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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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If we are to meet President Ramaphosa’s goal of boosting foreign investment and attracting skilled people to our country, we urgently need to optimise South Africa’s current visa application process, urges Marisa Jacobs, Immigration Specialist at Xpatweb.
She adds that South Africa needs to prioritise creating a more holistic evaluation process for skilled foreign workers and has to make sure their visa applications run smooth and seamless. “There are specific immigration and business challenges that exist for foreign groups within South Africa and I believe these challenges are hampering investment into the country. The long turnaround times and costs related to obtaining work visas for foreign nationals has been raised as a key area of concern for international companies looking to grow their footprints within South Africa, an issue that could have many positive consequences for our economy and people,” says Jacobs. Should foreign workers be forced to surrender their passports? The costs involved in securing employment visas to work in South Africa is high, particularly in certain visa classes that require the application to be made in the applicant’s home country. The costs of obtaining employment visas is further exasperated by the South African Embassy requiring foreign nationals to surrender their passports for the duration of the processing period. “When workers are forced to surrender their passports, they are rendered without a passport for the period that the South African High Commission takes to process the application. These applicants are then unable to travel during this period, which can impede their work commitments or personal travel needs,” explains Jacobs. Visa applicants not only wait long periods for their work visas, but the waiver and appeal application processes that they may need to pursue also regularly lead to prolonged waiting periods. “When comparing the waiting period as well as the requirements for work visas in South Africa to other countries, ours are considered onerous and burdensome. Besides the long waiting periods, visa applicants become frustrated with inconsistencies encountered when dealing with the various foreign embassies,” says Jacobs. Inefficient visa applications deter skilled foreigners Besides impeding foreign investment, these issues also extend to local companies who are looking to hire skilled workers from overseas. South Africa is currently competing with a myriad of other countries to attract and retain critical skills in sectors such as ICT, engineering,skilled trades, executives and medical professions to name a few. Burdensome visa processes could potentially deter skilled workers from taking up a work opportunity in the country. “When the Department of Home Affairs adjudicate visas for foreign nationals who are applying for critical skills positions in South Africa, they in many cases place too much emphasis on qualifications as opposed to experience even though the Act makes a clear distinction” says Jacobs. A person with 30 or 40 years’ experience in a profession may be overlooked if they don’t have the related qualification, which leads to local companies losing out on highly knowledgeable people. ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za For more information on Xpatweb please visit http://www.xpatweb.com/ Author: Nicolas Botha, Tax Diagnostic and Financial Emigration Specialist at Financial Emigration Incorrect information and advice from tax practitioners, or in some cases South African Revenue Service (SARS) officials, has resulted in the misunderstanding of complex South African expatriate tax legislation, which has landed many South African in deep water with SARS. This has led to many expats being under the incorrect impression that their tax affairs are in order, as a tax practitioner is handling their financial matters. However, often further investigation reveals that tax submissions are in many cases incorrect, or at least partially so. This could lead to serious legal implications with SARS, should this not be rectified. Common Misconceptions Many expats are informed that should they meet a simple days-test (183-61 days) they are no longer required to file tax returns or do not need to declare their foreign income in South Africa. Many expats have therefor been incorrectly filling returns showing only South African sourced income; zero returns or in severe cases not filling returns at all. If you are a South African working abroad and have not formally ceased your tax residency you are legally required to submit tax returns every year declaring your worldwide income. Should you then meet the requirements of section 10(1)(o)(ii) of the Income Tax Act No.58 of 1962 you will be able to exempt tax on your foreign earnings. This section states: • 10(1) There shall be an exemption from normal tax- • (o) on any form of remuneration- • (ii) received or accrued to an employee during any year of