South Africans are still recovering from the Global Financial Crisis, yet motorists have recently been saddled with an increase in the fuel levy and some horrendous amendments to the laws governing claims from the notorious Road Traffic Fund. To make things worse, additional ‘taxes’ are constantly levied on motorists to use relatively safe toll roads, provided they can dodge the bolders placed in the road by criminals!

Carte Blanche recently investigated the status of our roads and interviewed surviving victims of pothole accidents. The journalist had a very easy job to demonstrate that South African taxpayer motorists suffer the misfortune of having to negotiate countless potholes. To make things worse, honest taxpayers need to bear the cost of repairs to their cars if unsuccessful in this endeavour.

Then, motorists have to deal with all the non-functioning robots and will seldom, if ever, find a traffic official (who by the way is funded by motorist taxpayers) on duty at them. It seems like Metro cops are far too busy taking pictures of speeding cars to collect tax to, hopefully, fund the repair of potholes!

Now comes the final blow! Amendments proposed to the Income Tax Act will see the monthly taxable fringe benefit when an employee is provided with the use of a motor vehicle by his or her employer to go up from 2,5% to 4% of the determined value. This means that 48% of the determined value of the motor vehicle will constitute a taxable fringe benefit each year. Effectively, after two years of use, more than the entire cost of the motor vehicle will be subjected to tax as a fringe benefit. This will happen even though the car will be depreciating in value. At the very least, the determined value should be reduced each year for this purpose by a depreciation factor. But to make things even worse, the determined value is to be increased by the VAT paid on the acquisition of the motor vehicle, while VAT has up to now been excluded.

Seems like the jury is still out on whether death and taxes are related. The saving grace may just be the small consolation that the PAYE rules will be amended to make only 80% instead of 100% of the taxable fringe benefit subject to the deduction of PAYE.

Laduma!
Stiaan Klue

The Internet Service Providers' Association (Ispa) has called on both the Independent Communications Authority of SA (Icasa) and fixed-line utility Telkom to lower the price of broadband internet access. Ispa yesterday said the "Telkom tax" was one of the factors still keeping broadband prices artificially high in South Africa.

A new “tax friendly” regime is to be implemented in SA for foreign companies based in the country and wanting to invest on the African continent, according to new draft tax laws. The proposed regional holding companies regime will enable foreign companies to set up headquarters in SA without any significant tax exposure while expanding on the continent.

As a general rule, employees ie, those who, amongst other things, receive a fixed salary and/or work under the supervision and control of another, are in terms of section 23 (m) of the Income Tax Act only allowed to deduct very limited expenditure categories in calculating taxable income.

The ratio of this decision can be simply stated: if the trustees of a trust make a distribution of trust capital or income to a person or entity who falls outside the scope of the “beneficiaries” of the trust, as defined in the trust deed, then that award is a donation and is subject to donations tax.

This decision of the Gauteng Tax Court (which attracted considerable attention when it entered the public domain in electronic form) has now been reported in the South African Tax Cases. The taxpayer in this case was an association not for gain and was a registered VAT vendor.

Tax practitioners are requested to report operational and system issues to the Institute by completing the Tax Practitioners'Issues List.

SAIT regional representatives attended various regional tax practitioners' meeting this month.

SAIT provide a technical service free of charge to members in good standing. This service exclude advice / opinions and is limited to technical interpretation of tax laws.

This ruling deals with taxable benefits arising from overseas incentive trips (trips) for employees, where such trips have both business and private elements.

This ruling deals with whether, in terms of paragraph 9(7) of the Seventh Schedule to the Act, no value is to be placed on residential accommodation provided to employees seconded to the South African subsidiary from offshore based group companies.

This ruling deals with – whether the presence of a database replica and a web server in the Republic of South Africa (the RSA) will constitute a permanent establishment of a company that is not a resident; whether interest and finance fees payable under loan agreements by borrowers to the company that is not a resident will be exempt from income tax in the RSA; and whether the licence fees under the User Agreements will be business profits and not royalties.

This ruling deals with the question as to whether steps taken by a company to convert to a protected cell company (PCC) under legislation governing its commercial activities, entailing amendments to its incorporation documentation and other related administrative actions, will give rise to a “disposal” by the shareholders of that company as defined in paragraph 11(1) of the Eighth Schedule to the Act.

This ruling deals with the concept of “group of companies” for the purposes of section 45(4) of the Act and whether it is to be interpreted narrowly, to mean a sub-group within a group of companies or widely, to mean the bigger group of companies itself.

This ruling deals with the interpretation and application of the Articles of the relevant DTA’s governing dependent personal services in order to establish whether South Africa has a right to tax the remuneration derived by residents of India, USA, Romania, the Czech Republic, UK or the Netherlands for employment in South Africa. To the extent that South Africa is entitled to tax that remuneration, this ruling also deals with the obligation of the South African employer to withhold employees’ tax (PAYE) in respect of that remuneration in terms of paragraph 2 of the Fourth Schedule to the Act.

The OECD and the Council of Europe have developed a Protocol amending the multilateral Convention on Mutual Administrative Assistance in Tax Matters.

The OECD Committee on Fiscal Affairs has just released the draft contents of the next update to the OECD Model Tax Convention (the 2010 Update) prepared by Working Party 1 of the Committee. The update will be submitted for approval of the Committee in June and the OECD Council in July.

AUSTRALIAN miners suffered a setback in their campaign against the nation’s proposed new mining tax yesterday, with two constitutional experts saying that a threatened court challenge was likely to fail. Miners including Rio Tinto, BHP Billiton and Fortescue Metals have criticised the 40% tax proposed by Canberra this month, saying it undermines the country’s investment-friendly reputation and will hurt the commodity- dependent economy.

Washington - Sales of previously owned US homes touched a five-month high in April amid a late rush to take advantage of a homebuyer tax credit, but a jump in houses on the market pointed to a slow recovery. While analysts generally expect a lull in home buying over the next few months, they stressed that a strengthening economy and improving labour market should prop up the housing sector in the absence of more government aid.