Synopsis June 2015The application by billionaire Mark Shuttleworth to obtain a refund of a levy...

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SynopsisTax today

June 2015

A monthly journalpublished by PwC SouthAfrica providing informed commentary on current developments inthe tax arena, both locallyand internationally.Through analysis andcomment on new law and judicial decisions ofinterest, it assistsbusiness executives toidentify developmentsand trends in tax law and revenue practice that might impact their business.

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Contents

State levies - tax or regulatory charge? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Although the Tax Court is not a court of law, fundamental principles of the law of

evidence apply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

The finality of income tax assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Explanatory note: Research & development expenditure . . . . . . . . . . . . . . . . . . . . . . . 10

SARS Watch. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Editor: Ian Wilson

Contributors to this issue: RC (Bob) Williams, Ian WIlson and Zarene Viljoen

Dis tri bu tion: Elizabeth Ndlangamandla [email protected]

State levies – tax or regulatory charge?

The application by billionaire Mark Shuttleworth to obtain a refund of a levy imposed on him inorder to remit funds abroad has been rejected byour courts. The Constitutional Court recentlyreversed the decision of the Supreme Court ofAppeal in which it declared that the 10% levyimposed on emigrants who wished to transferfunds in excess of the mandated levels had notbeen properly enacted.

Shuttleworth had attacked the

validity of the charge that had

been imposed. The basis of his

claim was that the charge that he

had incurred was a tax and that it

had been imposed in a manner

that was inconsistent with the

Constitution of the Republic of

South Africa and with the

Currency and Exchanges Act,

1933. He had argued further that

the whole system of exchange

control was inconsistent with the

Constitution and should be

declared invalid.

In the matter of South African

Reserve Bank and Another v

Shuttleworth and Another [2015]

ZACC 17 (18 June 2015), the crisp

issue facing the Court is set out in

paragraph [5] of the judgment of

Moseneke DCJ, with which the

Court (Froneman J dissenting)

concurred:

“In this Court too, the decisive

question is whether the exit

charge, as Mr Shuttleworth

contends, was a tax imposed for

the purpose of raising revenue for

the State or, as the Reserve Bank

and Minister submit, a regulatory

charge whose main object was to

disincentivise the export of

capital. If the charge was a tax – a

revenue-raising mechanism – then

the regulation that authorised the

exit charge would be invalid. This

would be so because the exit

charge had not been enacted in

accordance with prescribed

constitutional and statutory

strictures.”

The legal framework

Section 9 of the Currency and

Exchanges Act (“the Act”) grants

power to the President to make

regulations relating to currency,

banking or exchanges. The

Exchange Control regulations had

come into effect in 1960 through

the exercise of that power.

Regulation 10(1)(c) provides:

“No person shall, except with

permission granted by the

Treasury or by an authorised

dealer and in accordance with

such conditions as the Treasury or

the authorised dealer may

impose—

. . .

(c) enter into any transaction

whereby capital or any right to

capital is directly or indirectly

exported from the Republic.”

June 2015 3

Contents

State levies - tax or regulatory charge? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Although the Tax Court is not a court of law, fundamental principles of the law of

evidence apply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

The finality of income tax assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Explanatory note: Research & development expenditure . . . . . . . . . . . . . . . . . . . . . . . 10

SARS Watch. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Editor: Ian Wilson

Contributors to this issue: RC (Bob) Williams, Ian WIlson and Zarene Viljoen

Dis tri bu tion: Elizabeth Ndlangamandla [email protected]

The term “Treasury” in the

regulations is defined as meaning

the Minister of Finance.

Section 9(4) of the Act provides

that regulations made by the

Minister must be tabled in

Parliament within a prescribed

period and, if the regulation is

calculated to raise revenue, he

must attach to the regulation a

statement of the revenue that he

estimates will be raised within 12

months of the regulation coming

into force. Every regulation

calculated to raise revenue ceases

to have force and effect from a

date one month after it has been

tabled unless it has before that

date been approved by both

houses of Parliament.

