June 4, 2021

Can losses be distributed out of a trust?

On 18 March 2021, the Supreme Court of Appeal delivered judgment in the case of Massmart Holdings Limited v The Commissioner for the South African Revenue Service. The case dealt with losses which were incurred within the broader Massmart group in respect of the investing of equity instruments as part of an employee share incentive scheme.  The mechanism of the scheme was that shares allocated to the designated employees would be purchased from a share Trust with funding from Massmart Holdings. Upon distribution of those shares to the designated employees, the share Trust could either have losses in respect of the distribution, or taxable gains.  Over several years of assessment, the Trust realised losses on the distributions on the vesting of those shares in the designated employees for a cumulative amount of R954 million. Rather than claiming […]
June 4, 2021

You cannot escape VAT when touring

On 25 May 2021, the Supreme Court of Appeal (SCA) upheld an appeal by the Commissioner for the South African Revenue Services (“SARS”) against Tourvest Financial Services (Pty) Ltd (“Tourvest”), a licensed dealer in foreign exchange, concerning its value-added tax (“VAT”) liability. The judgement sets very clear guidelines on when apportionment for VAT inputs must be made, where vendors produce both taxable and exempt supplies. The question before the SCA was whether Tourvest, in conducting its enterprise of the exchange of currency through its branch network, made both taxable and exempt supplies (as SARS contended) or whether it only made taxable supplies (as Tourvest contended). Tourvest’s business consists of 52 branches countrywide and a head […]
June 4, 2021

The taxation of medical lump-sums

The South African Revenue Service recently published a draft Interpretation Note relating to the taxation of medical lump sums. Employers often provide various incentives to attract and retain employees with scarce skills. One form of benefit is to cover the medical aid contributions of former employees in retirement. This could be an expensive and risky exercise for a taxpayer as medical inflation may exceed general inflation, or a former employee’s chronic illness can be protracted. In order to counter such a risk, taxpayers may seek to settle this liability upfront. Two common approaches to settling liabilities upfront are: to make a lumpsum payment to an insurer for a policy of […]
May 4, 2021

Value Added Tax and its application on general and specified-use vouchers

On 12 January 2021, the Gauteng High Court delivered judgement in the matter of MTN (Pty) Ltd v CSARS (79960/2019) [2021], in respect of a declaratory order that MTN sought to confirm their interpretation of the VAT treatment of certain airtime vouchers. The VAT Act distinguishes between two types of vouchers – those that can be used for unknown goods and services at the time of issue (consider, for example, a retail shopping voucher); and those vouchers that can be spent on specific goods and services (in other words, not able to be used for goods and services other than those specified). […]
May 4, 2021

Six ways you can improve your business’s cybersecurity measures

How well are you equipped for handling cyber threats to your business? Take the quiz below to test your knowledge on cybersecurity. 1) You just received an email from a client telling you to attend to an urgent financial matter with a link to help you. Do you… ? a.) Click the link provided to sort out the problem as quickly as possible. b.) Delete the email because all emails like these are scams. c.) Carefully assess the sender address and content, and contact the sender via a previously used channel. There are many cybercriminals out there who are intent on gaining access to company secrets and […]
May 4, 2021

Why do I need to know my rights as a taxpayer?

Since the introduction of the Tax Administration Act in 2011, which aimed to consolidate most of the administrative matters in tax acts, taxpayers have become ever more aware of their rights in dealing with the South African Revenue Service (SARS). There has also been a significant increase in the number of cases in the Tax Court (as well as in our High Courts) that relate not to substantive tax matters, but rather to the exercise of taxpayers’ rights. We briefly highlight below some of the rights that taxpayers have in terms of the Tax Administration Act, and which they may wish to enforce at […]
May 4, 2021

Is your business ready to face a bad month, or two, or three?

Are you sitting down? Let us share a frightening statistic with you. In a report published by FinFind in November 2020, it was found that 42.7% of small businesses in South Africa were forced to shut down during the first 5 full months of the lockdown. The research data was comprised in a survey of 1489 businesses across all main sectors of the economy, and so must be understood as a sample of the larger economy rather than an absolute fact. Nevertheless, to think that around 4 in every 10 small businesses closed in this time is worrying. The reasons for these closures are numerous, but at the end of the day it […]
April 19, 2021

What are the requirements for self-invoicing?

As a result of the specific nature of goods, it is common practice that certain recipients of goods and services “self-invoice” when they receive goods or services from their suppliers. In other words, they do not receive an invoice from the suppliers – instead, they invoice themselves. This scenario is typically found where the volume or quality of goods can only be determined by the recipient. An example of this is where a farmer (the supplier) takes produce to a co-operative which will only be sold at a later stage (once the quality and quantity of the produce has been determined). Since […]
April 19, 2021

Deductions on amounts already taxed

It often happens that a person may receive remuneration and other similar amounts (for services rendered or to be rendered, or by virtue of employment or the holding of any office), which subsequently have to be refunded, often because of contractual obligations not having been fulfilled, or due to an overpayment which was previously subject to tax. These amounts can include, for example, paid maternity or sick leave benefits, or retention bonuses, which are often refunded by the person in a subsequent year of assessment. The amounts refunded may qualify for an income tax deduction in the hands of the person under section 11(nA) […]
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