assessment by way of any salary; leave pay; wage; overtime pay; bonus; gratuity; commission; fee; emolument or allowance, including any amount referred to in paragraph (i) of the definition of gross income in section 1 or an amount referred to in section 8, 8B or 8C in respect of services rendered outside the Republic by that employee or on behalf of any employer, if that employee was outside of the republic- • (aa) for a period or periods exceeding 183 full days in aggregate during any period of 12 months; and • (bb) for a continuous period exceeding 60 full days during that period of 12 months • And those services were rendered during that period or periods Meeting these requirements will afford you a full exemption on all foreign earned income during this period. However, as of the 1st of March 2020, an amendment made to section 10(1)(o)(ii) comes into effect, this places a R1-million cap per annum on the exemption. Thus, foreign income earned exceeding this cap will now be subject to tax in South Africa. SARS Won’t Find Out As of June 2017, South Africa joined the Common Reporting Standard (CRS), this was created to combat tax evasion and is the sharing of tax and financial information on a global scale. Currently there are 97 countries who have already joined the CRS, which includes the European Union; United Kingdom; Australia; Canada; China; Kuwait; New Zealand; Qatar; Saudi Arabia and the United Arab Emirates. Thus, all your global earnings are now being shared from various financial institutions and revenue authorities globally. This includes: • Names, addresses, tax numbers and identification numbers relevant to place of birth. • Bank account numbers. • Account balances for the relevant calendar year. • Any capital gains acquired from the sale of properties or investments. Therefore, when SARS cross references the information they are receiving from the CRS with what you have declared on your tax returns and the two do not align, expats could face implications ranging from penalties to criminal prosecution for tax evasion. Solutions Be prudent in your approach to your tax affairs, explore your options and don’t take any information at face value as ignorance is not a valid or legal defence. Seek professional advice from experts in the field of expatriate tax law and ensure that you understand the requirements that affect you. ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za For more information on Financial Emigration please visit http://www.financialemigration.co.za/ Author: Christopher Renwick, Attorney at Tax Consulting SA
A trend of increased delays and frustration with the South African Revenue Service’s (SARS’) dispute resolution process, are becoming apparent among taxpayers and tax practitioners alike. The reasons for this appear to be numerous. The common, albeit perhaps slightly misplaced, view is that SARS is operating unfairly, however in my experience, often the frustrations come down to taxpayers being unfamiliar with the dispute resolution process and creating their own difficulties. However, as experts in the field, we have experienced several SARS officials dragging their feet. Don’t get me wrong. This is not the case across the board, that would not be fair to say. However, smoke and fire do go hand in hand. What should you do? What would be fair to say, or rather ask, is, what options you have if your matter stagnates, for whatever reason? The problem perhaps lies in the fact that SARS presides over its own process, and there are no cost implications for SARS if your matter crawls along. Do you continue to bash your head against the proverbial wall, approach the Ombudsman or cut your losses and run? For some, it would come as a surprise that an alternate option exists. Consider the Motion Court. The Motion Court The Motion court (for those not in the legal sphere) is a court held at the High Court of South Africa (ignoring the magistrates court for now) that follows court procedure and is presided over by a High Court Judge. Not only does the Motion court come with a highly skilled Judge, but also the added benefit of expediency. Where a trial date may be 18 months after application (in the Johannesburg High Court 2 years) a “motion date” may be less than 3 months from date of application. For those legal minded professionals reading closely, you are probably jumping on your chair and emphatically listing the differences between opposed and unopposed motions, the timing thereof and cost implications etc. While there are differences between the two, the principles of expediency, cost and judicial approach remain the same. It is important to add that, whilst you may be left powerless under the dispute resolution process, the High Court is bestowed with inherent discretionary power to grant you any appropriate relief that will solve your problem. An added sweetener is the fact that SARS may have to pay your legal costs as well. This all sounds picturesque and perhaps a little too good to be true? A Big Win Well, it would be if we had not just been successful in this very process. Without