 Authored by: Christopher Renwick – Senior Tax Attorney at Tax Consulting SA.
Down to a “T” I recently had the privilege of attending a tax conference in the Dominican Republic. This involved months of planning in order to ensure a smooth flight, travel and attendance at an international tax event. Naturally, a few mishaps occurred in the planning process which involved flight changes and adjustments to schedules, but on the whole, it was a successful expedition into the biggest commercial island in the Caribbean. In hindsight, when I look back on the planning, a few major points stick out. The most important of which is the advice given by everyone attending the conference as well as those in the travel industry. Quite simply, don’t drink the water from a tap - stick to bottled water. Keeping up good health Coming from South Africa, where our water is for the most part safe for consumption, this was naturally an adjustment. Of course, additional budget and planning was undertaken in order to ensure that whatever nasty bacterium or ill health effects that would arise from drinking the water, would be avoided. Thankfully, I made it through the trip without any health defects and made it back to South Africa in one piece. I cannot stress enough how simply planning around the water issue may have saved me a substantial amount of discomfort. The big question One question comes to mind, after planning that trip down to the letter, with plans to cover all possible issues that may have been encountered. From airport transfers to language translations to an extended check-out time, nothing was left to chance. Why then, if so much thought goes into travel and the expenditure of hard earned finances, does the same level of planning and attention to detail not have the same presence in ones taxes? This is not even in reference to International taxes. Locally, the lack of planning by taxpayers has become rife. Hindsight is clear Too often, a taxpayer will approach us with a massive tax liability. Whether it be provisional tax payments, or a VAT dispute that has derailed, or even a disagreement in the residency of the taxpayer, it is clear the most common underlying cause of the taxpayer’s strife is a lack of planning. Taxpayers often fall short when it comes to planning their personal tax structuring, or how best to pin SARS down in a dispute. We have even seen a lack of planning when it comes to document preparation for a VAT refund claim. Are taxpayers being lax in their approach to taxes? The current slip in tax morality has resulted in taxpayers having to pay over more to SARS. Surely this is not in the best interests of the taxpayer, so why do taxpayers not take more care in planning their taxes to avoid excessive payments, penalties and interest? Seek the right advice Thinking back to the Dominican Republic, if the travel planning had not been so extensive, I would have likely followed my usual routine and consumed about as much of the water as I do locally. It is truly unsettling to think of the consequences that may have ensued. The advice then is quite simple. If you seek and trust a travel agents’ advice when it comes to the consumption of water in a foreign country. Surely when it comes to your taxes, you should be doing the same? Ultimately, when it comes to your taxes, check before you “drink the water”. More importantly, you should engage a tax expert who knows which water is safe to drink. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za ABOUT Tax Consulting SA: Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance. For more information on Tax Consulting please visit: Website: http://www.taxconsulting.co.za/ LinkedIn: Tax Consulting South Africa Facebook: Tax Consulting South Africa
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 Authored by: Christopher Renwick – Senior Tax Attorney at Tax Consulting SA.
