Technical FAQs:April 2013
26 April 2013
Posted by: Author: Dieter van der Walt
Source: Dieter van der Walt
1. Registration as tax
practitioner – s 240
explain what the TAB recommends regarding the qualifications for registration
as a tax practitioner with SARS? How does this affect SAIT members?
A: There are no major
changes to current law except one additional requirement to
be registered as a tax practitioner. A person may notbe registered as a tax practitioner if during the
five years before his or her application for registration he or she has:
- been removed from a related profession or professional
body for dishonesty, or
- been convicted of theft, fraud, forgery or uttering
a forged document, perjury or statutory offence of corrupt activities, or any
other crime involving dishonesty
for which the person has been sentenced to two years imprisonment
without the option of a fine.
2. Employment requirements to
qualify as a SBC – s 12E(4)(d)
Q: I have a client who operates in a close corporation. The business
offers a research and development service.According to me this falls under the personal services ambit. In
order to qualify as a small business corporation, she needs to employ three
unconnected employees for a full year. Unfortunately she has only
employed three unconnected employees for about 60% of this year.Can she still claim as a small business corporation?
12E(4)(d) makes use of the wording: "…throughout the year of assessment…”. This
would then indeed suggest that the requirements to qualify as a SBC have not
3. Input VAT: costs relating
to a "motor vehicle” – s 17(2)(c)
cannot be claimed on a motor vehicle, but can we claim VAT on the so called "on
the road”-costs such as number plates and the cost of a maintenance plan if it
appears on the same invoice as the motor vehicle? Can we claim the VAT on the
maintenance plan if we purchase it separately?
A: Where the
purchase of the service/motor plan is included in the purchase price of the car
i.e. one supply of goods, the VAT on the acquisition of the motor car including
the service plan will be denied in terms of section 17(2)(c), read with the
definition of "motor car” in section 1.
However, where an additional or extended service/motor plan is purchased
as a separate supply or the service plan is purchased as an extra-cost item,
the vendor will be entitled to claim an input tax deduction of the VAT charged
on the service plan if it is acquired for consumption or use in the course of
making taxable supplies.
4. Non-residents: Foreign
taxpayer (salaried employee) was born in South Africa, but left South Africa
after school. He married a lady from the Republic of Slovak and they reside
there permanently. He visits his family in South Africa twice a year for about
a week at a time. He started working for a South African company. He does
work in Afghanistan for the company. They pay him every month and he rotates as
a base manager. Therefore, if he is not in the Republic of Slovak, he is in
Afghanistan (apart from the short visits to South Africa). Due to the fact that
the employer does not know how many days he will be in South Africa, they
deduct normal PAYE off his salary each month. For the year from 1 March 2011 to
29 February 2012 he was: 5 days in South Africa, 233 days in Afghanistan, 128
days in Republic of Slovak. When doing the calculation for the exempt income, I
used the 233 days that he was working for the company in Afghanistan, to
determine the exempt income. I therefore did not take into account the
rest of the days, even though he was also not in South Africa and he gets paid
each month (even when he is not working in Afghanistan). We received confirmation
that the exempt income has been allowed, but I am now wondering whether I did
the calculation correctly. Should he be paying any SA taxes? Should
I have shown the full income as exempt income? His secondment letter
stipulates that he was seconded to Afghanistan for the periods while he worked
there as base manager and then furthermore states that he resides in the
Republic of Slovak while not working in Afghanistan.
client is certainly not ‘resident’ or ‘ordinarily resident’ for domestic tax
purposes. The physical presence test, par (a)(ii) of the definition of
‘resident’ would not be met by your client.
In this instance your client, being a non-resident for tax purposes
would only be taxable if the source of the income was from a source within the
Republic. The Special Court has consistently laid down that the source (or
originating cause) of income from employment and other services rendered, is
the service. This is irrespective of the place where the contract is made or where
the remuneration is paid. The source of remuneration would therefore be located
at the place where the services are rendered.
Your client is not liable to pay tax in the Republic by virtue of not
being a ‘resident’ and the remuneration paid to him for his services is not
from services rendered from a source within the Republic.
5. VAT: Zero-rating of indirect exports under
Q: I have a
client, a Cape Town CC (hereafter referred to as ‘X’), who is involved in
exporting goods to a client of theirs in Karachi, Pakistan. X purchases the
goods that are exported from a Johannesburg based company (referred to as
"Y”). The goods are packed into containers on Y’s premises, are sealed and
then trucked to Durban from where it is exported to Pakistan. X merely
facilitates the process (including payment from the buyer in Pakistan) which is
then paid over to Y. X has been informed that this is normal practice for
many companies. Y, however, has raised VAT on the invoice at the standard
rate, whereas client X believes that the transaction is an "indirect export”
which should be zero-rated. Y refuses to issue zero-rated invoices. I need
clarity on the following questions:
- Is the transaction a "zero-rated”-transaction for X and Y?
so, how can X enforce the "zero-rated” status on Y’s invoices?