divulging any confidential information, we had the pleasure of assisting a taxpayer whose matter had been dragging for over a year. An information gap existed in the determination of the taxpayer’s tax liability and the information that was sought. However, SARS were not forthcoming with the information. On behalf of the taxpayer, we approached the Motion Court with two alternate prayers. The first prayer was a request that SARS issue the taxpayer with all the necessary information to allow the taxpayer to fully understand the exact origin of the liability raised against the taxpayer. I should probably mention the liability was sufficient for the client to consider the amount material enough to take action. The second (or alternate, for my legal colleagues) prayer was for the expulsion of the liability given that no grounds could be given to the taxpayer for the origin of the liability. Remember that information gap? In Closing Leaving the finer details of the motion and its ensuing arguments aside, the taxpayer came out on top and the alternate prayer was made an order of court. This means that the taxpayer’s liability was expunged. The cherry on top was that SARS was ordered to pay the taxpayer’s costs. What a victory for this taxpayer and with lessons perhaps, for all taxpayers burdened with stagnant matters that are suffering frustration. An alternative avenue for dispute resolution has presented itself to the tax paying community. Just make sure you take an attorney down the path with you. 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 taxpayers 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: Jean du Toit, Attorney at Tax Consulting SA
When is a SARS Tax Court case win a loss for the fiscus? After the recent SARS court case, dealing with the taxable income of foreigners working in South Africa, it is hard to argue that no-one is working harder than SARS to create tax loopholes for expatriate employees. If SARS disagrees, it may consider appealing their own win to reset the well-established principles and balance of international and South African tax law applicable to foreigners working in South Africa. On 9 March 2018, the Tax Court, Western Cape Division, delivered judgment in the matter of Mr X v the Commissioner for the South African Revenue Service. This dispute turned on the source of Mr X’s employment income, which he contended was where he physically rendered his employment services. SARS argued that it was located where Mr X had concluded his employment agreement and sought to tax him on his entire employment income on this basis. In a bewildering judgment, the court went against the well-established legal principle embodied by Mr X’s argument and ruled that the source of employment income is where the employment agreement is implemented. Therefore, Mr X’s entire employment income was regarded as being fully taxable. This decision, however, has a delightful upshot for inbound expatriates with foreign employers, which is that they will be fully exempt from tax on income earned from services rendered in South Africa. Of great concern, however, is the fact that SARS presented an argument in court that defies a principle that SARS has accepted and confirmed by to be correct in its Guide on the Taxation of Foreigners Working in South Africa. This raises some pressing questions –
Considering that Tax Court judgments are of persuasive value only, and do not constitute precedent, expatriates are advised to proceed with caution until SARS clarifies its position. For full analysis of the case, read the extended article here (http://www.taxconsulting.co.za/sars-creates-tax-loopholes). 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: Claudia Aires, Head of Financial Emigration at Financial Emigration
The death of a family member is never a topic that we like to discuss, however it remains a reality that one needs to prepare for in future, which is key for a smooth transition in the closure and pay-out of deceased estates and inheritances. Thousands of South African expatriates are beneficiaries of inheritances from deceased estates in South Africa. This can become an administrative nightmare for the beneficiary when the time comes for the South African estate to distribute to its beneficiaries and the subsequent transfer of funds from South Africa to a beneficiary abroad. Most South African’s abroad have not prepared for such inevitable scenario and will find it difficult to close off the affairs if they have not complied with the formalities of receiving inheritance abroad. Formalising emigration How does a South African abroad receive inheritance from a South African source? According to South African law and the Currency and Exchanges Manual for Authorised Dealers, a South African abroad will need to formalise their emigration before they will be able to receive inheritance abroad. The formalisation of emigration is commonly known as Financial Emigration and the main requirement to be able to undergo this process is to have a permanent intention that you will not be returning to South Africa on a permanent