Life is better on the sea Sometimes, those who have been living the corporate life decide to leave it all behind for a life working aboard luxury yachts. Some High school graduates take up the mantle of floating on seawater day in and day out in a gap year, but never depart the lifestyle. Either way, there are those out there who work and live on sea going vessels. Forgetting the sun, sea and foreign lands you’re likely to encounter while navigating the globe, there is the tax benefit afforded to such seafarers. The Income Tax Act makes provision in section 10(1)(o)(i) that any officer or crew member of a ship who spends 183 days outside the Republic, will have their remuneration exempt from income tax. Talk about a cherry on top. Oh, captain my captain Before you pack up and head for the nearest harbour, there are off course strict requirements to ensure such a tax exemption is applicable to you. One such requirement is that the remuneration received must be as compensation under an employment. Naturally, when SARS comes knocking, an employment agreement will serve as proof thereof. It’s important to note that an independent contractor does not qualify for the exemption. Which leads to a growing trend in the industry. When those who are ambitious enough to seek a captains’ role seek to take the next step in their careers, certain requirements must be fulfilled in order to advance. One such requirement is the need for a prospective captain to spend around 240 hours in command of a vessel. Solitary control being the main factor. Fact is, on even a 12-hour day, that’s 20 days of the captain needing to be absent. Given the nature of the industry, the number of days at sea and the limited time in which a captain is absent, the 240 hours becomes a rather significant mountain to climb. Especially where the prospective captain remains on the same boat consistently. Time is money. Making both. What many sailors are resorting to is charter contracts. A yacht owner will engage the individual to transport their vessel from, let’s say the Mediterranean to the Caribbean. For a fee of course. Thing is though, this is usually done through an agreement or a handshake. Are you seeing the problem that is starting to grow? Without having concluded an employment agreement with the owner of the vessel, the charter income earned is not subject to exemption. Fully taxable and in need of declaration. In our experience, many (if not most) of the sailors we encounter are unaware of this fact. They have been operating in this fashion for a number of years and have rather extensive tax liabilities. Being broadsided When advising our clients on the liability, there are those who feel that there is no cause for concern and no funds should be declared. Given that SARS has undertaken to exchange information globally and with payroll and personal audits on the rise, it really is only a matter of time before those who have not declared their seafaring income are caught in SARS’ net. The amendment to the foreign income exemption and the resistance of taxpayers to the change will lead to a more stringent audit of taxpayer’s affairs. All foreign income earners will be place in the same boat. The solution Nautical puns aside, there is truly cause for concern for those who have not declared their income to SARS. Which is why, for those sailors who approach us, we typically engage in a full tax diagnostic review of their affairs. Once we have established that a long-term lifestyle is the intention of our client, we undertake a planning structure to facilitate the optimal tax position as well as correct any historical shortcomings. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za ABOUT Tax Consulting SA: Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance. For more information on Tax Consulting please visit: Website: http://www.taxconsulting.co.za/ LinkedIn: Tax Consulting South Africa Facebook: Tax Consulting South Africa  Authored by: Tasia Brummer, Immigration Specialist, Xpatweb & Marisa Jacobs, Director and Head of Mobility, Xpatweb
In October, the Institute of People Management hosted a panel discussion at their annual convention covering the topic of Globalised Resourcing and Strategic Skills Growth through the import, export and exchange of skills. Four key role-players participated in the panel who discussed the typical challenges of sourcing foreign nationals and strategies to address common challenges. SKILLS SHORTAGES South Africa is faced with a shortage of skills across a number of sectors. The Critical Skills list published by the Department of Home Affairs was introduced in 2014 (the updated list is expected to be released in April 2019), identifying the sectors and specific occupations plagued with these shortages thereby providing business with the ability to source these skills globally ensuring continued economic growth. SKILLS TRANSFER – HOW? Mr Phindiwe Mbhele, Director of the Department of Home Affairs’ Corporate Accounts Unit, indicated that in many cases the source of the challenges faced in transferring of skills may not be the ability, but rather the method. This is especially apparent in occupations such as CEO and other executive roles where the skill set is diverse and hard to quantify. Deputy Director