The Constitution contains

provisions outlining the

procedures that must be followed

for the valid enactment of

legislation. Section 77 deals with

“money bills”. A money bill is a bill

which, inter alia, imposes national

taxes, levies, duties or surcharges.

Section 77(3) requires that all

money bills must be considered in

accordance with the procedure

established in section 75, which,

in turn, sets out the procedure by

which a bill passed by the National

Assembly should be dealt with in

the National Council of Provinces

before it may receive Presidential

assent.

The entire dispute therefore

revolved around whether the

regulation was a money bill or

whether the 10% levy was

calculated to raise revenue. It was

common cause that the

procedures applicable to money

bills or to regulations calculated to

raise revenue had not been

followed. If an affirmative answer

were to be given to either of these

issues, the appeal of the Reserve

Bank would fail.

Did the regulationimpose “national taxes,levies, duties orsurcharges”?

The starting point was to identify

the meaning of the term “national

taxes, levies, duties or

surcharges”. After concluding that

a literal meaning of any of the

terms was “less than useful”,

Moseneke DCJ applied the

principles of interpretation

(paragraph [43]):

“We must resort to the context

within which the term is used and

the purpose for which the tax,

levy, duty or surcharge has been

imposed.”

It was agreed by both parties

(paragraph [46]) that a law other

than a money bill could be passed

authorising government to impose

a regulatory charge. So, the

question to be answered was:

“…how does one distinguish a

regulatory charge from a tax that

may be procured only through a

money Bill?” (paragraph [47])

It is necessary, Moseneke DCJ said

(paragraph [49]), to look beyond

the words themselves:

“So, aside from mere labels, the

seminal test is whether the

primary or dominant purpose of a

statute is to raise revenue or to

regulate conduct. If regulation is

the primary purpose of the

revenue raised under the statute,

it would be considered a fee or a

charge rather than a tax. The

opposite is also true. If the

dominant purpose is to raise

revenue then the charge would

ordinarily be a tax. There are no

bright lines between the two. Of

course, all regulatory charges

raise revenue. Similarly, “every

tax is in some measure

regulatory”. That explains the

need to consider carefully the

dominant purpose of a statute

imposing a fee or a charge or a

tax.” (Footnotes removed)

The Court found (paragraph [53]):

“Here we are dealing with

exchange control legislation. Its

avowed purpose was to curb or

regulate the export of capital from

State levies - tax or regulatory charge?

The entire dispute therefore revolved around whether the regulation was a money billor whether the 10% levy was calculated to raise revenue. It was common cause that theprocedures applicable to money bills or to regulations calculated to raise revenue hadnot been followed.

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the country. The very historic

origins of the Act, in 1933, were in

the midst of the 1929 Great

Depression, pointing to a

necessity to curb outflows of

capital. The Regulations were

then passed in the aftermath of

the economic crises following the

Sharpeville shootings in 1960.

The domestic economy had to be

shielded from capital flight.

Regulation 10’s very heading is

“Restriction on Export of Capital”.

The measures were introduced

and kept to shore up the country’s

balance of payments position. The

plain dominant purpose of the

measure was to regulate and

discourage the export of capital

and to protect the domestic

economy.” (Footnotes removed)

Moseneke DCJ therefore

concluded (paragraph [55]):

“The exit charge was not directed

at raising revenue. The

uncontested evidence of the

Minister is that the exit charge

was part of the regulation

directed at easing in the

dismantling of exchange controls.

The economy was on a better

footing and could afford the

export of some capital provided it

was not wholesale. The charge or

levy was expected to slow down

the extent and the frequency of

capital externalisation.”

It was therefore held that the 10%

levy was not a national tax, levy,

duty or surcharge but a regulatory

charge. The regulation therefore

was not subject to the procedural

requirements of a money bill.

Was the charge, levy ortax calculated to raiserevenue?

