November 15, 2021

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 of acquisition or creation of that asset’. The word ‘expenditure’ includes expenditure in cash or in kind. In ITC 1783 the court established the following about the meaning of the word ‘expenditure’: “Expenditure” in its ordinary dictionary meaning is the spending of money or its equivalent e.g. time or labour and a […]
October 14, 2021

Business continuity planning: Are you prepared for the next crisis?

While the possibility of a global pandemic was always at the back of our minds, its emergence still managed to catch us off-guard and wreaked havoc on every aspect of our lives, particularly the world of work. Therefore, it’s safe to say that Covid-19 has been a wake-up call for organisations to rethink their priorities and strategies to ensure their businesses will survive the next disaster. When you fail to prepare, you prepare to fail The current health crisis highlighted the vulnerability of businesses around the globe, exposing the consequences of fragile business continuity plans and executives completely failing to […]
October 14, 2021

Transfer of assets between spouses: What are the tax implications?

Section 9HB of the Income Tax Act provides for a roll-over of a capital gain or loss when an asset is transferred between spouses during their lifetimes. The roll-over is mandatory, and spouses do not have the option to elect out of it. The policy rationale for the roll-over is that the transferor spouse must benefit from not immediately having tax exposure on a transaction since the transferee spouse will pay the downstream tax when they eventually dispose of an asset, or when it becomes part of the estate. Importantly, the roll-over relief in section 9HB will not apply when a […]
October 14, 2021

Deceased’s document not considered a valid will, despite clear wishes

The Wills Act sets out the requirements for a valid Last Will and Testament. For a will to be valid, it must be signed and witnessed. What happens if the wishes of the deceased are clear, but the document does not meet the requirements of a valid will? This was the heart of the matter in Estate Late Elaine Ilsia Williams and Others v Hendricks and Another, heard in the Western Cape High Court. In this matter, the close relations of the deceased sought an order directing the Master of the High Court to accept as a will for the […]
October 14, 2021

Disputing SARS decision and assessments

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 where an assessment has already been issued, the dispute resolution rules in the Tax Administration Act provides the legal framework to be followed by both SARS and the taxpayer to resolve any disputes. Section 93(1)(d) of the Tax Administration Act provides an alternative to the […]
September 15, 2021

Anomalies in fringe benefits regarding retirement funds addressed

With effect from 1 March 2016, and in terms of paragraph 2(l) of the Seventh Schedule to the Income Tax Act, all employer contributions to a retirement fund on behalf of employees are considered taxable fringe benefits in the employees’ hands. In turn, paragraph 12D(2) of the Seventh Schedule stipulates that if the employer contributes towards a fund that consists solely of a “defined contribution component”, as defined in paragraph 12D(1) of the Seventh Schedule, the value of the fringe benefit will be the cash equivalent of that part of the contribution that pertains to the employee. Additionally, the employer is not obligated to provide the employee with a contribution certificate. In […]
September 15, 2021

More time to benefit from the learnership tax incentive

The Learnership Tax Incentive, which was introduced in the Income Tax Act on 1 October 2001, is a programme that supports skills intensity through the tax system. To encourage skills development and job creation, the Learnership Tax Incentive provides employers with an additional tax deduction over and above the normal deduction on remuneration. The additional deduction is intended to encourage vocational training through formal learnership contracts and provide accredited workplace training through the employer. To claim the allowance, the employer, learner, and an accredited training provider must enter into a formal learnership contract. Similar to all other tax incentives, when […]
September 15, 2021

Balancing your business’s losses and taxes

In line with the 2020 Budget Announcement, Government proposes to broaden the corporate income tax base by restricting the offset of the balance of assessed losses carried forward to 80% of taxable income. The proposal extends to the balance of assessed losses at the time of implementation, i.e. it is not only the accumulation of losses starting from the date of implementation that will be subject to the new rules. This will contribute to providing the fiscal room for Government to lower the corporate tax rate. The effect of the proposed restriction is that only companies that would be in a positive taxable […]
September 15, 2021

VAT concerns during the temporary letting of property

The VAT Act makes provision for the supply of residential fixed property by a VAT vendor (being a property developer) to be subject to VAT at the standard rate of 15%. The property developer has to charge VAT on the sale of the residential fixed property. Depending on market conditions, residential fixed property developers are at times unable to dispose of newly built residential fixed properties for extended periods of time. In order to maintain expenses incurred in developing such fixed property, such as bank loan repayments, property developers often enter into short term temporary leases for such fixed property until a buyer can be found. […]
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