of Labour Migration at Department of Labour, Ms Nonhlanhla Ngwenya, further referred to the ‘Employment Services Act’ promulgated in 2014, that will introduce training processes for South African companies to better enable them to conduct the necessary upskilling of local talent through skills transfer programs. CONCESSION PLANNING Ms Monyela, whom has experience as an expat herself, advocated the importance of expatriate employees and especially at strategic and executive level. Philafrica being a multi-national organisation with plans to expand further across Africa, Ms Monyela appreciates that expatriates are necessary for the growth of the organisation but requires strategy to ensure skills transfer and concession planning. The skills transfer is further required both locally and abroad to ensure holistic development of the business. She caveats, it is about finding the balance between bringing foreign talent into South Africa and sending skilled local employees abroad with the clear intention that, in both instances, skills are going to be utilized fully and transferred for the prescribed purpose and period that they have been assigned. As an HR executive, Ms Monyela encouraged any HR professional to understand the landscape in which the desired skills of foreign employees ought to be deployed. ENGAGE Once the company has determined the set of skills they require, they need to familiarise themselves in terms of the various processes involved when employing a foreign national.This will include engaging both an Immigration Service Provider and the Department of Home Affairs to determine the correct and most feasible methods to proceed in employing a foreign national. Mr Moeketsi Seboko, Immigration and Technical Manager at Xpatweb, indicated that he is often approached by organizations and professionals after an application for a visa has been rejected, only to find, that numerous errors and incorrect processes were followed in applying for the visa. This naturally incurs unforeseen delays with the project where the expat is required to be onsite within a prescribed timeframe and causes frustration for the employer. At the on-set, it is imperative to determine and qualify a foreign employee correctly within a prescribed visa category as per the Immigration Act of 2002, as amended. This will avoid unnecessary delays and complications. It is best to approach a professional whom has gleaned knowledge in terms of processes and requirements for foreign employees. In most cases, rejections could have been prevented if prior engagement with the Department of Home Affairs had occurred. Mr Mbhele welcomes any Corporate to approach the Department of Home Affairs prior to the implementation of a project and to gain the support of the Department and determine exact requirements and protocols specific to the project. IN CLOSING The onus is therefore on employers to ensure that the South African labour market is upskilled by the foreign employees within the respective organisations. If further able, to retain these skills to ensure continued input into the South African economy. ENDS MEDIA CONTACT: Rosa-Mari Le Roux , 082 573 9219, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za ABOUT Tax Consulting SA: Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance. For more information on Tax Consulting please visit: Website: http://www.taxconsulting.co.za/ LinkedIn: Tax Consulting South Africa Facebook: Tax Consulting South Africa Authored by: Melani du Toit (CA S.A.) Senior Accountant and Christopher Renwick (LLB) Tax Attorney at Tax Consulting From the 7th of December the South African Revenue Service (SARS) will be implementing their new approach to use information supplied by the Companies and Intellectual Property Commission (CIPC) to determine which companies are not tax compliant and impose penalties accordingly. The national revenue collector issued an official notice to registered accountants and tax practitioners’ during October to confirm Fabian Murray, acting SARS chief officer’s announcement of the implementation of the new line of attack earlier this year. The notice, which is signed by acting SARS commissioner Mark Kingon, states that administrative penalties for late Corporate Income Tax (CIT) returns will be imposed on over 300 000 companies. Such penalties can range from R250 to R16 000 per month of lateness. It is a well-known public fact that SARS is short on collection, and as the Tax Administration Act determines a penalty per month of lateness, this will boost their collection. The law also looks at when a company should have been registered for tax. For instance, if you opened a company five years ago and never registered it, the minimum penalty is R250 x 12 months x 5 years = R15,000. However, this minimum penalty is only applicable in instances where a company was dormant, as the law still demands CIPC and SARS compliance. Where a company is active, depending on various factors, the Tax Administration Act will determine the level of penalties applicable. What should you do if you feel nervous The directors of companies that are found to be not tax compliant, should rightly feel uneasy, as SARS will undoubtedly come after them personally, especially where the company does not have means to pay penalties, or plainly ignores it. There are very clear company law provisions creating a personal liability against being reckless and delinquent on statutory duties. Therefore:
ENDS MEDIA CONTACT: Rosa-Mari Le Roux , 060 995 6277 , rosa-mari@thatpoint.co.za, www.atthatpoint.co.za ABOUT Tax Consulting SA: Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance. For more information on Tax Consulting please visit: Website: http://www.taxconsulting.co.za/ LinkedIn: Tax Consulting South Africa Facebook: Tax Consulting South Africa Authored by: Christopher Renwick, Attorney at Tax Consulting
More than a year after the Ombud’s rather critical report on the South African Revenue Service’s (SARS’) value-added tax (VAT) refund structure was issued, frustration among taxpayers has been intensified by the revenue service’s excessive verification demands, which seem to be driven by the aim to delay legitimate VAT refunds. The most brazen example brought to our attention, was when SARS withdrew money from a taxpayer’s bank account without following due procedure. Upon proving his case, the taxpayer was owed the funds back and a refund was due. SARS immediately requested a verification of bank details. Let me repeat that. SARS requested a verification of bank details from an account they had just drawn funds from. Holding horses Two possible conclusions can be drawn from this practise. Either, SARS officials aren’t properly equipped in their duties or the verification request was deliberate in an attempt to delay a refund. Reviewing the example above, we will let you decide. The biggest aspect of tax that seems to be subject to excessive requests for verification is the area of Value-Added Tax (VAT). The frustrations arising out of SARS’s verification process on VAT not only aggravates the taxpayer but also endangers the livelihood of the enterprise they operate. Particularly we have found that, when refunds start exceeding the R1-million amount, the process becomes somewhat further drawn out. Fraud is real It is common knowledge that SARS’ verification process is to prevent fraudulent VAT claims. In a modern world with modern criminals, fraud is a real concern. The integrity of the VAT system needs to be protected and no doubt SARS has the full support of the taxpaying community in preventing fraudulent depletion of Treasury funds through fraudulent VAT claims. No need to add to the ongoing political looting that is the talk of the town currently. Kicker What is to be done though, where SARS has no basis for a request for verification and yet persistently requests same? For those throwing their hands in the air right now, I understand your frustration. Why should your legitimate VAT refund be delayed? The short answer is, it shouldn’t. At least, that’s what the Ombud said. The Nugent Commission is likely to come to the same conclusion. Refunds are being delayed because, ultimately, SARS doesn’t want to pay them. It affects the collection figures. Probably also affects performance bonuses too? What should you do? In our experience, the easiest route is to go direct. To call SARS to order and get a response. Too many taxpayers believe that, once their refund is within the system that is SARS, there is no hope and it becomes a wait and pray type of game. How do you go direct? You use your years of experience and expertise to garner a result. If you’re short on these, contact a professional. ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za ABOUT Tax Consulting SA: Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance. For more information on Tax Consulting please visit: Website: http://www.taxconsulting.co.za/ LinkedIn: Tax Consulting South Africa Facebook: Tax Consulting South Afric New Critical Skills List due April 2019
In a recent statement by President Cyril Ramaphosa on economic stimulus and recovery plan for South Africa, he said that Government is decisively and rapidly accelerating the implementation of key reforms that will unlock greater investment in important growth sectors. Following the President’s address, the Minister of Home Affairs, Malusi Gigaba, briefed the media on the amendments to the visa regulations. While some of the changes, such as the visa requirements for highly skilled foreigners being revised, was well-received news, some of the reportedly “new” changes were implemented in South Africa years ago. “Foreigners studying to pursue a critical skill qualification in South Africa have been able to apply for permanent residency since 2016. Similarly, business people from BRICS countries have been able to obtain business visas that are valid for up to 10 years since 2014. These directives work well, but they are not new,” Marisa Jacobs, Director and Head of Immigration and Mobility at Xpatweb, points out. New critical skills list Arguably the most welcome visa regulation revision to promote foreign investment and encourage migration is the changes that are being planned to the critical skills list. Gigaba announced that the Department is currently engaging with respective Government Departments and business sectors for their input. The new critical skills list is expected to be released in April 2019. “Businesses have the opportunity to provide input on the critical skills