FAQ - 19 March 2015
17 March 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
1. If a director/public officer resigns must the company details be updated at SARS?
Q: I would like to know whether SARS should be informed of the resignation of a company director. If yes please let me know the procedure.
A: If the director was listed as the public officer (and consequently the representative) of the company for tax purposes, then the company would have to remove him/her from its SARS records if he or she resigns. If the director was not the company’s public officer, then there is no need to inform SARS of the resignation.
According to the following link on the SARS website, the public officer’s details can be updated on the company’s efiling profile via the RAV01 form:
2. Were there any changes to section 10(1)(o)(ii) of the ITA in respect of the 2016 tax year?
Q: Are there any changes to section 10(1)(o)(ii) for the 2016 year of assessment?
A: There were no announcements in the budget review 2015 regarding the foreign employment income exemption. However this exemption as well as the foreign pension exemption in section 10(1)(gC) ITA has been raised by Treasury as being counter to the principle of worldwide basis of taxation and they are relooking this from a policy perspective. It is however unclear whether it is matter of immediate importance to them and more clarity will be had when the 2015 Draft Bills are released by Jun/July this year.
3. Remedies where medical deduction disallowed because the 3 year prescription period passed
Q: I have a client who had to upload documents for the 2008 tax period as his tax practitioner failed to do so. An additional assessment was raised and a huge tax liability was incurred as his medical aid expenses were not taken into account. I have lodged a dispute and it has been disallowed due to the 3 year prescribed time frame.
Is there any way I can get this tax year reassessed?
We have assumed that you lodged the objection more than 30 days after the additional assessment was issued.
A: In terms of section 99(1)(a) TAA read with section 100(1)(b) TAA, an assessment will become final if no objection is lodged and a period of 3 years has passed since the date of assessment. The only exception to this would be section 93(1)(d) TAA which allows SARS to issue a reduced assessment if there is an undisputed error by SARS or the taxpayer, notwithstanding that no objection was lodged.
However it is our view that by not providing the substantiating documents the taxpayer has in fact failed the burden of proof in section 102 TAA which resulted in the additional assessment and it is therefore not as a result of an undisputed error. SARS therefore are correct that they cannot amend the additional assessment.
4. Will SARS be satisfied with the proceeds from a sale if they feel the buyer overpaid?
Q: Our client owns shares in a company that is going to be bought out by a non-related listed company for a value (proceeds) of Rx million. It looks like the company is worth less than what is being offered in the sales transaction. Our question is whether SARS will have a problem with a higher value than what the company looks on paper.
Our question then is whether SARS will be satisfied with the estimated proceeds (value of shares in company), even if the value is higher than it looks on paper due to the tremendous potential the buyer sees in the company.
A: We can’t comment on the value placed on the shares for purposes of the transaction. SARS, similarly, (in terms of section 80(a)(i) of the Tax Administration Act) SARS may reject an 'application' for an 'advance ruling' if the 'application' requests or requires the rendering of an opinion, conclusion or determination regarding the market value of an asset.
In section 1, of the Tax Administration Act, "fair market value” means the price which could be obtained upon a sale of an asset between a willing buyer and a willing seller dealing at arm's length in an open market. We submit that the value used for the transaction (which is not in terms of section 42 – 47 of the Income Tax Act) must just be a fair value and there must be no tax benefit (for either party) in using a specific value.
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.