The extensive and sophisticated South African tax environment demands that taxpayers carefully consider and plan their commercial affairs in accordance with the applicable legislation to ensure compliance with the South African Revenue Service (SARS). Failure to properly do so would result in an increased risk of commercial transactions being disputed by SARS, which could ultimately result in protracted litigation proceedings.
Planning and implementing commercial transactions
It is imperative that taxpayers are mindful of the following when planning and implementing commercial transactions:
- the tax implications of the outcome the commercial transaction is designed to achieve for the taxpayer;
- whether the commercial reason for entering into a specific transaction has been documented correctly;
- whether the drafting of the relevant agreements to give effect to the specific transaction is drafted in a manner that reflects the intention of the parties entering the transaction;
The tax consequences of a commercial transaction may be seen as inevitable and unavoidable, however, the Income Tax Act no. 58 of 1962 contains various mechanisms offering taxpayers reprieve from tax consequences that inevitably apply to commercial transactions and which facilitates the proper execution to achieve the desired outcome of the transaction.
Seek professional advice before entering into any commercial transaction
Taxpayers are urged to seek professional advice prior to entering into any commercial transaction. We as tax attorneys have a unique set of skills which can be utilised for the careful consideration and mitigation of the tax implications of commercial transactions as well as:
- Drafting, implementing and interpreting commercial agreements;
- Mergers and acquisitions, joint ventures and strategic alliances, business reorganisations and restructurings, corporate governance and BEE transactions;
- Incorporation of juristic entities, including all types of trusts, takeovers of existing entities and the preparation and registration of all corporate documentation;
- Mergers and acquisitions, including transactions involving offshore entities, corporate group restructurings, foreign loan approvals and exchange controls, declaring dividends and the structuring and restructuring of corporate and shareholder’s loans; and
- Strategic cross-border advice to companies and the implementation of complex transactions both domestically and internationally.