list. As such, HR professionals, recruiters and business owners are encouraged to ensure they take this opportunity to provide input on the skills that they are most struggling to source locally. This will allow organisations to attract foreign workers to South Africa and compete for talent,” says Jacobs. To aid local businesses and provide a platform for business to collectively give their input to the Department, Xpatweb has launched the 2018 Critical Skills Survey which takes less than 5 minutes to complete. The results will be submitted to Home Affairs and Parliament concerning the White Paper on International Migration and the Department of Higher Education and Training’s National List of Occupations in High Demand. “Now is the time for the private sector to make sure the skills they need are on the list and make use of the opportunity shape law,” adds Jacobs. Some of the skills that Jacobs expects to either stay on the current critical skills list or to be added include highly skilled senior finance executives such as CFO’s, C-suite senior executives as well as a variety of skills in the ICT sector. The Corporate General Manager category is expected to be removed and replaced with more defined roles. “There is a skills shortage in South Africa and we are competing globally for these skills. For the economic stimulus and recovery plan to work, South Africa needs to attract critical skills more easily. Revising the critical skills list, coupled with revised visa requirements for highly skilled foreigners is a vital step to attract knowledgeable and experienced resources to our country,” concludes Jacobs. ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za For more information on Xpatweb please visit: Website: http://www.xpatweb.com/ Authored by: Jean du Toit, Attorney at Tax Consulting SA
Despite the promising initiatives implemented under the South African Revenue Service’s (SARS) acting Commissioner Mark Kingon, its tribulations in meeting its collection targets have not yet waned, with payroll audits falling under its enhanced collection efforts to make up the shortfall. The simple reason behind SARS’s targeting of payroll when it needs extra taxes, is purely because of its tendency to contain errors. Not only are there many instances where mistakes can occur, but such mistakes are magnified by the size of a company’s payroll. In the case of a large payroll with many employees, even the smallest errors can leave a company with a large tax exposure, as these errors are proliferated across the employee base. In other instances, inexperienced payroll administrators simply do not know the law, which results in glaring errors such as failing to tax fringe benefits or paying lump sums without getting tax directives. The truth is that SARS will find something, and most employers only become fully compliant once they have gone through the ordeal of a payroll audit conducted by SARS. Rising Trend As if the challenges of a payroll audit are not daunting enough, a new trend has become apparent that makes it increasingly difficult to get a clean bill of health from the SARS audit team. Rather than identifying specific items that were inaccurately treated on payroll, SARS has now turned its gaze to the financial statement aspect of payroll. These statements are assessed by SARS for an understatement or short payment of employees’ tax purely on the basis that there is a discrepancy between the company’s payroll reconciliation and the cost of employment as reflected in the company’s annual financial statements. This is despite SARS’ awareness that not all amounts reflected in the annual financial statements under cost of employment should be processed to the payroll. Nevertheless, the onus is placed on companies to dispute this and to explain why the amounts making up the difference is either exempt or not taxable. SARS is using this to get around the prescription periods to raise audits going back more than five years, maintaining that there is an element of fraud or misrepresentation when the taxpayer declared its employees’ tax to SARS. Unblemished payroll Given the ease with which SARS can collect revenue by targeting payroll taxes, a head-in-the sand approach is ill-advised and will end in calamity. SARS will come knocking and the best defense is to ensure that your company’s payroll is unblemished and, if there are any issues, to submit a voluntary disclosure programme application before SARS institutes an audit. There is no escaping an audit, the best course of action therefore, would be to ensure that your company’s payroll is independently audited before SARS undertakes to do so. ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za ABOUT Tax Consulting SA: Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance. For more information on Tax Consulting please visit: Website: http://www.taxconsulting.co.za/ LinkedIn: Tax Consulting South Africa Facebook: Tax Consulting South Africa After becoming aware of an increase in payroll deductions in the past years, the South African Reserve Bank (SARB) and National Treasury have engaged in discussions with stakeholders on the creation of a regulatory framework to govern payroll deductions. The proposal was open for public comment until 30 April 2018.
