Author: nitascha (page 2 of 35)

Valuation of trading stock for tax purposes

On 27 September 2019, just over a year since delivering judgement in another matter with very similar facts, the Supreme Court of Appeal in CSARS v Atlas Copco South Africa (Pty) Ltd (834/2018) [2019] ZASCA 124 gave a judgement on the valuation of trading stock for income tax purposes.  

The general (and oversimplified) principle is that taxpayers are allowed, as a deduction, the value of opening trading stock during a year of assessment, while the value of the closing trading stock is required to be included in taxable income. From a tax perspective, the higher the value attributed to closing stock at the end of a tax year, the lower the cost of sales for that year will be and the greater the taxable income of the taxpayer. Conversely, the lower the value attributed to closing stock, the higher the cost of sales and the lower the taxable income for that year. The value of the trading stock is generally the cost thereof, less an amount which SARS may think is just and reasonable as representing a diminishing in that value due to damage, deterioration, change of fashion, decrease in the market value or for any other reason. 

Taxpayers often use accounting (or IFRS) values for the determination of stock values. These valuation methods usually involve a time-based approach. I.e. a write-down of stock if it has not been sold for several months. The more the number of months since the stock was last sold, the higher the write down. This approach is often based on internal policies. The court notes (in the previous judgement) that: 

If taxpayers had a free hand in determining the value of trading stock at yearend it would open the way for them to obtain a timing advantage in regard to the payment of tax, by adjusting the value of closing stock downwards. They could by adjusting these values manipulate their overall liability for tax in the light of their anticipations in regard to future rates of tax, future trading results, the need to incur significant expenses in the future and the like. 

The Court finds that IFRS values, based on net realisable value are explicitly forwardlooking and that using this value for tax purposeshas the effect that expenses incurred in a future tax year in the production of income accruing to or received by the taxpayer in that future tax year, become deductible in a prior yearWhether IFRS values was a sensible and business-like manner of valuing trading stock from an accounting perspective was neither here nor there for tax purposes. The concern was whether it accurately reflected the diminution in value of trading stockFor income tax purposes, the exercise is thus one of looking back at what happened during the tax year in question. 

SARS may only grant a just and reasonable allowance in respect of a diminution in value of trading stock in two circumstances. The first is where some event has occurred in the tax year in question causing the value of the trading stock to diminish. The second is where it is known with reasonable certainty that an event will occur in the following tax year that will cause the value of the trading stock to diminish. 

It may, therefore, be necessary that taxpayers keep to sets of trading stock valuations: one for accounting purposes and one for tax purposes.  

Although often only a timing issue between opening stock (for which a deduction is allowed) and closing stock (which is taxable)it could happen that the assessment in respect of the year during which the deduction applies, may have prescribed by the time the dispute relating to the closing stock matter has been finalised. In such an instance, any difference becomes permanent, and not merely a timing difference. It is therefore advisable that any disputes relating to trading stock be dealt with by taxpayers as a matter of urgency.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

Veranderinge in korporatiewe beheer

Die einde van 2019 het aangebreekOns het dit dus goedgedink om ʼn kort opsomming vir u te gee van die belangrike onderwerpe wat gedurende die jaar aangeraak is. 

CIPC jaarlikse opgawes

In terme van Artikel 33 van die Maatskappywet No. 71 van 2008 (“die Wet”), word daar van alle maatskappye en beslote korporasies vereis om jaarlikse opgawes by die “Kommissie vir Maatskappye en Intellektuele Eiendom” (“CIPC”) in te dien. 

Die doel van die jaarlikse CIPCopgawe is om te bevestig dat:  

  • ʼn entiteit nog in besigheid is; 
  • ʼn entiteit handeldryf; en 
  • ʼn entiteit in die nabye toekoms nog handeldrywend gaan wees. 