The regulation may nevertheless

have been invalid under the

provisions of section 9(4) of the

Act if the measure was calculated

to raise revenue.

Moseneke DCJ rejected the

argument that the word

“calculated” should be interpreted

as “likely”. Instead, he held

(paragraph [60]):

“I have already found that the exit

charge did not have

revenue-raising as its primary

object. It was not calculated to

raise revenue. It was directed at

curbing or discouraging export of

capital. I am not persuaded by the

submission that the wider import

of the word “likely” is to be

preferred in this instance over the

ordinary meanings of

“calculated”, which include

“intended”, “designed”,

“planned”, or “considered”.

Section 9(4) of the Act is directed

at allowing Parliament to

scrutinise fiscal measures that are

planned or designed to gather

income for the fiscus. The section

is not directed at every

administrative or regulatory levy,

charge, fee, or surcharge found in

ample legislation.” (Footnotes

removed)

In any event, it was held,

regulation 9(4) was an

anachronism (paragraph [62]):

“I merely point out that with the

advent of the Constitution, the

procedural requirements of

section 9(4) have become

anachronistic. They have been

superseded by the Constitution. If

the exit charge was directed at

raising revenue and therefore was

a national tax, it would be hit by

the formalities for adopting a

money Bill. On the other hand, if

the exit charge was not calculated

to raise revenue and thus was not

akin to a money Bill, it would not

have to comply with section

9(4).”

The second issue was therefore

also decided in favour of the

Reserve Bank.

State levies - tax or regulatory charge?

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Comment

Moseneke DCJ had, in the course

of his judgment (paragraph

[10]), quoted from the

announcement of the relevant

exchange control measure by the

Minister of Finance in the Budget

Speech of 2003, where the

Minister said:

“Holders of blocked assets

wishing to exit more than

R750 000 (inclusive of amounts

already exited) must apply to

the Exchange Control

Department of the SA Reserve

Bank to do so. Approval will be

subject to an exiting schedule

and an exit charge of 10% of that

amount.”

The Court must have identified

from the passage quoted that the

exit charge was not the only

measure that would apply to any

application to externalise funds.

Approval would involve a

timetable or schedule for

remittance of funds. It is

questionable whether the charge

was a deterrent to persons who

had already left the Republic and

intended to externalise their

capital.

Moseneke DCJ came to his

conclusion that the charge was

not calculated to raise revenue

on the evidence of the Minister

that the charge was “part of the

regulation directed at easing in

the dismantling of exchange

controls” (paragraph [55]).

While Moseneke DCJ quoted (at

paragraph [10]) from the 2003

Budget Speech in setting out the

history of exchange controls, he

was apparently unaware that, in

the same speech, the Minister of

Finance had announced the

formation of a R10 billion fund

to support empowerment

initiatives, in respect of which

the Minister had then stated:

“This will in part be financed

from the extraordinary proceeds

of the exchange control

measures announced today.”

The above statement would

seem to contradict the

conclusion of Moseneke DCJ that

the exit charge was not

calculated to raise revenue. The

funds that would be raised from

the exchange control measures

that were to be announced

(which included the exit charge)

were intended to provide finance

for a specific government

initiative. It cannot be

ascertained whether this issue

was canvassed in the

proceedings.

This comment may be moot, in

view of the further observation,

obiter, in paragraph [62] of the

judgment that the procedural

requirements of section 9(4) of

the Act have been superseded by

sections 75 and 77 of the

Constitution. This further

observation raises issues in

relation to other legislation.

The other issue of concern is how

the dictum that any measure that

is intended to raise revenue

should be processed as a money

bill should be applied in practice.

In determining that the exit

charge was a regulatory charge,

the Court placed reliance on the

dominant purpose of the

legislation. It found that the

dominant purpose of the Act was

to shore up the country’s foreign

currency reserves. This begs the

question: “What is the position

with a levy imposed under

legislation whose dominant

purpose is to raise revenue?”