The SARB and National Treasury want to implement a stable and effective payroll deduction regulatory framework that aims to benefit employees by protecting them from unfair lending practices, affords them the opportunity to access financing at reasonable rates, promotes savings and productive credit and minimises the risk of conflicts of interest. The regulatory framework further aims to be transparent, safe and efficient to sufficiently protect employees. The Options The SARB and National Treasury have proposed three options which will form the base of the proposed regulatory framework for payroll deductions. Option 1: Employers will have no access to voluntary payroll deductions. Only statutory, court order, collective agreement and arbitration award deductions will be allowed. “This is the least complicated option and the playing field will be levelled as no preferential treatment can be given to certain creditors or institutions,” says Craig Rocher from Tax Consulting South Africa. Employees will also be protected against unauthorised deductions. This option may however affect employee benefit programs where employers are providing employees with financial assistance and employees may lose the cost-effective advantage of paying through payroll. Option 2: Employers will have limited access to voluntary deductions, meaning that only a set of approved voluntary deductions will be permitted. According to Rocher “this option allows for deductions that are beneficial to employees, such as their mortgage payments, savings and retirement annuities.” This will however require adjustments to payroll systems and certain financial institutions may feel disadvantaged when their deductions are not allowed. Option 3: Employers will have unrestricted access to voluntary payroll deductions, meaning an unregulated payroll deduction system. Under this option all parties will have equal right to deduct from an employee’s salary and there will also be improvements in employees honouring their financial obligations. Employees will have a choice in who gets paid from payroll and who doesn’t. “Collection preferences may occur under this option as the employer will then need to decide the hierarchy of payments” according to Rocher. Employees may also be exposed to unfavourable contractual terms and it may be difficult for them to stop or dispute payroll deductions. How will it affect employees? Employees will be affected no matter which of the options is chosen in the end. “They may be subject to additional bank charges should voluntary deductions no longer be allowed, and it should be considered that many employees don’t have access to internet banking to make their monthly payments, there for creating a lot of additional administration for them” says Rocher. The benefits should however not be disregarded, as many employees are subject to unfair lending terms and unreasonable interest rates, leaving them with almost no nett pay to take home. The way forward The SARB and National Treasury will be taking the public comments received in April under consideration and the preferred regulatory option will be communicated to stakeholders. ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za For more information on Tax Consulting please visit: Website: http://www.taxconsulting.co.za/ LinkedIn: Tax Consulting South Africa Facebook: Tax Consulting South Africa Authored by: Darren Britz, Attorney at Tax Consulting
With the wave of anti-SARS sentiment currently washing over South Africa, paying historical value-added tax (VAT) may be a hard pill to swallow. This has resulted in many companies understating or underpaying their VAT and subsequently incurring colossal penalties in addition to the tax payable. However, paying historical VAT remains the most sensible course of action for any business with longevity and reputation in mind. It is at this point where SARS’ Voluntary Disclosure Programme (VDP) comes in, affording the opportunity to any taxpayers with unpaid taxes, including income tax, pay as you earn (PAYE) and most importantly VAT. The blinding spot light In the tax realm, two topics continue to dominate the media spot light; namely SARS’ systemic delay of VAT refunds and the Nugent Commission’s airing of SARS’ dirty laundry. It is perhaps not difficult to understand why tax morality in South Africa is at an all-time low, and why businesses continue to underpay on their VAT liabilities to SARS. To add insult to injury, the Tax Ombud earlier this month announced a fresh investigation into claims that SARS are not playing fair in how they handle taxpayer’s disputes. Undoubtedly, this will add to the already slippery and sharply steep slope that is taxpayer morality. While the sentiment is well shared, there is a broader consideration which is continually left out of the conversation. I am referring to the end game: eventually, SARS comes out on top. Remember, it is a criminal offence for a company to fail to pay its VAT and directors also face risk of being held accountable. At the same time, no SARS officials have been held to account for their handling of taxpayer dispute and refunds. Not yet anyway. Collecting with determination Tax collections and SARS enforcement measures are by no means comparable with other facets of South African life, such as perhaps the collection of e-tolls payments and speeding fines, which everyday seem to be losing more traction. The collection mechanisms at SARS continue to operate, with varying tactics, including tough audits, quick court judgments and taking money directly from taxpayers’ bank accounts. In that regard, SARS has hit the accelerator in its VAT collections and has gone far beyond their denying taxpayers VAT refunds, albeit that the latter was confirmed by the Tax Ombud. VAT audits are