Applying the Canadian "reasonable expectation of profit” Test to a Section 80M(1)(d) Reportable Arrangement
A section 80M(1)(d) reportable arrangement is defined in the Income Tax Act 58 of 1962, as amended, and contains the reasonable expectation of a pre-tax profit requirement.Such an arrangement must be reported to the Commissioner of the South African Revenue Service within 60 days.Failure to do so can result in a R1 million penalty.It is submitted that this requirement is subjective because of a lack of indigenous litigation and implementation guidelines.The Canadian reasonable expectation of profit(REOP) test may be of value to formulate objective standards against which to apply the section 80M(1)(d) reportable arrangement.
Canada tax; Deductible expense; IAS; Income; Personal expense; Profit; Pursuit of profit; Reasonable expectation of profit; Reportable arrangement; Section 80M(1)(d); Source of income; Subjective interpretation; Tax benefit
Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.