With FIFA currently in the managing seat of the country, the government managed to slip in a proposed amendment to the taxation of fringe benefits to cater for ‘gifts’ given to their disgruntled [taxed] employees by employers in celebration of the World Cup.

SARS issued a media release on 10 June 2010 announcing a proposed once-off de minimis exemption of R750 on 2010 FIFA World Cup™ related items provided by employers to their employees. The exemption will apply only to 2010 World Cup™ related goods, such as T-shirts, jerseys and similar clothing, and match tickets. Once passed into law, it will be effective for individual taxpayers for the 2011 year of assessment.

The announcement however does not deal with the employer’s position, but the cost of providing the benefits would be deductible by the employer under s 11(a) of the Act, provided it is in the production of income. Now since the media reported on the tax consequences of the free soccer jerseys, many employees were hit by an additional tax burden for the free ‘gifts’, leaving employees demotivated.

The fact that the T-shirts were aimed presumably at keeping staff happy, it can be argued that the expense is deductible in terms of section 11(a) as it motivate their employees.

This feel-good amendment will certainly have the desired impact and increase productivity with a vuvuzela in hand!

Mzansi kaofela!

Stiaan Klue

In view of the importance of the 2010 FIFA World Cup for South Africa, its people and for nation building, draft legislation released last proposes a once-off de minimis exemption of R750 on 2010 FIFA World Cup related items provided by employers to their employees.

In C:Sars v LG Electronics (428/09) [2010] ZASCA 79 delivered on May 28 2010 the Supreme Court of Appeal (SCA) found in favour of the importer, LG Electronics (LG), deciding that there was no evidence to suggest that the respondent manipulated the design or manufacturing or the importation process to avoid the payment of duties.

On 11 June 2010 SARS updated the average exchange rates. The South African Reserve Bank publishes weighted average exchange rates, based on the foreign exchange transactions of commercial banks, on a quarterly basis. These rates may be used in the determination of the average exchange rate as required in the Act and are supplied on this web page to enable stakeholders (taxpayers) to use it for this purpose.

This ruling deals with the capital gains tax (CGT) consequences for a company that will undertake certain restructuring activities to mitigate its post retirement medical aid (PRMA) obligations where such restructuring activities will involve the use of trusts.

The issue considered in this ruling is whether the transfer of an amount constituting share premium of a company to another reserve of such company results in the nature of the amount being unchanged as envisaged under the second proviso to the dividend definition.