Archive for month: October, 2016

Sugar Tax Could Include Pure Fruit Juices – National Treasury

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South Africa could add pure fruit juices to the list of drinks expected to face a levy under a proposed tax on sugary drinks, the Treasury has said, in a country where more than half of adults are overweight.

In his budget speech in February, Finance Minister Pravin Gordhan proposed the tax on sugary drinks to be implemented in April next year, aimed at fighting growing obesity in the continent’s most lucrative market for Coca-Cola.

Health campaigners have welcomed the tax, citing obesity in South Africa, where 42% of women and 13% of men are categorised as obese.

The proposal initially exempted beverages containing natural or intrinsic sugars found in unsweetened milk and milk products and 100% pure fruit juices from the 20% tax, but officials have recently reconsidered their decision citing similar health risks to drinks with added sugar.

“Many health experts argued that 100% fruit juice should also be subject to the tax, as the natural sugar level it contains has the same or very similar negative health consequences as that of sugar added in soft drinks,” the National Treasury said in an emailed response to Reuters.

Chairman of South African Fruit Juice Association, Johan de Kock, said the big difference between fruit juices and some of the other beverages is that fruit juices contain a lot of nutritional value in vitamins and minerals.

“We believe the health benefits of 100% fruit juice outweighs the fruit sugar that it contains,” De Kock said, adding that his group had not been formally informed about the tax on pure fruit juice.

The Treasury said it will debate the proposed tax, including the inclusion of pure fruit juice, during a meeting in November.

The proposed tax on sugary drinks has been opposed by business lobby groups who argue that the tax will impact the economy by hurting soft drink producers and cutting jobs.

If the proposed law is passed, South Africa will join Mexico, France and Hungary in introducing taxes on sugary drinks to fight obesity. Britain also plans to launch the tax.

Source – www.engineeringnews.co.za

Supreme Court of Appeal – XO AFRICA SAFARIS CC v C:SARS (395/15) [2016] ZASCA 160

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XO AFRICA SAFARIS CC v C:SARS (395/15) [2016] ZASCA 160: Supreme Court of Appeal case dealing with whether the supply of services are to be standard rated or zero rated in terms of section 11(2)(l) of the VAT Act, following services being supplied to a non-resident of South Africa but being supplied directly to other persons who were present in South Africa at the time that the services were rendered.”

For access to the entire case, please click here.

Supreme Court of Appeal: CSARS V Morula Platinum Mines

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A Supreme Court of appeal case was ruled between CSARS and Morula Platinum Mines which determines whether certain mined ore should be included in trading stock or be classified as mining operations in terms of the deductibility of the costs thereof.

For access to the entire case, please click here.

Guide: SVDP Version 1.2

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A draft guide on the special voluntary disclosure program was issued and deals with the time frame as well as the relief offered to taxpayers on international un-declared assets.

For access to the entire guide, please click here.

Donations Tax and Capital Gains Tax Consequences of the Part Waiver of a Loan and Reduction of the Interest Rate

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Binding Private Ruling 252 was issued and determines the donations tax and capital gains tax consequences of the waiver of part of a loan to an employee share trust and the reduction of the interest rate on the remaining balance of the loan to 0%.

For access to the entire ruling, please click here.

Recent Ruling of Masango v RAF

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The recent ruling of Masango v RAF deals with the Contingency Fee Act and how to charge VAT on fees for services rendered.

For access to the entire ruling, please click here.

Tax Court Case No: IT 13164

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The recent Tax Court case 13164 gives clarity on the applicability of section 103(2) of the Income Tax Act to assessed losses carried forward.

For access to the entire case, please click here.

SARS Basic Guide to Income Tax Exemption for Public Benefit Organisations

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SARS has issued their second basic guide to income tax exemption for Public Benefit Organisations to assist organisations in obtaining and retaining approval as a public benefit organisation.

For access to the entire guide, please click here

Beverage Industry’s Scare Tactics Against Sugar Tax ‘Shocking’

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THE “fear-mongering” tactics employed by the beverage industry against the proposed sugar tax have been “shocking” and “more than the norm”.