The judgment (at paragraph

[51]) confirmed an earlier

decision that:

“…although the regulatory

aspect of customs and excise

legislation served an important

public purpose, the statute was

‘essentially a fiscal piece of

legislation’.”

Environmental levies are

imposed under the Customs and

Excise Act. Are they to be

considered as a national tax,

levy, duty or surcharge or as a

regulatory charge? It is

undeniable that the levies are

intended to inform or regulate

behaviour, yet they are an

element of a fiscal statute. May

they only be imposed or

amended under a money bill?

While we agree that the principle

is correct that the context must

be taken into account to

determine whether a charge

imposed under a law is a tax or a

regulatory charge, the context

should include not only the

legislative framework but

information known to the

persons responsible for the

legislation.

Sight should never be lost of the

purpose of sections 77 and 75 of

the Constitution, namely that it

is desirable that taxes should be

approved by the persons elected

to govern – there should be no

taxation without representation.

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Although the Tax Court is not a court of law,fundamental principles of the law of evidenceapply

Even though the Tax Court is not ‘a court of law’ in the strict sense of theword, but a specialist tribunal with a very restricted jurisdiction, a hearingin the Tax Court must be conducted in accordance with the cardinal rules ofevidence that prevail in the ordinary courts.

Thus, rule 44(2) of the rules

promulgated under s 103 of the

Tax Administration Act 28 of 2011

provides very concisely that –

“A party must present all evidence

. . . and must adhere to the rules

of evidence”.

The judgment referred to below

makes an important point in this

regard.

Leading questions

It is a principle of evidence that, in

a court of law, a litigant or his

legal representative is not

permitted to ask leading questions

of his own witness, save in

relation to issues that are not in

dispute.

A leading question is one that is

expressed in a form that suggests

the answer (“were you very angry

when you saw what had

happened?”) instead of expressing

the question in a neutral form and

leaving it to the witness to decide

how to answer (“what was your

reaction to what had

happened?”).

Leading questions can, however,

be freely put in the course of

cross-examination by a litigant to

a witness called by the other

litigant in order to impugn the

testimony the witness has given.

(“You have poor eyesight, don’t

you?”)

The same bar on leading questions

will apply to proceedings in the

Tax Court.

Thus, if the taxpayer’s

representative asks leading

questions of his own witnesses

(including the taxpayer), the

answers to those questions can be

accorded little weight. In Z v

Commissioner for the South African

Revenue Service [2014] ZATC 2,

Wepener J said –

“During both his evidence in chief

and in re-examination, leading

questions were put to the

appellant [by his own counsel]

. . . The veracity of the witness’s

conclusions on the very

controversial issue is such that

little or no reliance can be placed

on the conclusions of the witness

given to direct leading questions.”

A litigant or his representative will

usually object if the opponent asks

leading questions of his own

witness and the judge will usually

then rule that the question cannot

be put in that form, and must be

rephrased.

However, as the above quotation

makes clear, if a leading question

is asked of the litigant’s own

witness and is answered, the

answer will carry little weight.

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The finality of income tax assessments

The Supreme Court of Appeal decision in MedoxLimited v CSARS [2015] ZASCA 74, in whichjudgment was delivered on 27 May 2015, affirms– if affirmation were necessary – that the onlyavenue for challenging the correctness of anincome tax assessment is by timeously filing anobjection to the assessment.

That objection, if disallowed by

the Commissioner, can then be

taken on appeal by the taxpayer to

the Tax Court and thence to the

High Court.

If there is no objection, the

assessment becomes final.

Once the statutorily defined

period for objecting to an

assessment has passed, the

assessment becomes final, unless

SARS accepts a late objection –

but even then, SARS’s power to

issue a revised assessment is

subject to the statutory three-year

limitation period laid down in s

79(1)(c) of the Income Tax Act 58

of 1962; see now section 99(1)(a)

of the Tax Assessment Act 28 of

2011.

