July 12, 2023

Deducting income tax and CGT for estate duty

Is subjecting taxpayers to estate duty on post-death asset growth appropriate? IN 1789 Benjamin Franklin said that “in this world nothing can be said to be certain, except death and taxes”. He was right about death—but anyone who has had to interpret our tax laws would know that the task is fraught with uncertainty. This article examines whether income tax (including CGT) can be deducted from the net value of an estate for estate duty purposes. The net value of a deceased estate under the Estate Duty Act 45 of 1955 is equal to the total value of all property […]
April 13, 2023

What you need to know regarding home office expenses

The way we work on a day-to-day basis changed significantly since the Covid-19 pandemic with many employers adopting a more hybrid working model. This new economic environment and new ways of working created an environment where SARS and taxpayers had to adapt accordingly with new focus on salaried employees working from home to claim certain expenditure from their respective income taxes. With time passing by after the worldwide pandemic SARS again adapted to circumstances and changed legislation that includes changes to home office expenses and the deductibility thereof in future. So what now? Are home office expenses still deductible for […]
March 16, 2023

Render unto Caesar: Shares and the SARS slice

Whether you are a share trader or a long-term investor, when you make a profit, SARS will want its slice of the pie Ever since biblical times, there has been a tug-of-war between governments trying to extract as much as possible from their citizens in the form of taxes, and individuals trying to keep as much of their income and wealth away from those very same governments. In South Africa, owners of shares have not historically needed to worry too much about the tax man—especially if they considered themselves to be long-term investors.  This is because any profits made when […]
December 15, 2022

The effect of past transactions on the sale of a business

The sale of a business is often a complex venture and requires consideration of various facts in examining the financial reality behind the sale. From the outset, it is important to consider historical transactions and how they may have a detrimental impact on the current sale being considered. For purposes of this article, several factors are highlighted to consider in pursuance of the sale of a business. These factors, amongst others, include: Clawback provisions of the corporate restructuring rules: These rules, as contained in sections 41 to 47 of the Income Tax Act No. 58 of 1962 (“the Act”), potentially […]
October 24, 2022

Lenders of money are not all ‘money lenders’

Taxpayers’ actions need to back up what they claim to be In many groups of companies, intra-group loans make sense as a way of funding the operations of the group. If the funds are sourced from outside the group by a borrower entity and then on-lent to other companies within the same group as the borrower, the question is whether the interest incurred by the borrower entity is deductible in terms of section 24J(2) of the Income Tax Act No 58 of 1962 (the Tax Act)? This question was once again considered in Taxpayer H v Commissioner of the South African […]
September 9, 2022

Ceasing tax residency: Changes on the horizon for interest and capital gains

Section 9H of the Income Tax Act provides that a natural person’s year of assessment is deemed to have ended on the date immediately before the day on which that person ceased to be a resident for South African tax purposes. Furthermore, that person’s subsequent tax year is deemed to commence on the day that person ceased to be a tax resident for South African tax purposes. This effectively creates two years of assessment during a single 12-month tax period which would ordinarily constitute a single year of assessment beginning on 1 March and ending at the end of February […]
September 9, 2022

Taxation of variable remuneration: Changes are coming

The Draft Taxation Laws Amendment Bill was published on 29 July 2022. The bill’s publication marks the start of the tax legislative amendment season. The proposed legislative amendments are currently open for public comment and participation. Executives and payroll administrators should take note of a proposed change to the way in which variable remuneration will be taxed, particularly from a timing perspective. Currently, section 7B of the Income Tax Act provides for the matching of the timing between accrual and payment of various forms of variable remuneration. As a result, any amount of variable remuneration paid by an employer to an […]
August 4, 2022

Don’t lose that assessed loss!

Assessed losses can be carried forward—provided that the company doesn’t cease trading If the amount of allowable deductions exceeds the taxable income in your business, you will end up with what is known as an ‘assessed loss’ for tax purposes.  In terms of Section 20 of the Income Tax Act, you are entitled to carry forward this assessed loss and set it off against taxable income in future years. This loss can be carried forward indefinitely, provided that you carry on a trade during the year.  If there is no trade at all during a tax year, and there is […]
August 4, 2022

Section 24C Allowance: Future expenditure

The nature of a taxpayer’s business may be such that the taxpayer receives amounts under a contract that will be used to finance expenditure to be incurred in future in performing under that contract. Generally, this would result in an inclusion of the amount in that taxpayer’s income in that year of assessment. In contrast, a deduction for the expenditure incurred will only be available in a future tax year. An adverse tax liability would, therefore, arise in the year of receipt of the amount. Section 24C of the Income Tax Act No. 58 of 1962 (“the Act”) serves as […]
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