Jaarlikse opgawes kan slegs elektronies op die CIPC webtuiste ingedien word en binne die volgende voorgeskrewe tydperke. In die geval waar ʼn entiteit dormant is, word daar steeds van die entiteit verwag om ʼn jaarlikse opgawe by die CIPC in te dien ten einde deregistrasie te vermy. 

Gedurende Februarie 2016, het CIPC ‘n program geloods om eXtensible Business Reporting Language (“XBRL”) te loots wat sal dien as ‘n digitale vorm van finansiële verslaggewing vir entiteite in Suid-Afrika. Entiteite wat deur wetgewing verplig is om hul finansiële state in te dien saam met hul jaarlikse opgawe, sal dit dus in XBRL formaat moet indien. 

Die aard van beslote korporasies

‘n Beslote korporasie het nie aandeelhouers nie, maar het lede. ‘n Beslote korporasie is ‘n afsonderlike regspersoon en staan onafhanklik en verwyderd van sy lede. ‘n Beslote korporasie kan uit tussen een en tien lede bestaan. Die beperking op die aantal lede in ‘n beslote korporasie beklemtoon die Wetgewer se bedoeling dat beslote korporasies bestem is vir kleiner ondernemings, waar die verhoudings tussen die lede soortgelyk is aan dié van vennote. 

Slegs natuurlike persone mag lede van ‘n beslote korporasie wees en geen regspersone mag ‘n ledebelang in ‘n beslote korporasie hou nie. ‘n Maatskappy of beslote korporasie kan dus nie ‘n lid van ‘n beslote korporasie wees nie. ‘n Beslote korporasie mag wel ‘n lid van ‘n maatskappy of vennootskap wees  ‘n beslote korporasie kan selfs die beherende aandeelhouer van ‘n maatskappy word. 

‘n Trustee van ‘n trust, hetsy ‘n inter vivos of testamentêre trust. kan in die hoedanigheid van trustee lid van ‘n beslote korporasie wees. Daar bestaan egter sekere beperkings op die toelating van ‘n trustee van ‘n trust inter vivos om ‘n lid te wees, soos die vereiste dat geen regspersoon ‘n begunstigde van sodanige trust kan wees nie. 

PBO’S NPO’S en NPC’s

Daar bestaan baie verwarring rondom die onderskeid tussen ‘n Openbare Weldaadsorganisasie (“PBO”)’, ‘Nie-winsgewende Organisasie (“NPO”)’ en ‘n ‘Nie-winsgewende Maatskappy (“NPC”). Alhoewel daar soortgelyke karaktereienskappe tussen hierdie liefdadigheid-entiteite bestaan, en alhoewel hulle in ‘n sekere mate met mekaar verbind is, is elkeen van hierdie tipe entiteite verskillend van die ander een en dien elkeen ‘n ander doel.  

Elk van die voornoemde entiteite word ook by verskillende regerings-organisasies en departemente geregistreer, wat die onderskeid verder beklemtoon. 

‘n NPO word gedefinieer deur die Nie-winsgewende OrganisasieWet No. 71 van 1997 as ‘n trust, maatskappy of enige ander assosiasie van individue wat gestig word vir: 

  • ‘n publieke doel en; 
  • waarvoor die inkomste en eiendom nie verdeel word onder die direkteure of lede andersins as vir die verkryging van redelike vergoeding vir dienste gelewer aan die entiteit nie. 

‘n NPC word gedefinieer deur die Maatskappy Wet No 71 van 2008 (“die Wet”) as “‘n maatskappy wat:  

  • geïnkorporeer word vir openbare voordeel soos vereis word deur item 1(1) van Skedule 1 van die Wet en; 
  • waarvan die inkomste en eiendom nie verdeel word onder die direkteure, beamptes of persone watenigsins verbind is tot die maatskappy nie.” ‘n Organisasie moet aansoek doen om geregistreer te word as ‘n NPC by die Kommissie vir Maatskappye en Intellektuele Eiendom (“CIPC”). Die organisasie sal dan dieselfde eienskappe en voordele hê van ‘n privaat of openbare maatskappy. ‘n NPC kan geregistreer word met of sonder lede. 