As Mothle J said in Ackermans

Limited v CSARS at para [33] –

“The essence of section 79(1) of

the Income Tax Act is that any

additional assessments have to be

effected within three years from

the date of the original

assessment. SARS is not entitled

to raise additional assessment

after the three years of the

original assessment, unless the

circumstances stated in

subparagraph (aa) or (bb) of

subsection 1(c)(i) to section 79,

exist.”

Once the assessment has become

final for lack of a timeous

objection, then even if the

assessment is demonstrably

‘incorrect’ – for example because,

as in this case, the taxpayer, when

making out its tax return, had

failed to exercise the right to set

off an assessed loss incurred in a

prior year against the current

year’s income – there is no legal

avenue to contest the assessment.

It will not avail the taxpayer to

approach the High Court for, in

these circumstances, it has no

jurisdiction to issue a declaratory

order setting aside the assessment.

These fundamental principles of

tax administration derive from the

Income Tax Act 58 of 1962, read

with and supplemented by the Tax

Administration Act 28 of 2011.

The now-repealedprovisions of the Income Tax Act and the currentprovisions of the TaxAdministration Act

The now-repealed section 81(5) of

the Income Tax 58 of 1962 was

explicit in regard to the finality of

assessments and provided that –

“Where no objections are made to

any assessment or where

objections have been allowed in

full or withdrawn, such

assessment or altered assessment,

as the case may be, shall be final

and conclusive.”

Currently, the Tax Administration

Act 28 of 2011 is equally explicit

and unambiguous. Section 100(1)

states that –

“An assessment . . . is final if

(a) . . .

(b) no objection has been

made . . . ”

Nor, indeed, does SARS have

power to take pity on a taxpayer

(even if it were minded to do so)

and unilaterally issue a revised,

reduced assessment once three

years have elapsed after the date

of the original assessment; see

section 99(1) of the Tax

Administration Act.

The review jurisdictionof the High Court inrelation to assessments

Section 105 of the Tax

Administration Act is explicit as to

the forum in which a disputed

assessment must be contested, for

it states that –

“A taxpayer may not dispute an

assessment . . . in any court or

other proceedings, except in

proceedings under this Chapter or

by application to the High Court

for review”.

This provision, read in its context,

makes clear that an assessment

can be disputed only in the tax

court and only via a timeous

objection and appeal, but makes

the important point that the High

Court retains its inherent review

jurisdiction.

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Thus, where a taxpayer seeks the

review of an assessment (in which

the process of assessment as

distinct from the correctness of the

amounts reflected in the

assessment is impugned as having

been unlawful), such a challenge

is distinct from an appeal (in

which the merits of the

assessment are contested – in

other words, where it is claimed

that the assessment incorrectly

reflects the taxpayer’s tax

liability).

In a tax context, a review may in

some circumstances lie to the High

Court and not to the Tax Court.

Thus, for example, an application

for review in terms of the

Promotion of Administrative

Justice Act 3 of 2000 may be

heard only by the High Court and

not by the Tax Court – but the

taxpayer must first exhaust his

internal remedies under the

relevant tax legislation.

The taxpayer arguedthat the assessment was invalid

It seems that, in the present case,

the taxpayer was in essence

requesting the High Court to

review its 1997 assessment on the

basis that the assessment was

invalid.

It may be inferred that the

taxpayer had in mind that success

in this regard in the High Court

would lay the groundwork for

arguing that, by way of a domino

effect, all assessments for

subsequent years must also be

invalid and therefore void.

Validity as distinct fromcorrectness

There is a crucial distinction

between an assessment’s being

incorrect and its being invalid.

This distinction was the crux of

the difficulty facing the taxpayer

in the present matter.

The 1997 assessment was, it

seems, incorrect in the sense that

the taxpayer had omitted, when

filing its return for that year, to

carry forward the prior year’s

losses into the current year of

assessment, with the result that

the recorded taxable income was

higher than it should have been.

