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: "georgia" , "times new roman" , serif;">§<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->the applicant furnishes all documentation of
information stipulated in the SVDP application form which information and
documentation includes, but is not limited to:<br />
<!--[if !supportLineBreakNewLine]--><br />
<!--[endif]--><o:p></o:p></span></div>
<div class="Clause3Sub" style="margin-left: 90.0pt; mso-list: l1 level5 lfo4; tab-stops: 36.0pt; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: "georgia" , "times new roman" , serif;">¨<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->the market value as at 29 February 2016 of the
unauthorised foreign asset in the foreign currency of the country of which the
asset is located;<o:p></o:p></span></div>
<div class="Clause3Sub" style="margin-left: 90.0pt; mso-list: l1 level5 lfo4; tab-stops: 36.0pt; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: "georgia" , "times new roman" , serif;">¨<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->a description of the identifying characteristics
and location of such foreign asset; <o:p></o:p></span></div>
<div class="Clause3Sub" style="margin-left: 90.0pt; mso-list: l1 level5 lfo4; tab-stops: 36.0pt; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: "georgia" , "times new roman" , serif;">¨<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->a valuation certificate by a valuator of the
country where the unauthorised foreign asset is located or a valuation by a
sphere of government where the asset is located or an original certified
statement of account reflecting the balance or market value or any other form
of proof of value of that foreign asset as the Treasury may on good cause shown
allow to be submitted, and<o:p></o:p></span></div>
<div class="Clause3Sub" style="margin-left: 90.0pt; mso-list: l1 level5 lfo4; tab-stops: 36.0pt; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: "georgia" , "times new roman" , serif;">¨<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->a sworn affidavit or solemn declaration of the
contravention.<o:p></o:p></span></div>
<div class="Clause1Head" style="margin-left: 54.0pt; mso-list: l1 level3 lfo4; tab-stops: 36.0pt; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: "georgia" , "times new roman" , serif;">§<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span><!--[endif]-->the applicant furnishes
any additional information relating to the unauthorised foreign assets as may
be required in terms of the SVDP.</span></div>
<div class="Clause1Head" style="margin-left: 54pt; text-indent: 0px;">
<br /></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">The FinSurv has indicated that a levy of 5% will be payable on the value of the unauthorised foreign assets where the assets are repatriated to South Africa. The 5% levy is required to be paid from foreign sourced funds.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">Where the applicant retains the foreign assets abroad, a levy of 10% is required to be paid and that must be sourced from foreign sourced funds.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">Where the applicant does not pay the 10% levy from foreign sourced funds because the foreign assets are illiquid, the levy will be increased to an amount of 12% on the value of the unauthorised foreign assets.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">It must be noted that the applicant will not be allowed to deduct the foreign investment allowance or any unutilised portion thereof from the leviable amount. The levy due is required to be paid within three months from the date of receipt of notification from FinSurv and in those cases where the 5% or 10 % levy is payable that levy must be repatriated to South Africa to an account held at a local Authorised Dealer, that is, a commercial bank, which must be converted in South Africa at the ruling exchange rate.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">Once the applicant’s bank has received the payment of the levy they will be required to pay that over to an account held at the Corporation for Public Deposits.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">The SVDP exchange control circular deals with foreign assets held in contravention of the exchange control Regulations and especially those arising from the sale, cession or assignment by residents of intellectual property owned or developed by South African residents without first having obtained the approval of the FinSurv. In these cases disclosure of the sale or assignment of intellectual property will be required including the identity of the parties involved and details of royalties paid by residents pursuant to any disposal of intellectual property.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<br /></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;"> In addition, where an applicant has incurred foreign liabilities to acquire foreign assets with recourse to South Africa without having obtained the obtained the requisite approval, disclosure of the underlying transactions relating to the liability will be required, including details of the liability itself for the parties involved. Finally, the acquisition of a direct or indirect interest in a foreign asset, including foreign cash balances as a result of foreign funds abroad which should have been repatriated to South Africa or having remitted funds from the country without prior approval fall into the SVDP for exchange control purposes. </span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">This will include the acquisition of foreign securities, the retention abroad of export proceeds, unauthorised spending on credit cards resulting in foreign assets and inheritances from South African deceased estates with unauthorised foreign assets. In these cases disclosure of the transaction including any underlying transactions are required to be provided. Where a South African has reinvested foreign assets into South Africa via a so-called loop structure or 74-26 structure those may also be unwound utilising the SVDP for exchange control purposes.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">Thus, where, for example, a South African resident has disposed of shares that they held in a domestic company to a foreign trust of which they are a beneficiary, that will be regarded as a loop and that structure is required to be unwound with a levy being payable to the FinSurv.