Die Inkomstebelastingwet 58 van 1962 (“die Inkomstebelastingwet”) definieer ‘n PBO as enige organisasie wat:  

  • ‘n nie-winsgewende maatskappy, trust of assosiasie van persone is soos gedefinieer in artikel 1 van dieWet wat geïnkorporeer of gevorm is in terme van wetgewing; of
  • enige tak van ‘n maatskappy, assosiasie of trust wat geïnkorporeer of gevorm is  en wat vrygestel is van inkomstebelasting waarvan die hoofdoelwit is om een of meer openbare belang aktiwiteite te dryf waar –
  • sulke aktiwiteite uitgevoer word op ‘n nie-winsgewende manier met ‘n filantropiese bedoeling; en 
  • hierdie aktiwiteite nie bedoel is om direk of indirek enige belanghebbende persoon of werknemer van die organisasie ekonomies te bevoordeel nie, andersins as vir betaling van redelike vergoeding vir die werknemer of belanghebbende persoon se diens aan die maatskappy, en 
  • die aktiwiteite wat deur die organisasie uitgevoer word vir die voordeel is van die wyer publiek. 

Dividendverklarings

Ingevolge Artikel 46 van die Wet, moet die direksie van die maatskappy die dividendverklaring goedkeur per skriftelike resolusie.  Die direkteure moet ook verklaar dat die solvensie- en likiditeitstoets toegepas is, soos vereis in Artikel 4 van die Wet, en dat hulle redelikerwys bevind het dat die maatskappy solvent en likied sal wees vir die 12 maande wat volg op die datum van die dividendverklaring. 

Die dividend moet aan die aandeelhouers van die maatskappy uitbetaal word, proporsioneel tot hul aandeelhouding in die maatskappy, nadat die direksie die dividendbelasting in ag geneem en teruggehou het.  Die dividendbelasting is betaalbaar aan die Suid-Afrikaanse Inkomstediens (“SAID”) teen die laaste werksdag van die maand wat volg op die verklaring van die dividend. 

Direksie vergaderings

Die Maatskappywet 71 van 2008 (“die Wet”) spesifiseer dat ‘n maatskappy en maatskappy aangeleenthede bestuur moet word onder die beheer van ‘n raad van direkteure, wie die bevoegdhede moet hê om al die magte en funksies binne die maatskappystruktuur te kan uitoefen. Die algemene magte van die raad van direkteure word gereguleer deur die Wet en mag ook beperk word in terme van die maatskappy se Memorandum van Inkorporasie (“MOI”). 

Daar word van die direkteure van ‘n maatskappy vereis om hul magte op so manier uit te oefen om uitvoering te gee aan effektiewe bestuur van die maatskappy deur middel van besluite en resolusies wat goed gekeur moet word by direksie vergaderings.  

Die vergaderings moet behoorlik belê word deur ‘n kennisgewing van die vergadering wat aan elke lid van die direksie gegee moet word en ‘n behoorlike quorum wat teenwoordig moet wees voordat enige vergadering kan voortgaan en daar op enige aangeleentheid besluit mag word.  

‘n Direksie vergadering mag enige tyd byeen geroep word deur ‘n direkteur wie gemagtig is deur die raad van direkteure om so te doen. Onderhewig aan die maatskappy se MOI, wat ‘n groter of laer persentasie kan voorskryf, moet ‘n direksie vergadering byeengeroep word as teminste 25% van die direkteure een vereis in die geval waar die maatskappy 12 of meer direkteure het, of deur teminste 2 direkteure waar die maatskappy uit minder as 12 direkteure bestaan.  

Indien u graag meer wil uitvind oor enige van die onderwerpe wat aangeraak was in terme van Korporatiewe beheer aangeleenthede, kontak gerus vir Arné Bester (pty@asl.co.za) in ons Korporatiewe Beheer Afdeling. 