occurring more frequently and with harsher outcomes for repeat offenders or in respect of significant tax liabilities which extends over several years. Penalties aren’t optional It should come as no surprise that outstanding VAT debts will accrue both interests, roughly 10 – 11% per annum as well as percentage-based penalties. While a standard 10% VAT penalty is more often imposed, a worst-case scenario, where SARS finds evidence of deliberate tax avoidance, will permit the imposition of a penalty up to 200% of the VAT payable. Of course, nothing prevents SARS from making the allegation of tax avoidance, so the cards in SARS’ deck are well stacked. It also goes without saying that audit findings and penalty impositions remain on your tax record and therefore there is a risk of remaining on SARS’ radar for future audits. Once a SARS auditor has smelled blood, expect a difficult, agenda driven audit. VDP Relief If we push through the anti-SARS, anti-taxpaying mania and consider the possible solutions open to taxpayers, SARS VDP is at the forefront. The relief afforded includes:
A successful VDP, in most cases, allows for full remission of penalties. This leaves then just the tax and interest payable which, while leaving a sting, permits a total regularisation of tax affairs and avoidance of criminal prosecution. ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za ABOUT Tax Consulting SA: Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance. For more information on Tax Consulting please visit: Website: http://www.taxconsulting.co.za/ LinkedIn: Tax Consulting South Africa Facebook: Tax Consulting South Africa Author: Christopher Renwick, Attorney with Tax Consulting South Africa
By now, most people know what Bitcoin, or cryptocurrency, is. Some have even bought and sold a few and more impressively, some have found out how to turn cryptocurrencies into a business. Then, there are the “miners”. Following a process that involves no actual hard labour or rock breaking, crypto miners can generate cryptocurrencies by performing very complex calculations with the help of large amounts of computing power and specialised equipment. For many miners, once the cryptocurrency is “minted”, the question of “sale or hold” arises. In other words, do they sell what they have minted, or do they simply retain it for the purposes of generating a long-term value? Of course, these decisions have a myriad of consequences, some of which go unconsidered. Paying Your Dues One of the more serious and often forgotten consequences of mining (and distributing) cryptocurrencies is the tax aspect and arising liability. More importantly however is that, where cryptocurrencies are concerned, the advice being given to miners, traders and holders of crypto’s is inconsistent, inaccurate and potentially damaging for the recipient of such advice. Predominantly, most tax professionals giving advice hereon appear to have taken the stance that all crypto sales result in a generation of revenue and therefore income tax is payable. Whether this is owing to extreme conservatism or a lack of understanding, the principle that all crypto sales lead to revenue is, often, incorrect. Long-standing Debate The test for whether proceeds received from cryptocurrency sales comes down to the much debated and heavily adjudicated argument of ‘capital versus revenue. Without digging into the debate and adding a voice to what is possibly the most saturated contestation in tax law, one quite simply cannot apply a blanket approach to all crypto disposals. SARS’ own website provides a differentiation between Capital and Revenue by stating: “Whilst not constituting cash, cryptocurrencies can be valued to ascertain an amount received or accrued as envisaged in the definition of “gross income” in the Act. Following normal income tax rules, income received or accrued from cryptocurrency transactions can be taxed on revenue account under “gross income”. Alternatively, such gains may be regarded as capital in nature, as spelt out in the Eighth Schedule to the Act for taxation under the CGT paradigm.” All factors need to be considered and specifically, the factors around crypto miners need special attention. Crossing the Rubicon There are those miners that sell upon minting crypto’s and those that hold them for lengthy periods. However, the advice being given to these miners is a complete blanket approach. Tax practitioners seem to be opting for the easiest route of advising clients that all proceeds being generated from crypto disposals are revenue in nature, effectively implying that every crypto transaction is part of a profit-making scheme. Only Caesar would benefit from such an approach. As a tax professional it is not reasonable to simply advise that all crypto-traders, miners and sellers should be subject to the same taxation standards. There are too many factors to consider with everyone to make a blanket judgement call. Consider the implications of advising a capital asset holder of the need to pay income tax on a disposal. The monetary difference alone is enough to raise the hair on the back of your neck. Not to mention the professional negligence. For those involved in the crypto sphere, it is necessary to make sure that the advice you are being given is both sound and informed. Consult two tax professionals or better yet, consult ten. Alternatively, save yourself all that run around and ask the right tax professional. ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za ABOUT Tax Consulting SA: Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance. For more information on Tax Consulting please visit: Website: http://www.taxconsulting.co.za/ LinkedIn: Tax Consulting South Africa Facebook: Tax Consulting South Afric |
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