A: The EIS (VAT Export Incentive Scheme – Notice 2761 Government Gazette
1947 of 13 November 1998) deals with transactions where ownership of the goods
changes in South Africa. The recipient of the goods or his cartage contractor
takes delivery in South Africa and somebody other than the South African vendor
exports the goods. Where the recipient of the goods, for example, contracts
with a cartage contractor to deliver the goods to him in an export country, the
export of the goods will be regarded as an indirect export but will be subject
to VAT at the standard rate (s 11(1)(a)(ii)(aa)).
An exception to this rule applies in respect
of exports by sea or air, in which case the supplier (that is the SA vendor)
may at his own discretion and risk decide to apply the zero rate (Part2
of the EIS).
Am I correct to say that the supplier
invoices your client, and in return your client invoices its foreign client? In
terms of part II of the EIS, the rate of zero may only apply where the vendor
supplies (invoices) the goods to a ‘qualifying purchaser’. In terms of part I
of the EIS, a ‘qualifying purchaser’ is a non-resident, a tourist, a foreign enterprise or a foreign diplomat.
It is therefore my understanding that the
supplier did not make the supply to a ‘qualifying purchaser’ (your client). Your
client will however make the supply to a ‘qualifying purchaser’ by virtue of
that purchaser being a non-resident. This may change in the event that your
client merely acts as an agent on behalf of the principal as contemplated in
terms of section 54 of the Value Added Tax Act. This would result into the
supply being deemed to be made by the principal (your clients’ supplier).
6. Exempt government grants – s
Q: With regards to section 12P, "Exemption of amounts received or
accrued in respect of governmentgrants”, what is the
difference between a taxable and a non-taxable government grant?
comprehensive legislative list of exempt grants will be published and updated
annually. The purpose of this Ministerial authority is to provide exemption for
certain grants devised between the annual budget periods. The list as published
can be found in the 11th Schedule and will apply to grants received
or accrued on or after 1 January 2013.
7. Suspension of
payment (tax pending objection or appeal) - s 164
can you assist me with the compilation of a Section 163 Application required by
SARS to have payment suspended in terms of an ADR1 submitted?
A: I think
you are rather referring to clause 164 of the TAA (Payment of tax pending
objection or appeal), as a preservation order has not yet been granted by a court.
As I am sure you are aware, the suspension of payment pending an
objection or appeal is not automatic. An application has to be made to the
Commissioner in a form as prescribed by the Commissioner. I could not find a
standard form issued by the Commissioner, nor a description of the process to
be followed. Please contact the collection agent dealing with the specific case
and enquire as to the format of your application.
8. Debit loan in a company &
Q: My client
is a member of a CC. For the 2012 year of assessment she took a salary of
R130 000 and has a loan due to the company of R812 349.Is the
loan due by her a deemed dividend and therefore liable for dividends tax?
the loan will be regarded a deemed dividend provided that no interest is
charged on the loan at the ‘official interest rate’ as defined in par 1 of the
7th Schedule to the Income Tax Act (s 64C(3)(d)).
9. SARS’s requirements for financial information provided
Q: A client was advised by SARS officials that auditing of financial
statements is not required. According to them, he only needs to provide SARS
with a trial balance in order for them to fill in his tax return. Our client
now feels that he does not need financials drawn up, and we are charging him
unnecessarily. Do all companies need a review or an audit, or can the tax
return be done on basic financials? Can the client really just take his
cashbook/ trial balance to SARS and file his company’s tax return?
terms of Companies Act of 2008, the requirement to conduct either and audit or
independent review is determined after the calculation of a companies’ Public
Interest Score (PIS).
- PIS 350 or more : Audit required (private company)
- PIS 100 to 349 : Independent Review (private
- PIS 0 to 99 : No requirement provided that the
shareholders are also directors of the company (private company)
In terms of s 28 of the
Act, all companies must keep accurate and complete accounting records, and all
companies must produce annual financial statements each year within 6 months
after the end of their financial year which meet the requirements in terms of
their PIS (s 30). An owner-managed company is however exempt from an audit or
an independent review in terms of s 30(2)(A) provided that the company
changed its MOI’s to remove any audit requirement.
The Income Tax Act/Tax Administration Act
S 28 of the TAA makes
provision for the Commissioner to call for, and if he may so require, a
certificate or statement from the taxpayer setting out the details of the
extent of the persons (preparer of the financial statements/accounts)
examination of the books of accounts and related documentation and whether this
discloses the true nature of the transactions, receipts, accruals, payments or
debits in so far as it may be ascertained by the examinations. This is not a
request for audited AFS, but rather a method for SARS to evaluate the degree of
reliance that may be placed on the financial statements to consider further
verification or audit by SARS. The same provisions can be found in s 73 of the
It is my understanding that
SARS may well accept a trial balance as a source for purposes of completing tax
returns however; the Commissioner may request a certificate or statement to
test the reliance of the source and may call for further verification or audit.
Where your client may not be in contravention of the ITA or TAA, he may well be
acting in contravention of the Companies Act.