basis. Intentions change all the time, so the intention must merely be this when deciding to proceed with the process. Undergoing this process is arguably the simplest, cleanest and most compliant way of ceasing tax residency in South Africa. It is a formal process through the South African Revenue Service and the South African Reserve Bank, which has been endorsed as the “right” way to go about it by South African parliament. Another very important point to note is that you can backdate your financial emigration, under certain circumstances, to the date you left South Africa. Often South Africans have been abroad for many years without formalising their emigration and being able to backdate FE can be extremely useful in lowering any capital gains tax liability that could arise. Complying with the Law South African’s abroad, there is a solution available to you to ensure you are legally compliant so that you may exercise your right to receive the benefit of an inheritance. Financial Emigration is currently the only formal process available in confirming your non-tax resident status of South Africa, and thus the only solution in this scenario. ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za For more information on Financial Emigration please visit: http://www.financialemigration.co.za Author: Jean du Toit, Attorney at Tax Consulting SA
The South African Revenue Service (SARS) has created some nervousness in the South African tax base by embarking on an initiative to criminally prosecute taxpayers who fail to submit their tax returns. Whilst the threat of a criminal record and a fine ought to serve as sufficient incentive to submit one’s return, it is perhaps worth pointing out that submission of returns also gives taxpayers access to the Voluntary Disclosure Programme (VDP), which affords acquittal from far more serious criminal sanctions. Criminal sanctions under the TAA South African taxpayers are not unfamiliar with SARS’ aggressive implementation of the authority afforded to it under the Tax Administration Act No. 28 of 2011 (TAA) insofar as the collection taxes and the imposition of penalties. With SARS’ new initiative, taxpayers have now seen that SARS’ powers go beyond imposing monetary penalties. Generally, failure to comply with the prescripts of the TAA amounts to a criminal offence, which is subject to a fine or to imprisonment for a period not exceeding two years. These offences, as we have now seen, may result in a fine and a criminal record, but rarely ends with the taxpayer behind bars. A criminal record is certainly not something to brush aside, but the TAA also makes provision for more serious sanctions where there is intent to evade tax, which can result in actual jail time for the taxpayer. Reprieve under the TAA - VDP The TAA is, arguably, partisan to SARS’ cause, but it does offer non-compliant taxpayers some solace if they wish to come clean. SARS allows taxpayers to avoid criminal prosecution and regularise their tax affairs by making a disclosure under the VDP, of which the benefits include:
Taking into consideration the potential ramifications non-compliant taxpayers might face, the VDP represents an appealing olive branch. The VDP, however, comes with an important caveat, which is that taxpayers only have access if they do not have any outstanding returns. VDP applications will be discarded without further notice if the taxpayer in question has outstanding returns. Take Away It is worth noting that the new initiative, to close more criminal cases, does not represent a widening of SARS’ powers, as it has always had the discretion to do so. What the initiative illustrates is SARS’ no tolerance policy on outstanding returns. Taxpayers who are not deterred by the sanctions for not submitting returns must keep in mind that they cannot regularize other instances of non-compliance under the VDP, instances which carry far more severe sanctions. 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: Marisa Jacobs, Director and Immigration Specialist at Xpatweb The starting point when bringing in a foreign specialist into your business is the Critical Skills List, which notes the professions where Home Affairs issues Work Permits due to areas where there are shortages of skills. Foreign nationals who therefore have the skills listed on the Critical Skills list may apply for a Critical Skills Work Visa to work in South Africa. The list has been highly criticised, from not including many business skills, to certain categories being “abused” by a wide interpretation. Over the last 18 months there has been talk of refining the list further with the “Corporate General Manager” category top of the chopping block. This new list is highly anticipated with wide spread speculation on what will be included, or perhaps more importantly excluded. Do you need a new Museum Manager, Director of Marketing or IT specialist? The Department of Higher Education and Training (DHET) has published the "National list of occupations in high demand: 2018” listing over 370 high-demand occupations in South Africa. The occupations