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:

• IRP 5: Check that your employer-issued IRP5 certificate is correctly reflected on the tax return. Where you do not have a South African identity number, for example an expatriate working in South Africa, your IRP5 certificate will not be pre-populated and you need to obtain this from your employer to allow you to manually input this information.
• Medical and retirement annuity tax info: SARS has administered a major improvement with regards to the taxpayer’s medical aid and retirement annuity tax information. This information is now prepopulated, as received from financial institutions – saving the taxpayer time in preparing the 2018 tax return. However, the onus is on the taxpayer to ensure this is correct; please verify before just accepting the SARS information. Where there are mistakes, this is probably not a SARS error, but may be incorrect information sent through from a financial institution.
• Get professional help: We have no doubt that SARS will even more vigorously enforce compliance this year. Where you are a high-risk taxpayer, including foreigners working in South Africa, South African working abroad; having large capital gains, income from rental properties or from a trust; as a rule of thumb engage an experienced tax practitioner to assist with the tax filing.
• Check for audits: Before you submit your tax return, check with the tax calculation function on SARS e-filing, that there are no amounts due. Where there are tax amounts due, interest or penalties will often be charged when these amounts should have been settled on a provisional tax basis. An experienced tax practitioner will not only be able to assist with any possible mitigation, but also confirm the instances where there are no penalties and interest.
• Pay now, argue later: Where you disagree with SARS’ tax assessment, always bear in mind the pay-now-argue-later principle. You must ask for a suspension of payment, as commencing a dispute with SARS does not stop the obligation to settle the amount SARS computed as due. Also, in following the dispute resolution rules, it is best to ask SARS for “reasons” before simply lodging an objection. In more complex or higher value cases, engage a tax practitioner earlier on, and ideally an admitted attorney specialising in tax, to avoid premature forfeiture of your claim and ensuring client privilege.

 
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

Author: Vincent Radebe, Tax Consultant at Tax Consulting SA
 
We are one month away from the opening of ‘tax filing season’, however, this year things will be a bit different. Taxpayers will have until 31 October to submit their tax returns, which is three weeks shorter than usual and will increase efficiency according to acting SARS Commissioner, Mark Kingon.
 
In a media statement on Monday 4 June, Kingon, acting Commissioner of SARS, announced the alteration in the tax season to run from 1 July to 31 October 2018. This has changed from the traditional season, which historically ran from July to November.
 
“A shorter filing season allows additional time for SARS, taxpayers and the tax fraternity to deal with return verifications before most taxpayers go on the December holiday break. Often there are delays with taxpayers having to respond to our queries and requests over the holiday break. The quiet period after the first three months of tax season has now been removed resulting in efficient use of our resources,” Kingon put forward as rationale for the alteration.
 
Analysis and findings
SARS analysed the data derived from the high volumes of taxpayer visits to their various branches, the reason for the visits, who was filing returns and which filing medium they were using. It was found that, inter alia:

• There is an inundation of people going to file at a branch while they are not required to do so.
• Many returns are being filed for prior years.
• Registered eFilers are unnecessarily filing at branches.
• Tax practitioners who primarily file via eFiling are using branches to file taxpayers’ returns, to name but a few.

 
The three-week cut is one of the Revenue Service’s initiatives to provide effective, transparent, professional and fair service to all taxpayers. The alteration in the tax season will further streamline audit processes to reduce volumes, allow the Receiver of Revenue, taxpayer and tax practitioners to deal with return verifications before the December holiday break, and result in a more timeous pay-out of refunds to taxpayers.
 
Who will be impacted?
SARS does not require natural persons to file an income tax return if, at the very least, their annual gross income consists solely of remuneration from a single source (i.e. employer) which does not exceed R 350 000 and PAYE has been withheld accordingly. However, through our experience, we have noticed that SARS may raise an assessment based on an estimate or refrain from paying out a refund due to non-submission of a return which was below the above-mentioned R 350 000 limit. As such, we advise taxpayers to continue filing to achieve complete compliance with SARS.
 
