TAX COSTS OF BARTER TRANSACTIONS
Barter transactions are commonplace in today’s commercial environment. Parties exchange goods or services without a cash transaction underpinning it. The question is, “What happens when I sell the asset in future? Do I have a tax cost for it?” Paragraph 20(1)(a) of the Eighth Schedule to the Income Tax Act refers to ‘the expenditure actually incurred in respect of the cost […]
CORRECTION OF AN ASSESSMENT: SECTION 93
As portrayed in the Tax Administration Act No 28 of 2011 (TAA), the dispute resolution rules lay out the legal framework to be followed by both the taxpayer and the South African Revenue Service (SARS) to resolve disputes. Section 93 of the TAA lists a number of circumstances under which SARS can reduce a taxpayer’s […]
WEAR-AND-TEAR ALLOWANCE
Capital expenditure incurred in the production of income and in carrying on of a trade does not qualify for a deduction under the so-called general deduction formula in section 11(a) of the Income Tax Act No 58 of 1962 (the Act). The Act does, however, grant deductions or allowances for specific types of capital expenditure […]
EMPLOYEE SHARE INCENTIVE SCHEMES
Employer companies generally implement employee share incentive schemes to retain and incentivise their employees by enabling the latter to receive indirect benefits from the appreciation in the growth of the company. This is an effective way to offer benefits to employees and encourage their participation and loyalty of employees. Even though these schemes are generally […]
ANALYSING THE RESCIND ABILITY OF TAX JUDGEMENTS
On 11 March 2022, the Constitutional Court (CC) of South Africa granted leave to appeal and set aside an order from the High Court of South Africa (HC), Western Cape Division. The issue before the court in Barnard Labuschagne Incorporated v SARS was whether a certified statement filed by SARS that is treated as a […]
CAN SARS CORRECT MY ASSESSMENT?
A taxpayer who is aggrieved by an assessment or decision of SARS against that taxpayer has the right to dispute that assessment or decision. If an original assessment has not been issued, SARS may request a taxpayer to submit an amended return to correct an undisputed error made in the prior return. In the case […]
FUTURE EXPENDITURE ON CONTRACTS
Section 24C of the Income Tax Act[1] (hereinafter referred to as “the Act”) allows a deduction, from income, received by or accrued to a taxpayer in terms of any contract, to finance future expenditure which will be incurred by the taxpayer in fulfilling its obligations in the performance of such contract. On 3 December 2019, the […]
FORM REQUIREMENTS FOR OBJECTIONS
Dispute resolution with the South African Revenue Service (SARS) generally has a two-pronged approach. Firstly, taxpayers must present their case on the merits – this will include the factual basis and background that has led to the dispute. Secondly, and equally important (if not more so), is the procedural process. This deals with timeframes, form […]
RATING FORMULA FOR FARMING INCOME
The Income Tax Act[1] provides for a natural person who derives income from farming operations to elect (within three months after a year of assessment) to be subject to tax according to a rating formula, instead of the normal income tax tables. The reason for this option is the (sometimes) abnormal and unpredictable way in […]
THE TAX COURT REVIEWS THE DEDUCTIBILITY OF GENERAL BUSINESS EXPENSES
The recent Cape Town Tax Court judgment of S G Taxpayer v The Commissioner for the South African Revenue Service,[1] delivered on 9 May 2018, re-affirmed a number of key concepts regarding the deductibility of expenses for tax purposes generally in terms of the general deductions formula contained in section 11(a) of the Income Tax […]