Hierdie artikel is ʼn algemene inligtingsblad en moet nie as professionele advies beskou word nie. Geen verantwoordelikheid word aanvaar vir enige foute, verlies of skade wat ondervind word as gevolg  van die gebruik van enige inligting vervat in hierdie artikel nie. Kontak altyd ʼn finansiële raadgewer vir spesifieke en gedetailleerde advies. (E&OE)

Belastingaftrekkings vir werknemers wat van die huis af werk

Al hoe meer werkgewers laat gesalarieerde werknemers toe om van die huis af te werk ten einde vermorsing van produktiewe ure terwyl hulle pendel, te vermy. Sodanige werknemers kan ’n tuiskantoor-aftrekking eis (wat toegelaat word ​​onder die afdeling “Ander Aftrekkings” van die persoonlike inkomstebelastingopgawe of ITR12-vorm) indien daar aan sekere streng vereistes voldoen word.

Die aftrekbaarheid van hierdie uitgawes word bepaal deur artikel 11 (veral paragrawe (a), (d) en (e), saamgelees met artikels 23 (b) en 23(m) van die Wet op Inkomstebelasting[1]). Die vereistes van al hierdie bepalings moet nagekom word voordat die betrokke werknemer vir die tuiskantoor-aftrekking kwalifiseer.

In die algemeen moet die werkgewer die werknemer toelaat om van die huis af te werk en moet die werknemer meer as 50% van sy/haar totale werksure van die huis af werk om vir hierdie aftrekking te kwalifiseer. Dit is belangrik om daarop te let dat die werknemer ’n spesifieke area in die huis moet hê wat uitsluitlik vir hierdie doel gebruik word (soos ’n aparte kantoor of studeerkamer) en dat hierdie area spesifiek toegerus moet wees vir die werknemer se ambag (byvoorbeeld ’n werktuigkundige se gereedskap, ’n tekenbord van ’n argitek of toerusting vir ’n dokter se ondersoekkamer). Hierdie vereistes is van toepassing op beide kommissieverdieners (waar meer as 50% van die totale vergoeding kom uit óf die kommissie óf ’n ander veranderlike vorm gebaseer op werkprestasie) en normale gesalarieerde werknemers (met veranderlike betalings wat minder as 50% van sy/haar totale vergoeding uitmaak).

Om die tuiskantoor-aftrekking te bereken moet die werknemer eers die totale vierkante meter oppervlakte van die tuiskantoor in verhouding tot die totale vierkante meter van die huis as ‘n persentasie bereken en hierdie persentasie op die tuiskantoor-uitgawes toepas. Hierdie berekeninge, asook afskrifte van alle relevante fakture, moet deur die werknemer wat hierdie aftrekkings eis bewaar word sou die Suid-Afrikaanse Inkomstediens stawende dokumentasie versoek.

Die tipe uitgawes wat geëis kan word, is onder meer die na verhouding aangepaste aftrekkings gebaseer op huur, die rente van verbandlenings, herstelwerk aan die huis en alle ander uitgawes wat verband hou met die werknemer se huis. Benewens hierdie uitgawes, sluit ander tipiese tuiskantoor-uitgawes telefone, skryfbehoeftes, eiendomsbelasting, en diensgelde, skoonmaak, kantoortoerusting en slytasie, in.

Werknemers wat nie ’n kommissie verdien nie, maar die grootste deel van hul tyd op die pad deurbring om kliënte te besoek en hul pligte hoofsaaklik op hul kliënte se perseel verrig, kwalifiseer gevolglik nie vir die aftrekking van uitgawes vir tuiskantore nie. Alleeneienaars of vryskutwerkers wat van die huis af werk, kan outomaties al die uitgawes vir tuiskantore aftrek en hoef nie aan al die vereistes soos hierbo uiteengesit, te voldoen nie.

Dit is duidelik uit die bogenoemde dat werknemers wat van die huis af werk, deeglik moet oorweeg of hulle aan al die vereistes voldoen ten einde die uitgawes vir tuiskantore te eis.