The change will impact all individual taxpayers who are non-provisional taxpayers using the eFiling platform, and provisional taxpayers who file their returns at a branch. Failure to submit a tax return within the deadline may just lead to the possible imposition by SARS of administrative non-compliance penalties.
 
Avoid penalties
Therefore, to avoid possible administrative penalties, it remains imperative for taxpayers to file their returns within the tax filing deadline. If you need assistance with your tax return, Tax Return Service, a division of Tax Consulting SA, has a team of highly efficient tax specialists that are complemented by tax attorneys, chartered accountants and Master Tax Specialists, thus ensuring quick turnaround time and maximum tax saving. For more information on Tax Return Service, visit www.taxconsulting.co.za.
 
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

Authors: Jonty Leon, Attorney and Financial Emigration Legal Manager and Claudia Aires
Financial Emigration Manager at Financial Emigration
 
When it comes to choosing financial emigration (FE) or a Double Taxation Agreement (DTA), expatriates must understand that there can never be a one size fits all approach. FE requires certain criteria to be met before one can undergo the process, while a DTA will only be suitable for certain individuals.
 
Unfortunately, there is a lot of misinformation circulating in the South African expatriate community, perpetuated by service providers using scare tactics and promoting that which will benefit them over what is best for expats at large. 
 
Therefore, it is cardinal that South Africans abroad, whatever their decision, should thoroughly get to know the tax law that currently affects them and will affect them more so once the tax law amendment becomes effective on 1 March 2020.
 
Advantages of Financial Emigration

• 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.
• The main requirement is to have a permanent intention that you will not be returning to South Africa on a permanent basis.
• It ensures that your taxes are fully compliant, and that SARS decides on your tax residency status which they cannot later reverse. You can come back to South Africa and reverse this process yourself without worrying that SARS may attempt to tax you on those years you had been financially emigrated.

 
Disadvantages of Financial Emigration

• Your South African bank account changes status from a resident account to a non-resident account, also commonly known as a “blocked asset” or “capital” account. This account is fully functional except that it no longer allows for internet banking transactions. This is done for security reasons and thus makes the account one of the safest accounts to be transacting with. Although safe, expats generally rely on being able to transact online.
• You are no longer permitted to hold a credit card in South Africa or have personal loans. Thus, these will need to be settled before the FE process.
• Once the FE process is completed, expats must ensure they do not fall foul of the physical presence test, which is entrenched in South African tax law. Thus, expats must limit their time in South Africa to less than 91 days a year to ensure they do not become tax residents of South Africa once again.

 
Advantages Double Taxation Agreement

• South Africa does not have DTA’s with all countries, so this will only apply to an expat that is living/working in a country that has concluded such an agreement with South Africa.
• You do not need to undergo any formal process in South Africa, it leaves an expat with the opportunity to make decisions on a whim if the expat ensures that it still fulfils the requirements of the DTA to be a non-tax resident in South Africa.
• DTA’s are also a less permanent solution, meaning that a person working abroad can apply for it and be fully exempt from paying taxes in South Africa on their foreign income. They will also not have to reverse any formal process if they do return to South Africa.

 
Disadvantages Double Taxation Agreement

• Applying for a DTA is a yearly process, which can become an administrative nightmare.
• To prove you fit the bill in terms of a DTA, SARS often requires a tax residency certificate from the country you are paying taxes in. This may seem simple, however this is often not the case. For instance, in the UAE, obtaining such a certificate can mean taking two full days of your time to go through the process.
• Being a less permanent solution, DTA’s are also therefore a riskier solution. Nothing is final when dealing with DTA’s due to the yearly nature of the proof you need to provide. However, a way to solidify this is by obtaining a legal tax opinion confirming your non-residency in terms of the DTA.

 
What Is Best?
Each client is different, and their specific circumstances must be considered when choosing the best legal avenue to go down. Everyone will firstly need to see if they fit the requirements of the options available, and if they do, they will need to weigh up the pros and cons of each.
 
Either way, you can be protected, the new expatriate tax law does not have to be the straw that breaks the camel’s back.
 
ENDS

MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za
 
For more information on Tax Consulting please visit http://www.financialemigration.co.za