FAQ - 13 November 2014
12 November 2014
Posted by: Author: SAIT Technical
Author: SAIT Technical
1. Releasing of a company’s eFiling profile where the company has outstanding fees with its existing tax practitioner who is, as a result, refusing to release the company’s eFiling profile
Q: I am in need of some guidance at the moment as to whether or not a company is allowed to withhold a company’s eFiling profiles due to outstanding invoices.
If I am requesting e-filing profiles and documents from a company and they do not release it due to there being outstanding invoices for that specific client, are they allowed to do this or is this unlawful in a sense?
What is the procedure to follow should I encounter this problem in the future?
On 4 September 2014, SAIT issued a notice on "override Function to transfer of taxpayers profiles”. Apart from the instructions on how to override the request, the last paragraph dealt with "something to remember” and clearly stated that it is unlawful to prevent a taxpayer from submitting their tax return to SARS and that it may equally constitute misconduct by the tax practitioner concerned. Some tax practitioners still refuse to release the profiles where the client has not settled the account.
We have given Mr X instruction to follow the override procedure where the profiles are not released. Mr X would, however, like to have something more concrete where tax practitioners refuse the release of the e-filing profiles.
Section 32(I)(b) of the Constitution provides for the right to access to information held by another person to everyone when that information is required for the exercise or protection of any rights. The right of access to information held by the private body must, however, be reasonable and justifiable.
Surely we can invoke the relevant applicable sections of The Promotion of Access to Information Act as the tax profile and relevant information and access to information thereon falls within the definition of "personal information”. Records include any recorded information regardless of form or medium, e-filing would therefor fall under the relevant definition.
I do believe sending the request for transfer and e-mailing the clients formal letter of resignation can be treated as reasonable and justifiable conduct from the client as well as the new tax practitioner’s side.
In my opinion the obligations to attend to the clients tax starts the moment the client has signed the new mandate and that it would in fact be unfair business practise to withhold the e-file profiles.
What is your opinion on this? We have proceeded with the override requests but expect negative feedback from certain tax practitioners.
A: Though an argument could be made, we do not believe that s50 of PAIA (i.e. request for private body records or personal information held) to be the best forum to achieve the transfer of a taxpayer profile, as the latter in itself is arguably not a record or personal information. The information it contains are records held by SARS as they are in fact the body who controls eFiling - the practitioner merely has access to it as allowed. This process is also not quick as it does have protracted timelines as various provisions why a request can be legally refused, which then could only be overturned by court order.
As noted, we sent out the previous warning on the basis that we believe the most prudent manner in dealing with this is under SAIT’s disciplinary code. Clause 4.6.4 of the SAIT Disciplinary Code 2009 states that members may not knowingly obstruct the proper administration of the tax laws, which we believe a practitioner would be doing if he prevents a taxpayer from submitting his or her return by withholding his or her eFiling profile. Such person may, however, withhold any of his work product such as schedules and calculations until paid for by the taxpayer.
Should you wish to follow the above process, we would advise that you first inform the member in writing that you intend to lay a complaint with SAIT if he or she does not accede to the request to transfer the taxpayer profile as duly authorised by the taxpayer. A complaint can be lodged by contacting Michelle Landman per email at firstname.lastname@example.org for the relevant forms.
2. Rollover relief on CGT where immovable property is transferred between spouses
Q: The client transferred an immovable property in his name into the name of his spouse (married ANC without accrual). Should he pay CGT in the year of transfer? The spouse sold the flat in the following tax year. She will have to pay the CGT since date of initial accrual by her husband (the initial owner)?
A: Our guidance assumes that paragraph 68 of the Eighth Schedule does not apply in this instance.
On that basis the capital gain or loss (if any) at the time of the initial transfer (from the transferor to the transferee) was disregarded – refer to paragraph 67(1)(a) of the Eighth Schedule to the Income Tax Act. No taxable capital gain would then have arisen for the transferor.
The transferee is then treated as having—
(i) acquired the asset on the same date that such asset was acquired by the transferor;
(ii) incurred an amount of expenditure equal to the expenditure contemplated in paragraph 20 that was incurred by that transferor and the executor of the deceased estate of the transferor in respect of that asset;
(iii) incurred that expenditure on the same date and in the same currency that it was incurred by the transferor or the executor of the deceased estate of the transferor;
(iv) used that asset in the same manner that it was used by the transferor and the executor of the deceased estate of the transferor…
The capital gain of the transferee is then basically the proceeds on disposal less the base cost of the transferor, unless the transferee incurred paragraph 20 expenses since the transfer.