[1] No.58 van 1962

Hierdie artikel is ʼn algemene inligtingsblad en moet nie as professionele advies beskou word nie. Geen verantwoordelikheid word aanvaar vir enige foute, verlies of skade wat ondervind word as gevolg  van die gebruik van enige inligting vervat in hierdie artikel nie. Kontak altyd ʼn finansiële raadgewer vir spesifieke en gedetailleerde advies. (E&OE)

The different VAT supplies

There are a few instances where VAT is not charged at the standard rate of 15%. In the following newsletter, we distinguished between the different supplies that attract VAT but does not necessarily have the impact of a standard rate supply.

  1. Denied Supplies
  2. The VAT Act provides for certain expenses where input VAT is denied, even if the expense is incurred in the course of conducting an enterprise and if there are no input VAT consequences there will ultimately be no output VAT consequences. The following circumstances are common instances where input VAT will be denied:

    • Acquisitions of a motor vehicle:
    • When a motor vehicle is purchased by a vendor, who is not a motor car dealer or car rental enterprise, the input VAT on the purchase will be considered a denied supply.

      The definition of “motor vehicle” includes all vehicles designed primarily for the purposes of carrying passengers. This definition covers ordinary sedans, hatchbacks, multi-purpose vehicles and double cab bakkies. A single cab bakkie or a bus designed to carry more than 16 persons will qualify for input VAT purposes.  Any repairs and maintenance to vehicles, irrespective of the type of vehicle, will also qualify for the claiming of input VAT, as long as the cost is separately identified and invoiced.

    • Fees and Club Subscriptions:
    • Input tax in terms of subscriptions/membership fees to sport, social, recreational and private clubs are denied supplies. Input VAT may, however, be deducted on subscriptions to magazines and trade journals which are related in a direct manner to the nature of the enterprise carried on by the vendor.

      However, fees for membership of professional bodies and trade organisations paid on behalf of employees are not denied supplies and SARS allows an input VAT to be claimed. Trade unions are exempt in this regard.

    In the case of denied supplies, no VAT may be claimed, and no output VAT needs to be declared, thus these supplies don’t need to be declared on your VAT return.

  3. Zero-Rated Supplies
  4. A zero-rated supply is a taxable supply, but VAT is levied at 0%. Vendors who make zero-rated supplies are still able to deduct input tax on goods or services acquired in making of the zero-rated supplies.

    Zero-rated supplies include certain basic foodstuffs such as brown bread and maize meal, certain services supplied to non-residents, international transport services, municipal property rates and more.

    Although a zero-rate supply is levied at 0%, it is still a taxable supply and should be declared separately on the VAT return.

  5. Deemed Supplies
  6. A vendor may be required to declare an amount of output tax even though they have not actually supplied any goods or services. Deemed supplies will generally attract VAT at either standard rate or zero rate.

    Two common examples of deemed supplies at standard rate are trading stock taken out of the business for private use and certain fringe benefits received provided to employees.

    The deemed supply will be declared on the VAT return under either your standard rate or zero-rate codes.

  7. Notional input VAT 
  8. A VAT vendor may in certain circumstances deduct a notional input VAT credit in respect of secondhand goods acquired from non-vendors where no VAT is actually payable to the supplier.  Second-hand goods exclude animals, certain mineral rights and goods containing gold or consisting solely of gold.

    The following requirements must all be met for a notional input credit to be deductible in respect of secondhand goods:

    • Goods must be previously owned and used (as per the second-hand good definition in section 1 of the Act) and
    • Goods must be used to generate taxable supplies and
    • The seller must be a resident non-vendor and
    • Goods must be located in South Africa and
    • There must be no actual VAT levied on the transaction.

     
    It is important to keep all the documentation for all types of supplies for VAT purposes and to have it available as SARS may require it to confirm VAT transactions.

