Important Tax Court Decision for All Franchise Operators and Their Accountants / Tax Advisors

Public Benefit Organisations

Expatriate Petition Group – SARS & National Treasury & Parliament (Standing Committee on Finance) Submission – 18 August 2017

Transfer Pricing Guidelines

The OECD released the latest updates to the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations on 10 July 2017. This 2017 edition incorporates the substantial revisions made in 2016 to reflect the clarifications and revisions agreed to in the 2015 BEPS Reports on Actions 8-10 Aligning Transfer pricing Outcomes with Value Creation and on Action 13 Transfer Pricing Documentation and Country-by-Country Reporting. It also includes the revised guidance on safe harbours approved in 2013 which recognises that properly designed safe harbours can help to relieve some compliance burdens and provide taxpayers with greater certainty. Finally, this edition also contains consistency changes that were made to the rest of the OECD Transfer Pricing Guidelines.

Please follow the link below to access the latest version of the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations:

Maggie Kgobane(Tax Expert) live on Yilungelo Lakho

Maggie Kgobane was interviewed on Tax related matters with SARS Manager Thokozani Mzantsi and Advocate Ombudsman Eric Mkhawane of SARS on Yilungelo Lakho on SABC 1 on the 10th of July 2017. Maggie shared her expertise with utmost confidence.

She addressed questions that are frequently asked by taxpayers regarding Taxation and included useful guidelines that should be followed when filing your tax return. Tax Consulting South Africa is very proud of Maggie’s sterling performance on national television.

Please see below a clip of the interview:


A repeat of the interview will air at 22:00 on 2017-07-13 on SABC 1


Expats – Filing Tax Returns

The 2016/17 tax season is here and this is an important year of tax filing for expatriate employees, especially South Africans working temporarily abroad. We are all well aware of the tax change on the cards and this tax submission must be done bearing future tax strategy in mind.

As an expatriate, there are a few tax concepts to keep in mind, most importantly that you need to declare world-wide income. We have seen so many expatriates or their tax practitioners simply submitting a zero tax return and this is incorrect. This can only be done where you are a non-resident for tax purposes and have no South African source income.

Where you do file correctly, i.e. declaring your world-wide income, there is obviously the section 10(1)(o)(ii) exempts foreign income exemption, which is the section which will be changed this year. Many expatriates have decided to assume a status as a non-resident to pre-empt the impact of this tax law change. Some have even proceeded to obtaining tax residency certificates in foreign jurisdictions. Whilst a residency certificate is by no means conclusive of the tax status, this no doubt assists in discharging the burden of proof.

SARS seem to have caught onto this trend and have now introduced new sections in the tax return to specifically make sure that these expatriates correctly declare their tax position. By making incorrectly a non-residency declaration, there is an automatic trigger of various tax and exchange control provisions, and expatriates must please be cautious to only make an informed decision hereon. There should be no willy-nilly assumption of non-residency and no “quick ticking” of any boxes.

Otherwise, we have seen an increased audit on expatriate employees, but at this stage we are unsure if this is simply part of the higher SARS 12% audit target per year, or whether there is a specific focus on expatriate tax compliance.


SARS Sets Sights on High-Net-Worth Individuals

High-net-worth individuals (HNWIs) will find themselves under greater scrutiny from SARS in the immediate future says Jerry Botha, Managing Partner at Tax Consulting South Africa. “In reviewing the SARS Annual Performance Plan for 2017 to 2018,” he states, “one will notice that they have highlighted low compliance of HNWIs as a strategic risk.”

Botha notes this is in addition to the 12% of taxpayers on the register which SARS will audit for the next year.

The South Africa 2017 Wealth Report, published by Research and Markets, indicates that the country is home to some 40,400 HNWIs with a combined wealth of US$171-billion. If many of these individuals are not meeting their tax obligations, as SARS believes, a substantial amount of revenue is being lost per annum.

SARS Upping its Detection Abilities

SARS’ response to this perceived threat to revenue collection will be to “develop and acquire capability to effectively tackle HNWIs and their related trusts, and redefine taxpayers in this segment.” The document also states that one approach the tax authority will take to enforce compliance is “increased and targeted audits”. The text goes on to say that 130 HNWIs can expect to be audited in the 2017/2018 tax year.

SARS has also committed itself to complete its implementation of the Organisation for Economic Cooperation and Development’s (OECD) Common Reporting Standard (CRS) by end of December 2017. This means that there can effectively no longer be offshore hidden money, as the world has followed the United States’ lead in forcing disclosure by financial institutions of any account owned or otherwise connect to South African residents or citizens.

Legislation to Tackle Loopholes

Apart from SARS’ activities, new legislation is being developed to close loopholes that are often exploited to reduce one’s tax obligation. A recent example is the Taxation Laws Amendment Act 15 of 2016 that redefines the forgone interest on low-interest or interest-free loans to a trust as a donation, thereby making the lender liable for donations tax.

“My advice to every High Net Worth Individual is to realise that their options for avoiding taxation, legal or otherwise, are shrinking,” says Botha. “It’s important that they get their financial affairs in order and, if necessary, make use of the leniency SARS is offering in terms of voluntary disclosure. The most effective measure is that High Net Worth Individuals should self-audit their structures and ask themselves the tough questions. Once SARS asks these questions and you are found wanting, the penalty regime means your penalties alone will mostly be more than the actual taxes

As far as this self-disclosure is concerned, Botha is referring to SARS’ Special Voluntary Disclosure Programme by which taxpayers can reveal undeclared income at reduced penalties and without fear of prosecution. However, he warns that the final date for this allowance is 31 August 2017, so those wishing to take advantage of it should act promptly.

Be Prepared

As financially astute as they are, wealthy individuals should be wary of approaching tax matters unprepared, whether it’s an audit, voluntary disclosure or other related issue. There are cases where a special voluntary disclosure is not required and a standard voluntary disclosure will suffice. When being audited, offering the right answers to an auditor’s pointed questions makes all the difference to the outcome.

Understanding the nuances and configurations of an ever-changing tax landscape and how to respond to them is key to wealth preservation. Botha urges those of high net worth to engage a strong legal, financial and tax team. “Having dealt with HNWIs and complex tax matters over the years,” observes Botha, “I can confidently say that those who have a strong team of specialists are better prepared to handle any eventuality.”

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