But this did not mean that the

assessment was invalid; it merely

meant that the amount reflected

as taxable income in the

assessment – which was based on

information contained in a return

that had been compiled and

lodged by the taxpayer – was

incorrect.

The court pointed out (at para

[15]) that if the argument put

forward by the taxpayer in regard

to the invalidity of the disputed

assessment were accepted, the

untenable corollary would be

that –

“virtually any assessment in which

the Commissioner erroneously

refuses to allow a deduction,

rebate or exemption provided for

in the Act, could be regarded as

invalid and therefore not subject

to the provisions of ss 81 to 83 of

the [Income Tax] Act. This would

render the mechanisms provided

in ss 81 to 83 [of that Act] for

objections to and appeals against

assessments nugatory and grant

aggrieved taxpayers carte blanche

to approach the high court in

virtually every instance where they

disagree with an assessment made

by the Commissioner. ”

(Emphasis added.)

Fourie AJA (giving the unanimous

decision of the court) went on to

point out that –

“it is the taxpayer who has to

render a return in which any loss

occurred (sic.) in any previous

year is carried forward to be set

off against income derived by the

taxpayer from carrying on any

trade. That this is the taxpayer’s

duty, is made clear in section

20(2A)(b) of the Act which states

that the taxpayer shall not be

prevented from carrying forward

a balance of an assessed loss

merely by reason of the fact that

he or she has not derived any

income during any year of

assessment. Further, section

82(b) of the Act places the burden

of proof - that any amount is

subject to set-off in terms of the

Act - upon the person claiming

such set-off, ie the taxpayer.”

The judgment concludes by

holding that the taxpayer’s

application for an order declaring

the disputed assessment to be void

had been correctly dismissed by

the High Court.

Consequently, there was no

avenue open to the taxpayer to

contest the assessment as, correct

or not, it had become final.


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Editor’s noteThere is a provision in the Tax Administration Act which may result in

an assessment being withdrawn after it has become final and after the

elapse of more than three years from the date of assessment. Section 98

sets out the circumstances under which an assessment may be

withdrawn. Where an assessment is withdrawn, it is treated as if it was

never issued and a new original assessment may then be issued.

Section 98(1) may be applied despite the fact that no objection has been

lodged or appeal noted.

This begs the question whether a taxpayer who has not objected to an

assessment or not appealed may bring an application before the High

Court against a refusal by SARS to grant an application for withdrawal

of an assessment under section 98 of the Tax Administration Act.

It is submitted that, if the circumstances for the application of section 98

are found to apply, the making of an application under that section

constitutes the only internal remedy available and the fact that no

objection was made or no appeal was noted in respect of the original

assessment would not debar the High Court from reviewing an

administrative decision refusing such an application.

June 2015 10

Explanatory note:Research anddevelopmentexpenditure

In our May edition of Synopsis we reported on

a decision concerning the deductibility of

expenditure incurred on research and

development. While the decision reflected the

law as it was then enacted, it should be noted

that there has since been an amendment to the

provisions of section 11D(1) of the Income Tax

Act.

The amendment introduced a significant

exception to the denial of an incentive

deduction where the purpose of the activities is

the development of internal business

processes. It permits the incentive to apply

where:

“those internal business processes are mainly

intended for sale or for granting the use or right

of use or permission to use thereof to persons who

are not connected persons in relation to the

person carrying on that research and

development.”

Had the expenditure referred to in our earlier

article been incurred on or after 1 January

2014, it would have been eligible for the

incentive deduction by virtue of the

amendment.

This publication is provided by PricewaterhouseCoopers Inc. for information only, and does not constitute the provision of professional advice of any kind. The

information provided herein should not be used as a substitute for consultation with professional advisers. Before making any decision or taking any action, you

should consult a professional adviser who has been provided with all the pertinent facts relevant to your particular situation. No responsibility for loss occasioned

to any person acting or refraining from action as a result of any material in this publication can be accepted by the author, copyright owner or publisher.

