There’s a hard lesson for us all that is emerging from the current global financial crisis. Staying competitive in today’s volatile and fast-changing business world requires the striking of the right balance between risk and reward. As a result, tax risk management has become one of the top priorities of companies as revenue agencies change from vertical to horizontal monitoring.

Horizontal monitoring form the basis of the compliance culture of the Netherlands and contributed to the enhanced relationship between the Dutch revenue and taxpayers. The benefit of horizontal monitoring is voluntary disclosure, where the taxpayer promises, through a compliance agreement, to actively notify the tax administration of any issues that have a possible significant tax risk. In addition, the taxpayer disclose all the facts and circumstances surrounding issues without hesitation. In return, the tax administration promises that, having received disclosure, it will provide timely advice on the matters concerned, taking into account real commercial deadlines for doing so. Additionally, the taxpayer agrees to file its tax returns within an agreed time-frame and the tax authorities undertake to impose tax assessments as soon as possible after receipt of the return and to do so in consultation with the taxpayer wherever possible.

The objective of a compliance agreement is to create a collaborative approach that will make more efficient and less costly use of the resources of both the taxpayer and the authorities. It will also reduce tax uncertainty and at the same time discourage the use of aggressive tax planning schemes that would otherwise end up being challenged as part of the regular tax audit process. Its overriding aim is therefore to create real trust and openness between the taxpayer and the revenue authorities, for everyone’s benefit.

With the current R70bn shortfall in tax revenue, we can certainly learn from the Dutch on implementing horizontal monitoring in South Africa to the benefit of taxpayers and SARS.

Yours truly,
Stiaan Klue
Chief Executive

A collective investment scheme in securities (CIS), more commonly known as an equity unit trust, has until now been treated as a company for the purposes of the Income Tax Act. Although it is in truth a trust, the definition of a ‘company’ in s 1 of the Act has made it a company for tax purposes.

Some significant, but not headline-grabbing, amendments introduced by the Taxation Laws Amendment Act 17 of 2009 are as follows: With effect from the coming into force of the Taxation Laws Amendment Act 2009 (namely, as from the commencement of years of assessment ending on or after 1 January 2010) the 50/30/20 depreciation allowance under s 12B(2) will extend to "improvements (other than repairs)" to any machinery, plant, implement, utensil or article referred to in s12B(1)(f), (g) or (h) which are, during the year of assessment, used in the requisite manner. In essence, the improvement is treated as though it were a qualifying asset in its own right.

The technical committtee reviewed the draft Taxation Laws Amendment Bills released on 1 September and identified an unforseen anomaly with the introduction of the new proviso to section 9D(2A). A detailed submission was made to National Treasury on 29 September.

SARS published Binding Private Ruling 46 on 1 October 2009. The ruling deals with the time of accrual of a retirement fund lump sum benefit which is payable to a pensioner by election.