Harbour & Associates

There are two categories of tax relief and it is important to understand the distinction between them: Relief for business premises. Relief for residential premises. This is not the distinction that is defined in the Income Tax Act, but I choose it because some people think that because they’ve installed the system at their residence for the benefit of their business, they can claim the first of the above. Not so, because the s12BA of the income Tax Act states that the premises must be used mainly for business purposes in order for that section to apply. OK so what…

It was during one of my many meetings that I realised that this was a question that did not have a simple answer. A client of a Personal Services Provider has to deduct PAYE when paying the provider’s invoices, so does that mean that the PSP is an employee? If so, does that mean that, even though its turnover exceeds R1m, it is not carrying on an enterprise and therefore does not have to register for VAT? It’s a tricky question, but, fortunately, the South African Institute for Tax Practitioners (SAIT) came to my resuce with an opinion on that…

By “swallow” I’m referring to people who live in the Northern Hemisphere and travel South every year (typically to a coastal town) to enjoy our summers and avoid the worst of their winters. Now, interestingly, I asked myself the title question while talking to a South African who has lived and worked in Abu Dhabi for 17 years and heads South during the height of their summer to cool off in our winter weather! He and his wife are planning to build a “swallow’s nest” in Mossel Bay. It will not be rented out and will be used only by…

Each year, you will be making a donation of R100 000 to your trust owned company. Does it have to be declared anywhere? Yes. All companies must declare all income received or accrued in their annual tax return. Here’s how: Click on Balance Sheet. Under Current assets – Trade and other receivables enter the current balance from the TB. It will include the latest donation and previous ones as well. Under Total Equity, enter the current balance from the TB. Click on Income Statement, then on Income Items. Under Other income type in the donation amount. Then click on…

I’ve talked a lot about double CGT in various articles and in my books. It generally arises when you own a company that owns growth assets. If you sell, or, on death are deemed to have sold, the shares in the company, in the first instance to your trust and in the second to your deceased estate, you will make a capital gain on the increase in value of the shares which resulted from the growth of the asset values, and you will pay CGT. Then, if the company subsequently sells the growth assets (possibly to pay your deceased estate’s…

Wow. How important things flip flop! SARS decided in their (its?) wisdom that a pure capital gain could not pass through the conduit and be taxed in the hands of a beneficiary. They imposed penalties and interest on the ABC Trust which, they deemed should have declared the gain and paid CGT. In ABC Trust v Commissioner of the South African Revenue Services (IT 24918)(18 March 2021), however, the Tax Court overturned SARS’ decision and declared that the CGT was, in fact, payable by the beneficiary. So the answer to the title question is – Yes! For those of you…

The short answer is yes. Allowances are fully taxable. But if you are using your cellphone for company business or the company’s cellphone for your private calls, the tax implications change. There’s a Draft Interpretation Note that explains all this. Here is a summary – 1) Your company provides you with a phone/tablet/contract and allows you to use it for personal matters as well as for business. If the asset is used mainly for business, then there is no tax payable for this benefit. “Mainly” means more than 50% but this is pretty subjective, because it would include incoming as…

When SARS changed the 2022 annual tax return IT14 for companies, they got really clever. Not only do they want the details of the shareholders and when they acquired the shares. They also want the tax registration numbers of the shareholders. Now, since any well designed trust structure requires that the trust owns a company that owns the assets, when preparing the company tax return, the trust’s tax number is required. If you can’t fill that in, you can’t submit the company’s return. And, of course, once you’ve registered your trust as a taxpayer, you have to submit (hopefully Nil)…

A couple who booked a meeting with me were not sleeping at night because they had been doing more than R1m a year turnover from their two multi-unit AirBnB premises and they weren’t VAT registered. What does the law say about this? As soon as you exceed R1m a year VATable turnover, you must register as a VAT vendor. If you don’t, SARS may deem you to have done so and demand the VAT portion of all your invoices, even if you didn’t add VAT. This is what they were panicking about. The legislation is open to various interpretations and…

