AUDIT CERTIFICATES: WHAT YOU NEED TO KNOW?
The South African Revenue Service (“SARS”) issued Interpretation Note 112 on 21 June 2019 to provide guidance on the interpretation and application of the audit certificate requirement as set out in section 18A of the Income Tax Act.[1] For background purposes – section 18A provides a taxpayer with an income tax deduction for bona fide […]
SECTION 7C: WHAT IS IT ALL ABOUT?
Section 7C of the Income Tax Act, No 58 of 1962 (the Act), was enacted effective 1 March 2017 and serves as an anti-avoidance measure aimed at curbing the tax-free transfer of wealth to trusts through the use of low interest or interest-free loans, advances or credits. The Explanatory Memorandum on the Taxation Laws Amendment […]
SIMULATION
In addition to specific anti-avoidance provisions and the general anti-avoidance provisions (GAAR) in the Income Tax Act,[1] the South African Revenue Service can apply another established principle to attack the validity of transactions and arrangements, namely the common law doctrine of simulation, or the plus valet doctrine. This is a fundamental principle of the South […]
ADDITIONAL CHANGES TO INCOME TAX RETURNS FOR TRUSTS
The South African Revenue Service (“SARS”) implemented several changes to the income tax returns for trusts (the ITR12T) on 17 September 2018. These changes are in addition to the changes already made on 26 February 2018. The September 2018 changes apply in respect of the year of assessment ending on 28 February 2018. Taxpayers that […]
BAD DEBTS AND VAT
While there is currently a focus on the income tax considerations of bad and doubtful debts (given that National Treasury has proposed changes to section 11(j) of the Income Tax Act[1] to allow for an allowance of 25% of impairments in respect of doubtful debts), the Value Added Tax (VAT) aspect of bad debts is […]
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 […]
SPECIAL TRUSTS
The Income Tax Act[1] includes specific provisions for “special trusts”. These trusts are taxed on the same sliding scale applicable to natural persons, which could be lower than the current 45% flat rate applicable to conventional trusts. Capital gains tax (“CGT”) is also lower within a special trust, at a maximum rate of 18% compared […]
CHANGES TO BAD DEBT ALLOWANCE
Most South African businesses are at some point in time exposed to credit risk in the form of bad debts. Although taxpayers would undoubtedly prefer to recover the debts, the Income Tax Act[1] provides for some relief in cases where debts have become bad, or doubtful. Not only does section 11(a) provide for the deduction […]
TAX ALLOWANCES AGAINST ASSETS USED FOR PURPOSES OF TRADE
The Income Tax Act[1] allows for various income tax allowances to be claimed in respect of moveable assets used for purposes of a taxpayer’s trade. Most commonly, section 11(e) provides for a deduction equal to the amount by which the value of any machinery, plant, implements, utensils and articles have diminished by reason of wear […]
DEBT REDUCTION RULES: NEW TAXPAYER FRIENDLY AMENDMENTS EXPECTED
The South African Income Tax Act contains a number of rules which give rise to onerous tax consequences where a taxpayer’s debts owing is forgiven. These rules were in recent years the subject of comprehensive legislative amendments. During the 2018 budget process, National Treasury indicated that it was aware of unintended tax consequences that arise […]