Tax

Some South African tax residents working abroad, often referred to as 'expats', are grumbling about changes to the Income Tax Act, 1962 (the Act) which comes into effect on 1 March 2020.

We were asked what Mr Edward Kieswetter’s first actions should be when he takes over the reins at SARS on 1 May. The answer for us was a no-brainer, crack down on those implicated in the State Capture Inquiry, starting with the beans spilled on Bosasa.  

Before you earn a cent, government takes a chunk out of your pay packet in taxes. Today, Saturday 18 May, marks Tax Freedom Day 2019 - the day from when the money you earn belongs to you to fund your and your families' activities and wellbeing.

The levy income of a body corporate, share block or an association of persons, such as a home owners association ('residential estate'), is exempt from income tax by virtue of section 10(1)(e) of the Income Tax Act.However, not all income received by a residential estate is exempt from tax, only levy income. SARS recently published a new Interpretation Note 64 on the levy exemption.

The tax implications of running a business are not widely taught in the South African education system. This is why many entrepreneurs are not well equipped to deal with the taxation side of their businesses in an informed manner.

For those who have been subjected to a SARS audit, it may be hard to imagine a reality where this experience can be any more agonising. If this resonates with you, perhaps consider a world where SARS makes you pay for the resources it had to expend in putting you through this ordeal. The truth is, it can.

In addition to the tax payable, SARS can impose penalties on a taxpayer for an 'understatement'. In a standard case, and depending on the taxpayer’s behaviour, penalties can range from 10% for a 'substantial understatement' to 150% for 'intentional tax evasion'.

South African multinationals achieved a victory recently when the Dutch Supreme Court held that South African parent companies could, effectively, be exempt from Dutch withholding tax on dividends.

On 1 March 2020 the amended section of the Income Tax Act concerning the foreign employment income exemption comes into effect. This so-called 'expat tax' has caused concern among South Africans working abroad who currently pay no tax if they meet certain criteria. But, from next year, only R1 million of this income will be exempt from tax here.

The indirect taxation of cross-border e-commerce transactions have been high on the agenda for tax authorities worldwide. There is clearly a perception that much of these transactions are escaping indirect tax (essentially VAT) because the supplier and consumer are in different jurisdictions.