    This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

Skenkingsbelasting

Is jou kennis genoegsaam oor skenkingsbelasting? Dink jy dalk daaraan om ń familielid finansieel by te staan, of om ń kind te help met ń deposito vir die aankoop van ‘n huis of motorvoertuig? Voor jy die transaksie aangaan is daar ń paar dinge wat jy in gedagte moet hou wanneer dit by ń skenking en skenkingsbelasting kom.

Wat is skenkingsbelasting?

Skenkingsbelasting is belasting betaalbaar teen ń vaste koers van eiendom wegmaking deur skenkings (artikel 54 van 64 van die Wet op Inkomstebelasting, 1962).  Skenkingsbelasting word teen ń vaste koers van 20 % gehef op die waarde van eiendom geskenk.

Deur wie is skenkingsbelasting betaalbaar en wie word vrygestel?

Skenkingsbelasting is van toepassing op enige individu, maatskappy of trust wat as ń inwoner geklassifiseer word, soos omskryf in artikel 1 van die Inkomstebelasting, 1962.

Artikel 56(1) van die inkomstebelastingwet bevat ń lys van vrygestelde skenkings wat die volgende insluit:

  • Skenkings tussen gades;
  • Skenkings kleiner of gelyk aan R100 000 vir ń jaar van aanslag, per individu;
  • Skenkings aan goedgekeurde openbare liefdadigheidsorganisasies;
  • Skenkings deur nie-inwoners;

Wanneer moet skenkingsbelasting betaal word en hoe moet dit betaal word?

  • Skenkingsbelasting moet aan die einde van die maand wat volg op die maand waarin die skenking in werking tree betaal word of sodanige langer tydperk as wat SARS toestaan;
  • Nadat jy ń skenking gemaak het, moet jy ń IT144 vorm (verklaring deur skenker/ontvanger) invul en aan SARS stuur, tesame met die bewys van die skenking;
  • Skenkingsbelasting kan deur eFiling betaal word.

Daar is dus verskeie faktore wat in ag geneem moet word wanneer ń skenking gemaak word. Dit is dus raadsaam om ń belastingkonsultant te raadpleeg, ten einde die belastingimplikasies te bespreek, voordat ń besluit geneem word.

Hierdie artikel is ʼn algemene inligtingsblad en moet nie as professionele advies beskou word nie. Geen verantwoordelikheid word aanvaar vir enige foute, verlies of skade wat ondervind word as gevolg  van die gebruik van enige inligting vervat in hierdie artikel nie. Kontak altyd ʼn finansiële raadgewer vir spesifieke en gedetailleerde advies. (E&OE)

Cryptocurrencies: Everything you need to know

1.1 Background to Bitcoin

Bitcoin, Ether and Litecoin. These are some of the most prominent cryptocurrencies on the market today. Bitcoin is by far the best-known cryptocurrency due to the substantial increase in the price that was experienced in the past couple of years.

Bitcoin is a cryptocurrency – a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. Bitcoin was developed by an anonymous creator – Satoshi Nakamoto – to enable society to operate with a digital cash system, without the need for third-party intermediaries which are traditionally required for digital monetary transfers.

Should you wish to read the original paper used to introduce bitcoin to the word, please follow this link:  https://bitcoin.org/bitcoin.pdf.

1.2 Tax consequences of cryptocurrencies

For the most part, South Africans have only been able to enter the crypto market locally for a short while, which has drawn the attention of the South African Revenue Service (SARS) to cryptocurrencies.

SARS released a statement on the 6th of April 2018, declaring its stance regarding the taxation of cryptocurrencies. The following is an extract from the statement:

The South African Revenue Service (SARS) will continue to apply normal income tax rules to cryptocurrencies and will expect affected taxpayers to declare cryptocurrency gains or losses as part of their taxable income.”

The statement further indicates that for purposes of the Income Tax Act, SARS does not deem cryptocurrencies to be a currency (due to the fact that wide adoption has not been reached in South Africa and crypto can’t be used on a daily basis to transact), but rather defines cryptocurrencies as assets of an intangible nature.