3. The deductibility of medical expenses relating to special care
Q: My Client is 88 years old sold her flat in an old age home a year ago to move to frail care. She has Parkinson’s disease and can’t look after herself anymore. She must be bathed and fed and cannot walk without assistance. The question is can the frail care which is about R8000 per month, be claimed as a medical expense under disability. If yes, must the doctor complete a ITR-DD form? He refused to complete the form when we asked him, but with motivation from SAIT, I am sure we can change his mind if it is deductible.
A: SAIT can’t, as you request, provide a document to the medical practitioner to request completion of the ITR-DD form. SARS sets out the prescribed diagnostic criteria for a disability in paragraph 9.3 of the Guide on the Determination of Medical Tax Credits and Allowances (Issue 4). The doctor must issue the ITR-DD in accordance with the SARS prescriptions.
As defined (in paragraph (a)(ii)) ‘qualifying medical expenses’ means any amounts (other than amounts recoverable by a person or his or her spouse) which were paid by the person during the year of assessment to any duly registered nursing home or hospital or any duly registered or enrolled nurse, midwife or nursing assistant (or to any nursing agency in respect of the services of such a nurse, midwife or nursing assistant) in respect of the illness or confinement of the person or any dependant of the person…
In the prescribed list of expenditure for purposes of section 18(1)(d) (disability) of the Act (see the SARS Guide on the Determination of Medical Tax Credits and Allowances (Issue 4)) the following is said:
PERSONAL ATTENDANT CARE EXPENSES
Expenditure that is incurred and paid for purposes of special care, for special services to assist, guide, care for a person with a physical impairment or disability, regardless of the place the services are rendered (for example home, nursing home, retirement home etc.)
Examples of expenditure in this category include nursing services, special care for a person with a disability etc.
This will include salaries paid to care attendants, agency fees if the care attendant is provided by an agency as well as fees for professional services performed by, for example, nursing homes.
If the expenses are not qualifying expenses (paragraph (a)(ii) ones) the ITR-DD is required to make the deduction.
4. Local VAT vendor constructing in RSA for foreign company: VAT output and input
Q: My client, a VAT vendor, is building a specialised structure for a foreign entity with no RSA presence. Based on the fact that the service will be supplied for building a fixed structure in South Africa, my client has to charge VAT. The foreign entity, however, is refusing to pay the VAT because they will not be able to claim it back as input VAT. Is there any way that the foreign entity can claim some sort of VAT (maybe customs?) back, thus enabling me to convince them to pay the VAT-inclusive amount?
Furthermore, the building project will take 18 months. On what basis, therefore, do I split the output VAT payment? Because if I pay all the VAT output in one month it will not be relative to the expenditure incurred therefore I will be receiving huge VAT refunds for the rest of the 18 month period.
A: Building of the fixed structure
The only possible instance where the supply can be subject to the rate of zero per cent is where section 11(2)(l) applies. That subsection requires that the recipient must be "a person who is not a resident of the Republic” (RSA) as defined in section 1(1) of the Value-Added Tax Act - this is a defined concept and basically requires that the non-resident must not carry on in the RSA any enterprise or other activity and from a fixed or permanent place in the RSA relating to such enterprise or other activity. Our guidance assumes that the non-resident is not a resident of and does not carry on an activity in the RSA. If this assumption is not correct the guidance may not be appropriate.
The next issue is that the said person (the non-resident) or any other person must not be in the RSA at the time the services are rendered. In this instance the non-resident must NOT be present in the RSA at the time the services are rendered (section 11(2)(l)(iii)) for the rate of zero per cent to apply. If the non-resident is present in the RSA at the time, the service will be standard rated (section 7(1)(a)).
The rate of zero per cent (mentioned above) will however not apply if the services are supplied directly in connection with land or any improvement thereto situated inside the RSA (section 11(2)(l)(i)). As the structure will be built in South Africa we agree with you that the rate of zero per cent does not apply – it is a standard rated supply.
The recipient can only make a deduction of the input tax if they are registered as a vendor in the RSA. Based on our assumption this is not the case, but we don’t know who will be using the fixed structure.
The output tax
The Value-Added Tax Act requires (section 16(4)) that output tax in relation to a supply made by a vendor must be attributable to a tax period where a supply is made or is deemed to be made by him during that tax period. The accounting for the output tax is therefore not influenced by when the input tax is deducted. If the supply took place in the period the output tax must be accounted for in the same period.
Disclaimer: Nothing in this query and answer should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. It remains your own responsibility to consult the relevant primary resources when taking a decision.