Section 7C of The Income Tax Act Explained
What is section 7C? This section of the Income Tax Act is an anti-avoidance measure aimed at transactions between connected persons and trusts, where a trust is funded by low interest or interest-free loans. This is usually done to ensure that assets form part of the trust’s capital, and the funder (who is usually a […]
Do you fall within the “Connected Persons” definition?
On 28 January 2020, SARS released interpretation note 67 providing guidance on the term “connected persons” in section 1(1) of the Income Tax Act. The interpretation note itself is voluminous but worthy of a short discussion as one may fall within this definition without knowing. The definition allows for the following scenarios to be regarded […]
Identifying the difference between donations and payments
BPR 338 deals with the tax treatment of payments made to a Public Benefit Organisation (PBO) at a fundraising event, under section 30 of the Income Tax Act. The ruling is essentially an interpretation of section 18A of the Act and seeks to clarify the situation for PBOs and funders. In terms of the transaction, […]
“Exit Charge” on ceasing to be a tax resident
Section 9H of the Income Tax Act deals with matters relating to the cessation of residency in South Africa. This section essentially states that where a person that is a resident ceases to be a resident during any year of assessment, that person must be treated as having disposed of his assets on the date […]
Tax: A historical perspective
It has often been said that inflation is the destroyer of wealth. To put this statement into a tax perspective, it is interesting to have a look back at historical rates of tax and related interest rates. It is, of course, true that earnings have also increased over the years, but it is nevertheless interesting […]
Diesel usage clarification
Farming is a qualifying activity under the Diesel Refund Scheme. Most farming enterprises will qualify to be registered for the Diesel Refund Scheme. The person carrying on the farming enterprise may, therefore, apply for registration with the Diesel Refund Scheme, provided the enterprise is registered for VAT. In terms of section 75(1C)(a)(iii) of the Customs and Excise Act 91 of […]
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 […]
What to do when the taxman comes?
With the tax filing season for individuals now closed, taxpayers may find themselves with tax debt that is due. This may be due to administrative penalties as a result of the non-submission of tax returns, the submission of a return without payment, only partial payment or debt arising from an audit assessment. The South African […]
Fellow subsidiary loan written off: Look to the cause to determine deductibility
On 15 November 2019, the Cape Town Tax Court handed down judgement in ITC24614. It is yet another judgement concerned with the distinction between expenses of a capital nature or revenue nature – arguably the issue over which there has been the most litigation in South African tax history. The importance of the distinction lies […]
Pitfalls of VCC structures
Recently, much emphasis has been placed on the ever-growing Venture Capital Company (“VCC”) regime, particularly on the tax benefits for investors, in terms of which they can deduct the expenditure incurred in acquiring VCC shares, from their taxable income. This is not likely to change any time soon, as the 2020 tax year draws to […]