Q: In terms of
section 10(1)(a) of the Income Tax Act (ITA), a municipality is exempt from
paying income tax. However, my client is a municipal entity wholly owned by the
municipality (i.e. state owned company). My questions are they Is the municipal
entity also exempt from tax?
A: In our view you are correct
that the income tax exemption in section 10(1)(a) of the ITA does not extend to
municipal owned companies ("SOE”) as they do not form part of the 3 spheres of government as stated in the
Constitution. Such a company, unless specifically exempt under another
provision, will be subject to normal tax on its taxable income.
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.
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.