listed are those that show relatively strong employment growth and/or are experiencing shortages in the labour market or which are expected to be in demand in future. The Critical Skills list published in 2014 was developed in conjunction with the occupations in high demand and the scarce skills lists of the DHET. It is therefore expected that the 2018 list will again be consulted when revising the Critical Skills list and as such may provide a window into what we may expect from revised Critical Skills list. For the first time the DHET list has been divided into three levels of demand, highest demand, higher demand, and high demand. Cross referencing the occupations on the above DHET list to the current Critical Skills list published in 2014, we highlighted below some of the occupations still showing high demand as well as a few new and emerging occupations not on the DHET list before and not on the current Critical Skills list. Please click here for the full list http://www.xpatweb.com/wp-content/uploads/2018/07/National-list-of-occupations-in-high-demand-2018.pdf ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za For more information on Xpatweb please visit: http://www.xpatweb.com/   Authors: Thamsanqa Msiza, Senior Tax Consultant at Tax Consulting and Darren Britz, Attorney at Tax Consulting
The South African Revenue Service (SARS) announced earlier this year that the 2017/18 tax filing season is to kick off on 1 July 2018, however their e-filing system is already allowing submission of tax returns. SARS also appears to drive tax compliance home with renewed vigour this year, with a shorter tax season, as well as a couple of enhancements on the new 2017/18 tax return. Here are important hints for the tax filing season:
If the above advice s used as needed, taxpayers should be able to be rest assured of a tax season that is relatively hassle free. About the authors: Thami is a senior tax consultant with Tax Consulting, specialising in personal taxes. Darren is an admitted tax attorney with Tax Consulting specialising in SARS dispute resolution and any cases where amounts are due to SARS. 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: Jean du Toit, Attorney at Tax Consulting SA
For some time, multinational enterprises have been bracing for the impending enforcement by the South African Revenue Service (SARS) of transfer pricing rules. This has resulted in these enterprises going to great lengths to ensure that they have thorough transfer pricing policies in place to survive any level of scrutiny from SARS, often at great cost. Yet, in the case of Crookes Brothers Ltd vs Commissioner for the South African Revenue Service, the first South African case dealing with transfer pricing provisions, it was an unpolished contract that handed victory to the Commissioner. The Facts Agricultural group Crookes Brothers Ltd advanced loans to its Mozambican subsidiary (MML) and pursuant to the terms of the loan, as well as in its return for the 2015 year of assessment, the group made transfer pricing adjustments to its taxable income. Thereafter Crookes Brothers Ltd requested SARS to issue reduced assessments, claiming that the adjustments were made in error. The basis for their claim being that the terms of the loan were aligned with the requirements of section 31(7) of the Income Tax Act No. 58 of 1962 (the Act), which would exempt the loan from the application of transfer pricing rules. To support its claim, they also furnished SARS with the loan agreements. Upon SARS’ interpretation of the loan agreements, it concluded that the terms are in contravention of section 31(7) of the Act and decided to reject the request for reduced assessments. This resulted in Crookes Brothers making an application to the High Court to review and set aside SARS’ decision. Outcome The nub of the dispute revolved around one clause. The terms of the loan agreements were completely aligned with the exemption, but for the inclusion of what was effectively a boilerplate acceleration clause. The author of the contract, perhaps inadvertently, inserted a clause in the loan agreement that accelerated the debt in the event of bankruptcy, liquidation, business rescue or judgment against MML. The inclusion of this clause foiled the application of the exemption, the Crookes Brothers Ltd’s application was dismissed with costs and the transfer pricing adjustments had to endure. The court gave effect to the wording of the agreements, irrespective of what the parties may have intended and, ultimately, Crookes Brothers Ltd paid a heavy price for what was a poorly drafted agreement. The takeaway This case shows that these efforts will be in vain if a company has a weak underbelly. It illustrates that robust, conscientiously drafted agreements outrank opulent transfer pricing policies. If the underlying agreements that orchestrate the dealings between connected entities are not up to spec, such entities stand to be snared by the transfer pricing provisions. 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 |
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