FAQ - 11 December 2014
10 December 2014
Posted by: Author: SAIT Technical
Author: SAIT Technical
1. Obtaining a tax clearance certificate where there is an instalment payment agreement with SARS
Q: Is there a method to get tax clearance certificate if there is a deferred payment arrangement with SARS?
A: Our guidance assumes that the reference to ‘deferred payment arrangement’ is in fact to an ‘instalment payment agreement’ – i.e. where a senior SARS official enters into an agreement with a taxpayer in the prescribed form under which the taxpayer is allowed to pay a tax debt in instalments. This is in terms of section 167(1) of the Tax Administration Act. In terms of section 256(3)(a) a senior SARS official may provide a taxpayer with a tax clearance certificate only if satisfied that the taxpayer is registered for tax and does not have any tax debt outstanding, excluding a tax debt contemplated in section 167.
So, if all the tax debt outstanding is subject to an instalment payment agreement, SARS may issue a tax clearance. We suggest that you refer the matter to a senior SARS official, such as the branch manager.
2. Taxability of PhD study grant received from a USA university where research is conducted in RSA
Q: Client received a doctoral fellowship grant for his PHD from a foreign (US) university. He was living in and conducting the research for his PHD in SA. Is the income received taxable? If it is can he deduct expenses that were incurred in conducting the research?
A: We submit that article 20 of the RSA / USA treaty doesn’t apply. Section 10(1)(q), however, exempts from normal tax "any bona fide scholarship or bursary granted to enable or assist any person to study at a recognised educational or research institution”. Interpretation Note 66 (01 March 2012) deals with the current practice prevailing in this regard. In paragraph 4.2 it explains as follows:
"The scholarship or bursary must be granted to study at a "recognised educational or research institution”. SARS will accept that an educational or research institution qualifies as "recognised” if that institution has been established by or registered under the laws of South Africa, for example the Higher Education Act, 1997, the Skills Development Act, 1998 or the National Research Foundation Act, 1998.
It will also be acceptable if a scholarship or bursary is granted to study at a foreign educational or research institution if the qualification obtained from that institution upon completion of such studies would be recognised by the South African Qualifications Authority under the National Qualifications Framework Act, 2008.
In cases where the educational or research institution does not fall into one of the above categories, the local SARS office should be approached for confirmation whether or not the institution qualifies.”
So, if the "doctoral fellowship grant” meets the above criteria it will be exempt and no deduction is then permitted – section 23(f) of the Income Tax Act.
3. Registering as a tax practitioner if you only complete your employer’s tax returns
Q: A friend of mine is currently employed on a full-time basis. Part of his job description is to complete and file the tax returns, VAT returns and PAYE returns for his employer. Would he in this instance have to register as a tax practitioner?
A: Section 240(1) of the Tax Administration Act requires that a person who ‘completes or assists in completing a return by another person’ must be registered as a tax practitioner. Section 240(2)(d)(i) provides that the provisions of section 240(1) do not apply in respect of a person who only provides the advice or completes or assists in completing a return to or in respect of the employer by whom that person is employed on a full-time basis or to or in respect of the employer and connected persons in relation to the employer.
From the information provided your friend would not need to register as a tax practitioner.
4. Does SARS allow minors to register for income tax?
Q: A client passed away and his money and some assets must be transferred to a trust for his very young daughter. The executor asked me to register the minor for income tax – reason being that they want to invest the money into a Living Annuity. Is it correct to register the minor for income tax number and will SARS accept it? According to me, the minor cannot be registered for income tax at this stage and any interest income will have to be reflected under the mother’s income tax.
A: Our guidance assumes that the trust is not a special trust and deals only with the request relating to the minor. A minor can in fact be registered as a taxpayer. This is in terms of section 67(1) of the Income Tax Act that "every person who at any time becomes liable for any normal tax or who becomes liable to submit any return contemplated in section 66 must apply to the Commissioner to be registered as a taxpayer in accordance with Chapter 3 of the Tax Administration Act.” If the minor therefore becomes liable to submit a return or becomes liable for any normal tax, the minor must be registered as a taxpayer.
5. A test for whether section 93 of the TAA applies
Q: The background is as follows:
- The 2013 return was e-filed on 28.9.2013 and assessed and selected for audit / verification..
- An additional assessment was issued by SARS on 11/11/2013.
- An objection was lodged to this on 14 November 2013 and supporting documentation provided for some of the expenses.
- An additional assessment was issued by SARS on 3 July 2014, where some of the expenses were allowed. However, other expenses were disallowed as no proof was supplied.
- As our client is overseas, it was with difficulty that we finally obtained the proof required.
- We visited SARS on 17/9/2014 to submit the appeal, reference numbers were received, they were unable to assist.
- On 23 October the Appeal and all the documentation was captured and handed into SARS.
- The client received correspondence from SARS legal department on 4 November that the appeal was invalid in terms of section 107 (2) b of the act – that the period for the appeal had been prescribed.
- Since then we were notified that the assessment could be reopened under section 93 of the TAA act, provided all the necessary requirements are met.
- Kindly advise your recommended course of action. Yours assistance is appreciated.
Kindly advise your recommended course of action. Yours assistance is appreciated.
A: According to section 93(1)(d) of the Tax Administration Act (TAA):
"SARS may make a reduced assessment if SARS is satisfied that there is an error in the assessment as a result of an undisputed error by—
I. SARS; or
II. the taxpayer in a return.”
SARS’ interpretation of an ‘undisputed factual error’, which appears in section 98(1)(d)(i)(aa) of the TAA, is that one should not encounter any interpretation problems when applying the law to the facts. We submit that the same could be said of "undisputed error” in section 93(1)(d).
Section 93(2) additionally points out that "SARS may reduce an assessment despite the fact that no objection has been lodged or appeal noted.”
From the facts of your particular case, this was not an ‘undisputed error’ by SARS or the taxpayer. This was the disallowance of the deduction because the taxpayer did not discharge the onus of proof regarding the incurral of the other expense. As such, our opinion is that section 93 will not apply. However, we would advise that you get a more extensive tax opinion from a tax practitioner as we only provide guidance.
Section 107(2) of the TAA states when an appeal can be extended:
A senior SARS official may extend the period within which an appeal must be lodged for—
a) 21 business days, if satisfied that reasonable grounds exist for the delay; or
b) up to 45 business days, if exceptional circumstances exist that justify an extension beyond 21 business days.
Unfortunately your appeal was lodged way after even the 45 business days extension a person could qualify for in exceptional circumstances.
As such, we are not of the opinion that the matter can be reopened. However, you are again urged to get a tax opinion regarding the matter.
Disclaimer: Nothing in these queries and answers 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 answers, SAIT do not accept any responsibility for consequences of decisions taken based on these queries and answers. It remains your own responsibility to consult the relevant primary resources when taking a decision.