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">The FinSurv also sets out the rules relating to donors of funds to foreign discretionary trusts which are very similar to the rules relating to the tax aspects of the SVDP.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">In such a case the applicant is deemed to hold the foreign assets owned by the foreign trust for purposes of the administrative relief available under the exchange control aspects of the SVDP and will be required to submit a copy of the trust deed to the authorities. The levy payable amounts to 5% or 10 % of the value of the foreign assets as at 29 February 2016.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">The Circular issued by South African Reserve Bank sets out the procedures to follow in the case of those applicants who are dissatisfied with any decision made under the process.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">The Exchange Control Circular also deals with administrative relief available outside of the SVDP. The authorities make it clear that in many cases foreign assets falling into the categories dealt with below will not generally attract any levy but merely requires disclosure being made to an Authorised Dealer. </span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">The disclosure must include confirmation of the source of the unauthorised foreign assets, details of the manner in which such assets were transferred and retained abroad as well as proof of the market value of the unauthorised assets at 29 February 2016. </span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">The categories of foreign assets dealt with relate to those persons who have immigrated to South Africa and who failed to declare their foreign assets upon immigration to an Authorised Dealer. </span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">The SVDP allows such immigrants to now place on record their foreign assets before 31 March 2017 thereby regularising the qualifying residents’ possession and retention abroad of the foreign assets concerned.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<br /></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">Where a resident became entitled to a foreign inheritance from a bona fide non-resident estate, which excludes South African estates with foreign assets, before 17 March 1998 they were required to declare those foreign assets to an Authorised Dealer for consent to hold the assets abroad. </span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">Those persons who have not yet done so may now regularise those assets by way of declaration to an Authorised Dealer.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">The Circular also deals with those cases of South African residents who became entitled to a foreign inheritance from the estate of another South African resident where those assets were held in compliance with the Exchange Control Regulations.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif;">Such persons may declare those foreign assets and apply for exemption from the provisions of the Regulations in question. The FinSurv will allow the assets to be retained abroad subject to the condition that those assets are not placed at the disposal of any other resident or used to create loop structures and no levy will be payable by the resident beneficiary. In the event that the foreign assets inherited by the resident were held by the deceased in a manner contrary to the Exchange Control Regulations they must be reported to an Authorised Dealer who would require the assets to be repatriated and such a case no levy would be payable. If, the decision is made to retain the assets abroad the levy of 10 % will be payable.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">Furthermore, the Circular also deals with foreign income which was required to be reported to the authorities where such income was generated prior to 1 July 1997 for permission to retain the funds abroad. All that is required in such a case would be a declaration which would regularise the qualifying resident’s possession and retention abroad of the foreign assets.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">The exchange control Circular dealing with the SVDP also deals with contraventions which may have taken place by corporate entities regarding approved foreign investments and may have failed to comply with procedural requirements. Where corporate entities failed to supply the authorities with financial statements and progress reports regarding the proof of investment and other technical violations have incurred, they will be required to submit the outstanding information and in most cases no levy will become payable.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;"><br /></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="font-family: "georgia" , "times new roman" , serif; text-indent: 0cm;">Those South African residents who do not apply for administrative relief under the SVDP and then make a full and frank and verifiable disclosure to FinSurv will be required to pay a settlement amount ranging from 10 % to 40 % of the then current market value of unauthorised foreign assets. Those persons who choose not to apply for SVDP relief nor voluntarily approach FinSurv for assistance to regularise their affairs will face the full force of the law in which case FinSurv may recover the full amount of the contravention as a penalty from the person in question.</span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<b><span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></b></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<b><span style="font-family: "georgia" , "times new roman" , serif;">Conclusion</span></b></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="text-indent: 0cm;"><span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="text-indent: 0cm;"><span style="font-family: "georgia" , "times new roman" , serif;">Those taxpayers holding assets in contravention of either the
income tax or exchange control rules are encouraged to apply for VDP relief and
need to evaluate whether to apply for relief under the Permanent VDP or SVDP.