This is according to Ismail Momoniat, deputy director-
general of the National Treasury, who was commenting on the 
industry’s reaction since Finance Minister Pravin Gordhan announced the tax earlier this year.

The tax will result in all 
sugar-sweetened beverages being taxed by 20 percent from April.

The tax is an effort to combat the country’s growing non-communicable diseases (NCDs) epidemic, including obesity, diabetes and heart disease.

By their August 22 deadline this year, the Treasury had received 190 written submissions on the tax.

Apart from the submissions, the beverage industry has held media briefings, and gone into communities to speak to local spaza shop owners in an effort to increase the voices of dissent against the tax.

BevSA argued that the 
proposed tax could lead to between 60 000 and 72 000 job losses, and would reduce the industry’s contribution to the country’s GDP by R14 billion.

“Industry backlash is inevitable… The process to impose or increase tax is always deeply 
contested, but it seems the scare tactics here have been more than the norm,” Momoniat said 
during an obesity-prevention workshop in Parktown, Johannesburg, yesterday.

Last month, the South African Institute of Race Relations (IRR) said the tax would do “almost nothing” to improve the health of South Africans, but rather was an attempt to raise more money by 
“a desperate government” that was running short of revenue.

But Momoniat denied this. He said while the Treasury had not yet put an estimate on how much revenue would be generated by the proposed tax, even if it had, the main aim of the tax was not to generate revenue but to deal with obesity and to discourage poor diets.

However, no health-related programmes have been earmarked for the revenue from the tax.

“Our main fiscal tool to prevent illnesses in this case is tax… The estimated revenue from the tax is R4 billion, which is not a Treasury figure.

“But even then, that wouldn’t be much compared to the trillions we raise through the three major taxes (personal tax, VAT, corporate income tax),” he added.

Source: Cape Times 

The Status of SARS’ Interpretation Notes

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A recent case before the Supreme Court of Appeal (CSARS v Marshall NO and Others (816/2015) [2016] ZASCA 158 (3 October 2016)) involved the question of whether or not actual supplies by a designated entity to the Western Cape Department of Health qualified for the zero rating under section 11(2)(n) read with section 8(5) of the VAT Act. The court, in arriving at its decision that the actual supply does not qualify for the zero rating and that only unrequited or gratuitous payments could qualify, refers to SARS’ Interpretation Note 39 which explains the reasoning behind section 8(5) and section 11(2)(n) of the VAT Act.

After quoting extensively from the Interpretation Note, the following statement is made Dambuza JA in delivering the unanimous decision of the SCA (at 33):

“These Interpretation Notes, though not binding on the courts or a taxpayer, constitute persuasive explanations in relation to the interpretation and application of the statutory provision in question. Interpretation Note 39 has been in circulation for years and has not been brought into contention until now.”

It is unclear what exactly is meant with the words “persuasive explanations” but at the very least, it suggest that SARS’ Interpretation Notes does carry some form of weight in legal proceedings. The exact legal basis for this is, however, not clear from the judgment, despite the footnote reference to “P de Koker and RC Williams Silke on South African Income Tax [Service Issue 57, 2016] at § 18.270”. It may be argued that this statement by the Supreme Court of appeal does to some extent elevate a SARS opinion on the correct application of the law in the form of an Interpretation Note above that of, for example a taxpayer.

There definitely appears to be a trend in our courts to place reliance on SARS’ Interpretation Notes.  This year alone, the Tax Court in ABC (Pty) Ltd v C:SARS (13539/ 13673) (dealing with the income tax treatment of grants) and RTCC v C:SARS VAT1345 (dealing with input tax claims on a motor vehicle) placed reliance on SARS’ Interpretation 59 and Interpretation Note 82 respectively in delivering judgment.

While it is accepted that SARS’ Interpretation Notes indeed go out for comment by the public and before they are published, it begs the question as to whether what is in essence a peer review process is sufficient to elevate an opinion to have weight in law.

It is, further, trite that SARS is not bond to their own Interpretation Notes. Taxpayers are accordingly in a very uncertain position as to whether or not , when and to what extent reliance should be placed on SARS’ interpretation notes.

Taxpayers would be well advised to exercise caution when relying on SARS’ Interpretation Notes.