© 2015 PricewaterhouseCoopers Inc. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers

International Limited, each of which is a separate and independent legal entity.

11

SARS Watch - 21 May to 20 June 2015

Legislation

21 May Notice of regulations on certain categories of research anddevelopment deemed to constitute the carrying on of 'research anddevelopment' in terms of section 11D(6)(b) of the Income Tax Act'

Notice published in Government Gazette No. 38729 withcommencement date from 23 April 2015.

21 May Notice of regulations regarding additional criteria for multisourcepharmaceutical products in definition of 'research and development'in terms of section 11D(1) of the Income Tax Act

Notice published in Government Gazette No. 38732 withcommencement date from 1 October 2012.

21 May Notice of rule amendment under section 75 of the Customs andExcise Act regarding keeping of registers by rebate users

Notice published in Government Gazette No. 38804 withcommencement date from 22 May 2015.

21 May Notice of tariff amendment of certain rebate items for the importationof fish under full rebate of duty


21 May Notice of tariff amendment of certain rebate items to exempt otherfermented beverages and tobacco products supplied to thePresident, diplomats and other foreign representatives fromregistration in terms of rule 59A


21 May Notice of tariff amendment of rebate item to provide for rebates onbeer made from malt and other fermented beverages, used in themanufacture of non-alcoholic beverages


21 May Notice of tariff amendment of certain rebate items to include spiritsused in the fortification of other mixtures of fermented fruit or meadbeverages, fortified with an alcoholic strength of at least 15% byvolume, but not exceeding 23% by volume


27 May Notice of publication of the Tax Information Exchange Agreementswith Liechtenstein

Notice published in Government Gazette No. 38812 with dateof entry into force 23 May 2015.

28 May Notice of tariff amendment concerning original equipmentcomponents for certain motor vehicles

Notice published in Government Gazette No. 38823 withimplementation date from 1 May 2015.

28 May Notice of tariff amendment for a refund on spirituous beverageswhich have become off-specification, have been contaminated orhave undergone post-manufacturing deterioration


28 May Notice of tariff amendment to increase the rate of customs duty onsugar in terms of the existing variable tariff formula


29 May Notice of regulations for the registration of VAT vendors in terms ofsection 74(1) read with section 23 of VAT Act


29 May Notice of regulations regarding the requirements that must be met bya person applying for registration as a VAT vendor in terms of section

74(1) read with section 23 of the VAT Act


5 Jun Notice of publication of the Tax Information Exchange Agreementswith Belize


12 Jun Notice to furnish returns for the 2015 year of assessment Notice published in Government Gazette No. 38874 withimplementation date 12 June 2015.

17 Jun Notice of publication of renegotiated Double Taxation Agreement and Memorandum of Understanding with Mauritius


18 Jun Notice of tariff amendment to increase the rate of customs duty onwheat and wheaten flour

Notice published in Government Gazette No. 38891 withimplementation date from 19 June 2015.

19 Jun Notice of rule amendment under section 19A to substitute DA260Accounts for Other Fermented Beverages

Notice published in Government Gazette No. 38878 with effect from 14:59 on 25 February 2015.

Binding rulings

28 May Binding Private Ruling 192: Cross-border interest-free loan andwithholding tax on interest

This BPR deals with the question as to whether an adjustmentmade to taxable income or tax payable under section 31 cantrigger withholding tax on interest levied under section 50Bread with section 50E of the Act.

15 Jun Binding Private Ruling 193: Debt reduction by way of set-off This BPR deals with the repayment of shareholder loans byway of set-off. The loan outstanding from the subscription of anew issue of ordinary shares will be used to set off the amount outstanding under the shareholders loans.

15 Jun Binding Private Ruling 194: Disposal of shares through a sharebuy-back and a donation

This BPR deals with the disposal of shares through a sharebuy-back by a resident company from a non-resident personand a donation of shares by the same non-resident person toanother resident company, both for no consideration.