This decision will depend on the person’s particular circumstances and advice
should be obtained from ENSafrica in this regard thereby ensuring the applicant
enjoys legal professional privilege.</span></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="text-indent: 0cm;"><span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></span></div>
<div class="Clause1Head" style="margin-left: 0cm; mso-list: none; tab-stops: 36.0pt; text-indent: 0cm;">
<span style="text-indent: 0cm;"><span style="font-family: "georgia" , "times new roman" , serif;">The relief available from the
South African Reserve Bank is reasonable and requires payment of a levy of either
5% in the case of assets returned to South Africa or 10 % where the applicant
chooses to retain the assets abroad. It is important that applicants start obtaining
the required information as the timeframe to submit application is short,
namely nine months from 1 October 2016 to 30 June 2017.</span></span></div>
<div align="left" class="Clause2Sub" style="margin-left: 36pt; text-indent: 0cm;">
<o:p></o:p></div>
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span>
<span style="color: red; font-family: "georgia" , "times new roman" , serif;"><i><b>It is important that applicants start obtaining the required information as the timeframe to submit application is short, namely from 1 October 2016 to 31 August 2017.</b></i></span><br />
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span>
<span style="font-family: "georgia" , "times new roman" , serif;">Dr Beric Croome </span><br />
<span style="font-family: "georgia" , "times new roman" , serif;">Tax Executive</span><br />
<span style="font-family: "georgia" , "times new roman" , serif;">ENSafrica</span><br />
<div>
<br /></div>
Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.comtag:blogger.com,1999:blog-6744933880439989452.post-59597529108018098872016-08-08T06:30:00.000+02:002016-08-08T06:30:34.438+02:00South African Revenue Service’s Powers to Collect Tax from Taxpayers<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Once a taxpayer has submitted a tax return to the South African Revenue
Service (“SARS”) they will receive a tax assessment reflecting either an amount
refundable to them or an amount payable to SARS. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Where an amount is reflected
as payable the taxpayer is required by law to pay the tax due by the date specified on the notice of assessment. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Failure to pay the tax on time will
result in the taxpayer being subjected to interest on the late payment of the
assessed tax and furthermore, SARS may then resort to the powers contained in
the Tax Administration Act (“TAA”) to ensure that the tax is paid.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">If a taxpayer
receives an assessment and is unable to pay for whatever reason it is important
that they engage with SARS failing which SARS will exercise the powers
contained in the law to ensure that the tax is paid.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Under the
provisions of the TAA and particularly section 179 thereof SARS is empowered to
issue a notice to a person who holds or owes any money, including a pension,
salary, wage or other remuneration for or to a taxpayer requiring that person
to pay the money to SARS in satisfaction of the taxpayer’s outstanding tax debt
and not to pay the funds over to the taxpayer.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">SARS is therefore
empowered to issue a notice, for example to a taxpayer’s bank or the taxpayer’s
debtors and instruct that person to pay any monies due to the taxpayer not to
the taxpayer but to SARS. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The Courts have previously examined similar
provisions and found that such powers do not violate the provisions of the Constitution
as they are commonly found in democracies to ensure that taxpayers pay tax
which is due to the fiscal authorities.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">It must be noted
that where a person receives a notice from SARS instructing them to pay over an
amount held by them to SARS and not the
taxpayer they are precluded from informing the taxpayer of the receipt of such
notice. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The person in receipt of the notice is obliged by law to pay over
whatever funds they hold to SARS failing which that person is personally liable
for the amounts paid to the taxpayer instead of to SARS.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Furthermore, where
a person chooses to disregard of the notice they can be convicted of a criminal
offence under the provisions of section 234(n) of the TAA.</span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://2.bp.blogspot.com/-3e67mlxAxGc/V6dc5bZoQSI/AAAAAAAAA3Y/HrNsUCy0XP0qT3KM9L9-kNyNriWxf9IcACLcB/s1600/45915098_thumbnail.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="320" src="https://2.bp.blogspot.com/-3e67mlxAxGc/V6dc5bZoQSI/AAAAAAAAA3Y/HrNsUCy0XP0qT3KM9L9-kNyNriWxf9IcACLcB/s320/45915098_thumbnail.jpg" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i style="background-color: white; text-align: -webkit-left;"><div style="color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; line-height: 17.248px; text-align: center;">
<i style="text-align: -webkit-left;"><div style="display: inline !important; text-align: center;">
<span style="line-height: 17.248px;"><span style="font-size: small;">If your tax assessment shows you owe SARS, </span></span></div>
