tax revenews | 18 July 2018

tax revenews | issue 9

by the tax department

case law

Supreme Court of Appeal: CSARS v South African Breweries

  • the correct classification of flavoured alcohol beverages, as contemplated in part 1 of schedule 1 to the Customs and Excise Act (the “CEA”), for the purposes of the excise duty that is payable in accordance with section 37(1) of the CEA, considered.
  • goods are classified in part 1 of schedule 1 to the CEA according to the terms of the headings and the relevant section and chapter notes.
  • the starting point for the classification of goods is the language of the schedule which must be considered in context and given a sensible meaning; the headings are the first and paramount consideration in determining classification between headings.
  • tariff heading 22.06 distinguished from 22.08.
  • find a copy of the judgment here.

advance tax rulings

binding private ruling 307:  relief from double taxation of interest

  • this ruling determines whether South Africa or Brazil has the taxing rights in respect of interest income on bonds issued by the government of Brazil and paid to a South African resident.
  • section 108 of the Income Tax Act, 1962 (the “Act”), considered. 
  • paragraph 4(b) of article 11 of the Convention between the government of the Republic of South Africa and the government of the Federative Republic of Brazil for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, considered. 
  • find a copy of the ruling here.

binding class ruling 63: income tax implications of settlement agreement

  • this ruling determines the treatment of contributions made by employer companies to a trust in terms of a settlement agreement and how the amount accruing to or received by the trust and the beneficiaries of the trust will be treated.
  • section 1(1) of the Act: definitions of “gross income” (paragraph (d)) and “severance benefit”, considered.
  • sections 11(a), 23(g), and 25B(2) of the Act, considered.

binding class ruling 64: transfer of a security that constitutes a participatory interest in a collective investment scheme

  • this ruling determines security transfer tax consequences of the transfer of a security that constitutes a participatory interest in a collective investment scheme, regulated by the Collective Investment Schemes Control Act, 2002.
  • section 1 of the Securities Transfer Tax Act, 2007 (the “STT Act”), considered.
  • sections 2(1)(a) and 8(1)(f) of the STT Act, considered. 
  • find a copy of the ruling here.

SARS publications

  • SARS publishes Frequently asked questions: increase in the VAT rate (issue 6).
    • find a copy of the FAQ here.
  • SARS replaces practice note 4 of 1999 | treatment of gains and losses on foreign exchange transactions with interpretation note 101 | section 24I – gains or losses on foreign exchange transactions.
    • sections 24I and 1(1) of the Income Tax Act, 1962 (the “Act”) – the definition of “trading stock”;
    • sections 3(4)(b), 6quat(4), 8(4)(a), 9(2)(l), 9(4)(e), paragraphs (c)(ii) and (iii) of the proviso to section 9D(2A), 9D(6), 9D(9)(fA)(ii) and (iii), 9D(9A)(a)(iii), 11(a), 11(i), 11(j), 19, 20(2), 22(3)(a)(i), 24J(2), (3), and (5A), and 25D of the Act.
    • paragraphs 12A, 35(3)(a), and 43 of the Eighth Schedule to the Act. 
    • paragraph 4(1) of the Tenth Schedule to the Act.
    • find a copy of the interpretation note here.
  • SARS publishes an updated summary of all interpretation notes.
    • find the updated summary here.

international

  • the Organisation for Economic Co-operation and Development (“OECD”) releases base erosion and profit shifting (“BEPS”) discussion draft, inviting public comments, on the transfer pricing aspects of financial transactions as part of BEPS actions 8 to 10.
    • find the press release here and the discussion draft here.
  • the OECD publishes a new set of bilateral exchange relationships under the Common Reporting Standard Multilateral Competent Authority Agreement (“CRS MCAA”), as over 100 jurisdictions prepare for the automatic exchange of offshore account information.
    • find the press release here and the list of exchange relationships for CRS information here.
  • for a concise summary of the most important developments in tax in Africa, find a copy of ENSafrica’s latest Africa tax in brief here.

other important developments

  • the intergovernmental fintech working group (“IFWG”) releases the report of the workshop between regulators, policymakers and industry held on 19 to 20 April 2018, focusing on three key areas:
    • private crypto-currencies;
    • financial inclusion; and
    • innovation facilitation.
    • find a copy of the report here.
  • the Minister of Finance designates, with effect from 1 August 2018, the following special economic zones (“SEZ”) in terms of section 12R of the Income Tax Act, 1962 for purposes of section 6(a)(ii) of the Employment Tax Incentive Act, 2013:
    • Coega SEZ;
    • Dube Tradeport SEZ;
    • East London SEZ;
    • Maluti-a-Phofung SEZ;
    • Richards Bay SEZ; and
    • Saldanha Bay SEZ.
    • find a copy of the government notice here.


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