The definition has the effect that cryptocurrencies will be treated as any other investment for tax purposes. The onus lies on the taxpayer to declare all cryptocurrency-related taxable income in the tax year which the taxpayer received or accrued.

Should a taxpayer thus trade in bitcoin, the trades will be deemed to be income in nature and the profit and loss on the trades should be included in the taxpayer’s taxable income. However, if the taxpayer holds the bitcoin as a long-term investment (the same way some investors hold a share portfolio for long-term investing), the income derived from the disposal of the bitcoin will be deemed to be capital in nature, resulting in capital gains tax needing to be declared on the disposal.

1.3 Conclusion

Whether you are for or against cryptocurrencies, it is evident that cryptocurrencies have formed a part of the modern era and will likely remain relevant. This new form of currency/investment has caused quite a stir at SARS and taxpayers are advised to familiarise themselves with the tax treatment of these currencies to prevent any unexpected tax consequences.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

Section 18A Audit Certificates – Part II

The South African Revenue Service (“SARS”) issued Interpretation Note 112 (“IN112”) 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] This was due to the fact detailed information on this requirement was not included in section 18A, resulting in uncertainties regarding compliance with these provisions.

Section 18A allows for an income tax deduction for donations made to certain approved organisations. These organisations include approved public benefit organisations (“PBOs”), certain specified agencies, programmes, funds, the High Commissioner, offices, entities or organisations[2]  (“approved organisations”) as well as certain government departments.[3]

However, the term “audit certificate” is not defined in section 18A. In terms of the guidance, this constitutes a physical document that provides an opinion on the use of donations for which the relevant entity issued section 18A receipts.

It is recommended that the person from whom an audit certificate is obtained should be independent of the relevant entity and suitably qualified. The IN112 lists examples of such persons for the different types of approved entities. For example, for PBOs, it may be an independent auditor or reviewer[4], while for trusts, it may be a bookkeeper not employed by the trust.

In general, the audit certificate should express an opinion confirming that all the donations for which section 18A certificates were issued were used solely for public benefit activities (“PBAs”) in Part II of the Ninth Schedule to the Income Tax Act.[5] In terms of IN112, additional information that should be included are details of the approved entity, details of the person issuing the audit certificate and details of the work performed. The latter includes, amongst others, a description of the work that formed the basis for the opinion reached and the tests performed. SARS recognises that detailed testing poses practical difficulties but requires an express statement that sufficient and appropriate audit evidence was obtained.

Please note that PBOs are not required to submit the audit certificate with its annual income tax return, though SARS may request it at any point. A government department must, however, submit the audit certificate annually. IN112 furthermore provides guidelines on the retention of audit certificates (generally for a period of 5 years).

The take away is that entities with section 18A status should carefully consider IN112 to ensure that they comply with all the requirements with regards to audit certificates.

[1] No. 58 of 1962

[2] Section 18A(1)(bA)

[3] Section 18A(1)(c)

[4] Appointed under the Companies Act No. 71 of 2008

[5] Section 18A(2B) with reference to section 18A(2A). Please see distribution requirement for PBOs providing funds or assets to other PBOs (referred to as “conduit PBOs”)

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

Spaarfondse voordele

Die drie spaarfondse wat voordeel inhou vir ‘n individu met aftrede, is ‘n pensioenfonds, uittree-annuïteitsfonds, en ‘n voorsorgfonds.

Vanaf 1 Maart 2016 geld die volgende:

  • Bydraes wat deur werkgewers aan bogenoemde aftree-fondse gelewer is word belas in die hande van die werknemer as ‘n byvoordeel;
  • Die volle bydrae van die werkgewer kan deur die werkgewer afgetrek word; en
  • Belastingaftrekkings vir “bydraes gemaak” is beperk tot R350 000; of die grootste van 27.5% van vergoeding of belasbare inkomste (insluitend belasbare kapitaalwins). Dus die maksimum bedrag wat jaarliks afgetrek kan word vir belastingdoeleindes is R350 000.