</i></div>
<div style="color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; line-height: 17.248px; text-align: center;">
<i style="text-align: -webkit-left;"><div style="display: inline !important; text-align: center;">
<span style="line-height: 17.248px;"><span style="font-size: small;">you are required by law to pay up by the date specified </span></span></div>
</i></div>
<div style="text-align: -webkit-left;">
<i style="text-align: -webkit-left;"><div style="display: inline !important; text-align: center;">
<i><span style="color: #222222; font-family: Georgia, Utopia, Palatino Linotype, Palatino, serif;"><span style="font-size: xx-small; line-height: 17.248px;">Image purchased from www.iStock.com ©iStock.com/"Business taxes in the text box</span></span></i><span style="color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 12.32px; line-height: 17.248px;"><span style="font-size: xx-small; line-height: 17.248px;"><i>" illustration by </i></span></span><i style="text-align: -webkit-left;"><div style="display: inline !important; text-align: center;">
<i><span style="color: #222222; font-family: Georgia, Utopia, Palatino Linotype, Palatino, serif;"><span style="font-size: xx-small; line-height: 17.248px;">jack191 </span></span></i></div>
</i></div>
</i></div>
</i></td></tr>
</tbody></table>
<div class="MsoNormal">
<span style="font-family: Georgia, "Times New Roman", serif;">SARS is required to
issue a final demand to the taxpayer demanding payment of the tax due before
the notice is issued to a third party instructing them to pay over whatever funds
are held for the taxpayer to SARS. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Inevitably, any person receiving a notice
from SARS demanding that whatever amounts held by them for a person are to be
paid over to SARS and not that person will not know if SARS has complied with its
statutory obligation to have informed the taxpayer of the amount of tax due and
to have in fact demanded payment of the tax from the taxpayer. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Under
section 179(5) of the TAA, SARS must issue a final demand at the latest 10
business days before the notice is issued to the person instructing them to pay
over amounts held by them for the taxpayer to SARS and not that taxpayer.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Invariably the
first time that a person will become aware of the fact that SARS has issued the
notice to a bank or the taxpayer’s debtors is when they receive information
that amounts have been paid over to SARS instead of the taxpayer concerned.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">In the case of a
notice received by a bank, it is submitted that where the taxpayer is in
overdraft the bank is not obliged to pay monies over to SARS such that the
taxpayer’s overdraft facility is increased on the basis that the bank does not
actually hold funds due to the taxpayer.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The notice issued
by SARS remains valid until the amount is paid over to SARS or until SARS
withdraws the notice. In addition to appointing a third party to pay over
amounts held for the taxpayer to SARS, SARS can also file a statement with the Court which
constitutes a judgment against the taxpayer which will impair the taxpayer’s
credit rating and can be used as a basis on which to liquidate or sequestrate
the taxpayer, as the case may be.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Previously SARS
collected the tax debts due to it by utilising its own staff but it has
recently outsourced the collection of certain tax debts to third party debt
collectors who are independent of SARS. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Where taxpayers owe SARS tax they may
therefore receive a call or other communication from a person employed by NDS
Credit Management, CSS Credit Solutions or Lekgotla Trifecta Collections acting
on instructions of SARS to collect tax debts. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">The debt collectors appointed by
SARS are legally obliged to adhere to the confidentiality provisions contained
in the TAA and will be remunerated by SARS for debts collected by them from
taxpayers. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">It does appear surprising that SARS has resorted to the appointment
of external debt collectors who have to be paid for their services whereas
previously SARS staff would appear to have been quite efficient in collecting
tax debts due by taxpayers.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">It is important
though that taxpayers who are indebted to SARS make arrangements to pay the tax
due failing which SARS will utilise the <span lang="EN-ZA" style="color: #222222;">draconian</span><span lang="EN-ZA"> </span>powers contained in the law to ensure the payment of tax due to SARS.</span></div>
<div class="MsoNormal">
<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<i style="background-color: white; color: #313131; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.4px; line-height: 21.56px;"><span style="font-family: Georgia, "Times New Roman", serif;"><span style="font-size: xx-small;">Dr Beric Croome is a Tax Executive at ENSafrica. This article first appeared in Business Day, Business Law and Tax Review, August 2016</span></span></i></div>
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<div class="MsoNormal">
<br /></div>
Beric Croomehttp://www.blogger.com/profile/10728374164223977885noreply@blogger.com0