12

SARS Watch - 21 May to 20 June 2015

Case law

22 May TC-IT 13541 The Tax Court ordered in favour of the Commissioner as it contendedthat the nature of the research and development was such that deduction was specifically denied by reason of section 11D(5)(b).

28 May Medox Limited The Supreme Court of Appeal dismissed the application for a declaratory order to set aside income tax assessments due to absence of objectionagainst the assessments and thus prescribed.

28 May Alan George Marshall N.O. & Others The High Court confirmed the declaratory order in favour of the taxpayerregarding an unfavourable VAT BPR issued by the Commissioner.

5 Jun Miles Plant Hire The Supreme Court of Appeal dismissed with costs the application forcondonation of an application for late appeal against final order ofwinding-up, irrespective of prospects of success.

5 Jun Candice-Jean van der Merwe The Supreme Court of Appeal dismissed with costs the application forcondonation of an application for late appeal against final order ofwinding-up, irrespective of prospects of success.

18 Jun South African Reserve Bank and Another vShuttleworth and Another

The Constitutional Court ordered in favour of SARB and the Minister forthe reason that the exit levy is not a tax and therefore not required to beenacted as a 'Money Bill'.

SARS publications

22 May Tax Information Exchange Agreements signed with StKitts and Nevis but not yet rectified

The TIEA was signed on 7 April 2015 in Basseterre.

3 Jun Updated Table 1: Interest rates on outstanding taxesand interest rates payable on certain refunds of tax

A note was added to Table 1 to explain the difference between thePFMA's determination of the "prescribed rate" and the implementationthereof under the Income Tax Act.

5 Jun Guide on the US Foreign Account Tax Compliance Act This Guide deals with the application and interpretation of specific issues arising from the statutory obligations placed on South African financialinstitutions in terms the FATCA agreement.

8 Jun First Batch of the Draft Taxation Laws Amendment Bill,2015

The First Batch Draft TLAB was published for comment that must besubmitted no later than 26 June 2015.

8 Jun Rates and Monetary Amounts and Amendment ofRevenue Laws Bill, 2015

This Bill was introduced into Parliament for comments that must bepresented no later than 15 June 2015.

8 Jun Draft Notice on FATCA non-compliance This Draft Notice was published for comment that must be submitted nolater than 22 June 2015.

8 Jun Tax Information Exchange Agreements signed withTurks and Caicos Islands but not yet rectified

The TIEA was signed on 27 May 2015 in Turks and Caicos Islands.

11 Jun Notice of Updated Tables A and B of the AverageExchange Rates

Average monthly and annual exchange rates up to May 2015.

11 Jun Draft Tariff Amendment Notice to provide for a newrebate item for spirits obtained by distilling grape wineor grape marc of an alcoholic strength by volume of 8% vol. or higher for use in the manufacture of fortifiedwine

The Draft Notice was published for comment that must be submitted nolater than 25 June 2015.

15 Jun Draft Tariff Amendment Notice to provide for thecalculation of the duty on goods with a statistical unit of "u" to be based on full units only and notproportionately

The Draft Notice was published for comment that must be submitted nolater than 30 June 2015.

19 Jun Draft Notice on Reportable Arrangements The Draft Notice was published for comment that must be submitted nolater than 30 June 2015.

PwC publications

9 Jun PwC Tax Alert - Entry into force of the Tax Treatybetween South Africa and Mauritius

Tax Alert deals with the Tax Treaty between South Africa and Mauritiusthat was signed in May 2013 and ratified by South Africa in October2013; Mauritius has now also ratified the treaty.

18 Jun PwC VAT Alert - New VAT regulations published - VATregistrations

Tax Alert deals with the new VAT regulations as published in theGovernment Gazette.

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Synopsis June 2015The application by billionaire Mark Shuttleworth to obtain a refund of a levy...

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