Bydraes wat die maksimum aftrekking van R 350 000 (beperk tot werklike bydraes gemaak) oorskry, word oorgedra na die volgende jaar en is dan onderhewig aan daardie jaar se perke.

Surplus bydraes aan pensioenfondse en uittree-annuïteitsfondse wat voor 1 Maart 2016 gelewer is het oorgedra, maar nie op bydraes tot voorsorgfondse wat voor 1 Maart 2016 gelewer is nie. Slegs bydraes wat aan voorsorgfondse gelewer is na 1 Maart 2016 en die perk oorskry, is oorgedra.

Bydraes wat nie as aftrekkings gebruik is wanneer ‘n individu ‘n fonds verlaat nie, kan verreken word teen die belastingpligtige se aftreevoordele by aftrede. Dit sal wel eers teen die enkelbedrag en daarna teen die annuïteitsinkomste verreken word.

Werkgewers kan die belastingaftrekking in berekening bring wanneer werknemers se maandelikse inkomstebelasting bereken word. Die maksimum bedrag wat afgetrek word per maand kan nie R29 167 oorskry nie aangesien dit gelykstaande is aan die maksimum bedrag van R350 000 wanneer dit oor 12 maande versprei is.

Hierdie artikel is ʼn algemene inligtingsblad en moet nie as professionele advies beskou word nie. Geen verantwoordelikheid word aanvaar vir enige foute, verlies of skade wat ondervind word as gevolg  van die gebruik van enige inligting vervat in hierdie artikel nie. Kontak altyd ʼn finansiële raadgewer vir spesifieke en gedetailleerde advies. (E&OE)

SARS dispute: What are the reasons?

Generally, disputes with the South African Revenue Service (SARS) are the result of an assessment which has been issued by SARS to a taxpayer. An assessment is the determination of an amount of a tax liability or refund, by way of self-assessment by the taxpayer (such as in the case of VAT) or assessment by SARS (such as in the case of income tax). If taxpayers are not satisfied with an assessment, the Tax Administration Act provides for dispute resolution mechanisms, in terms of which taxpayers can object to the assessment, and subsequently appeal, if objections are not maintained.

Although objection to an assessment is the correct procedure to dispute a tax amount, taxpayers often lodge objections against assessments, without knowing exactly what they are objecting to. This could seriously jeopardise a taxpayer’s case, since taxpayers may not appeal on a ground that constitutes a new objection against a disputed assessment. If a valid ground of objection is therefore not addressed in the objection itself, taxpayers may lose the opportunity to object to a specific ground.

For example: when an assessment is raised by SARS because “expenses are not allowed as a deduction” it could be as a result of, among others, the following:

  • SARS considers the taxpayer not to carry on a trade;
  • SARS considers the expense not to have been incurred in the production of income;
  • SARS considers the expense not to have been actually incurred; or
  • SARS considers the expense to be of a capital nature.

Without having reasons for the assessment, the taxpayer cannot properly formulate its grounds of objection and may, therefore, find itself in a position where the real grounds for the assessment, may not be challenged on appeal.

In terms of Rule 6 of the dispute resolution rules, a taxpayer who is aggrieved by an assessment may request that SARS provide reasons for an assessment. The reasons provided by SARS must enable the taxpayer to formulate its grounds of objection. The reasons for any administrative action must include the reasons for the conclusion reached, and it is not enough to merely state the statutory grounds on which the decision is based or repeat the wording of the legislation. The decision-maker should furthermore set out his understanding of the relevant law.

A request for reasons for an assessment must be made within 30 business days from the date of assessment. Taxpayers (and their practitioners) are therefore encouraged to consider assessments as soon as they are issued by SARS. If there is any doubt as to why the assessment has been issued, a formal request for reasons should be issued without delay.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

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