Last week SARS Commissioner, Oupa Magashula, publicly declared “war” against non-compliant taxpayers when he announced the implementation of the new administrative penalties. This was certainly good news for compliant taxpayers who pay their fair share of tax.

The new penalty system, applicable in terms of Section 75B of the Income Tax Act (No. 58 of 1962, as amended), provide for recurring monthly penalties for certain offences. The reason for the new penalty system was not to boost revenue, but rather to address the non-compliant behaviour (and culture!) of some taxpayers. In 2007/08 more than 5.3 million returns due to SARS were outstanding and SARS had to institute legal action against 81 000 taxpayers. This is surely unacceptable for a developing country where millions of people live in poverty.

Well done Oupa! It is about time that non-compliant taxpayers are brought to book.

Yours truly,
Stiaan Klue
Chief Executive

In Grundlingh v CSARS [2009] SAFSHC 88 the Free State High Court has, on appeal, upheld the decision of the Tax Court in ITC 1819 (2007) SATC 159. The taxpayer was a resident of South Africa, and had been admitted to practice as an attorney in both South Africa and Lesotho. He was a partner in Webbers, a Bloemfontein firm of attorneys, and was also a partner in the separate partnership, Webber Newdigate, which had its offices in Lesotho.

In the recent judgement of the High Court in Vacation Exchanges International (Pty) Ltd v CSARS [2009] JOL 24420 it was held that, where an employee fringe benefit falls within the scope of the Seventh Schedule, SARS is obliged to value the benefit and collect the tax in the manner contemplated in the Seventh Schedule to the Income Tax Act, and that SARS has no discretion to value the benefit and collect the tax in any other way, such as by issuing an estimated assessment to the employer in terms of the Fourth Schedule.

Consumers will bear the brunt of the imminent ad valorem carbon dioxide emissions tax on new vehicles coming into effect in March next year as motoring manufacturers will pass on the price increase of between 2 percent and 8 percent. The increases will dent affordability and suppress the expected recovery in the new car market from early next year.

The South African Revenue Service (SARS) will introduce a system of strict new administrative penalties against non-compliant taxpayers from 23 November 2009. In effect, taxpayers have until 20 November 2009 this year – the final deadline of the 2009 Tax Season - to submit any outstanding returns in order to avoid being penalised under the new penalty regime.

In 1994 the taxpayer, which was then known as Anglovaal Limited, had a mining division, as well as an industrial division which included a 60% shareholding in Anglovaal Industries Limited (AVI). One of AVI's subsidiaries was National Brands Limited in which it had a 97.7% shareholding.

In this case the Court provided clarity on who must pay the tax when the taxable value of a fringe benefit is adjusted by Sars on the basis that it has been incorrectly calculated by an employer. It may be recalled that in 2008, a timeshare operator had unsuccessfully appealed against an assessment for PAYE related to the provision of "points" in respect of its timeshare properties to sales staff, who could then utilise the points by occupying a timeshare unit operated by the employer for a period as vacation accommodation.

The Tax Court handed down judgement on August 14 2009 in Case No: VAT 711, which could have a major impact on the ability of associations not for gain to claim Value-Added Tax (VAT) on their operating expenses. It could even have a negative impact on profit making vendors who make certain supplies for no consideration as well.

The chief executive, Stiaan Klue, was cited in Sake24 in respect of the implementation of the new administrative penalties on 23 November 2009.

The eFiling system will be unavailable from 18h00 on Friday 23 October 2009 until 06h00 on Monday 25 October 2009 for scheduled upgrading and maintenance work. This will also impact e@syFile submissions.

This ruling deals with the conversion of two public sector pension funds to a closed defined benefit pension fund and a defined contribution fund respectively and whether the conversion will affect the status of these funds as a pension fund as defined in paragraph (a) of the definition of “pension fund” in section 1 of the Act. The ruling also looks at the transfer of members’ interests between the funds and related tax implications for the members.

This ruling deals with the tax consequences for pensioners whose former employers purchase annuity policies from insurers in the pensioners’ names in settlement of the employer’s obligation to pay medical aid contribution subsidies to ensure the pensioners continue to be members of medical aid schemes.

This ruling deals with whether a controlled foreign company CFC distributes a “dividend” as defined in section 1 of the Act, when undertaking a share buy-back without cancelling the shares repurchased but continuing to hold them as treasury stock.

The ruling deals with agency income earned by a controlled foreign company from its holding company which is a resident and whether such income must be taken into account when determining the net income of such controlled foreign company or not.

This ruling deals with the question as to whether the place of business of a controlled foreign company (CFC) will fulfil the requirements of subparagraphs (a)(i) and (ii) of the definition of “foreign business establishment” in section 9D(1) of the Act when taking into account the CFC’s use of employees, equipment and facilities of any other CFC that has the same country of residence and where that other CFC forms part of the same group of companies as the CFC.

This ruling deals with a 99 year lease granted in respect of property that is in the market for sale and whether the granting of the lease constitutes a ‘scheme of profit making’, the proceeds of which will be taxable in the hands of the participants.

This ruling deals with the deductibility for tax purposes of cash grants made by an employer to employee share-incentive scheme trusts to enable the trusts to acquire shares in fulfilment of the employer’s share-incentive scheme obligations. This ruling also deals with whether the provisions of section 23H be applicable if the grants are deductible.

This ruling deals with the interpretation of on environmental expenditure allowances as provided for in section 37B of the Act.

This ruling deals with the application of the foreign dividend exemption rules to the repatriation of profits in the form of foreign dividends paid by a foreign subsidiary to a resident company. The company used to be an exempt entity, but its exemption was withdrawn before section 9D was introduced into the Act which determines that the income of a controlled foreign company is to be included in the income of a resident.

This ruling deals with the value-added tax (VAT) implications arising from the construction of buildings by an entity and the subsequent donation thereof to an entity referred to in section 18A(1)(c) of the Income Tax Act, No. 58 of 1962 (the Income Tax Act).

The taxation of small and medium-size enterprises (SMEs) is an important topic for policy makers, as SMEs make up the vast majority of businesses and typically account for the bulk of employment in OECD countries. The OECD has just released Tax Policy Study No. 18: “Taxation of SMEs: Key Issues and Policy Considerations”, which examines a broad range of SME tax issues, including: the possible influence of taxation on SME creation, business structure and growth; arguments for and against tax incentives for SMEs; and measures to address a relatively high tax compliance burden on SMEs.