This question is only relevant when the liability date could fall either into the previous tax year or the new tax year of the seller. Let’s say that the seller’s tax year ends on 28 February. The Offer to Purchase was signed by both parties on 15 January 2023. The supensive clauses were satisfied on 5 February 2023. The transfer was registered at the Deeds Office on 25 March 2023. From a CGT point of view, when were the proceeds of the sale received by or accrued to the seller? (see 3(a) Eighth Schedule, Income Tax Act) My view, as…

Evidently about mid 2022 SARS posted a letter onto it’s website advising anybody that was lucky enough to stumble on it that it had set up a new platform for import and export licenses. It advised traders that they must migrate to the new platform (they called it “onboarding”) Of course, nobody saw the letter. Now we just got bombarded by SARS with SMSs advising us that our (clients’) licenses are about to be suspended, because they did not onboard to RLA. Thank you SARS. Brilliant communication. It took us the usual forever to navigate our way through the process,…

Well done SARS! They finally woke up. I’ve written on several occasions about taxes that SARS can’t hope to collect. Amongst them are – Transfer Duty on the sale of shares in a Residential Property Company. Securities Transfer Tax on the sale of shares in a company. CGT on the sale of shares in a company. Why was this? Because the only place where the shareholding of a company was recorded was on the share register on somebody’s computer. Now, however, there’s an addition to the Company Tax Return form IT14 which requires that the share register be disclosed. This…

Yes. The rules are the same as for any other person, partnership or company. That is. Compulsory if VATable turnover exceeds R1m Voluntary if Vatable turnover or purchases average at least R4 200 per month Here’s what the VAT Act has to say about it. s51. Bodies of persons, corporate or unincorporate (other than companies).—(1) Subject to the provisions of section 46, where any body of persons, whether corporate or unincorporate (other than a company), carries on or is to carry on any enterprise— (a) such body shall be deemed to carry on…

I can understand why this causes confusion. So let’s go through the entire story. All South African residents are taxed on their worldwide earnings. This is know as the residence based tax. Non-residents are taxed on earnings which come from a South African source. This is known as the source based tax. So, to test whether or not you are a resident of South Africa, there’s a step by step process. – Are you ordinarily resident in South Africa? Is this essentially your home? Various tests will be applied. Typically, it is your home if it is the place to…

I’m ready to give up! This is what the Lwazi Bot on SARS website says – “According to the law, a Company must submit tax returns annually and declare that the company is dormant, failure to do so may result in Administrative Penalties.” And they certainly are hitting dormant companies with a R250 penalty every month for every outstanding tax return. Here’s what their final demand says – Dear Taxpayer Trading Name: T TRADING PTY LTD FINAL DEMAND TO SUBMIT…

No. It is not a requirement. However, bear in mind that VAT is payable on all shipments that are imported into South Africa. This means that an importer will pay VAT but, if not VAT registered, will not be able to claim it back as input VAT. In order to maintain the same profits they will have to charge higher prices than their competitors. And what about exporters? They, also, are under no obligation to be VAT registered. Whether they are, or not, their customers will not pay VAT, because exports are zero rated. But, as with importers, they will…

It is a general rule in tax that transactions between connected persons are deemed to be at market value. Typically, this arises when someone sells their fixed property or shares in a private company to their trust. The question then arises “Who must do the valuation?” and the Income Tax Act and Transfer Duties Act are silent in that regard. They simply say that SARS may challenge any valuation. This means that the seller can determine the market value. And that raises the question “On what basis must the asset be valued?” Generally, companies are valued on their last signed…

I have been wrong all this time! The answer is yes, a trust must register as a taxpayer even though it will never receive taxable income. I dug this up while referencing my upcoming book 16 Steps to Tax Wisdom. Here’s why – s67 Registration as taxpayer.—(1)Every person who at any time becomes liable for any normal tax or who becomes liable to submit any return contemplated in section 66 must apply to the Commissioner to be registered as a taxpayer in accordance with Chapter 3 of the Tax Administration Act s66 Notice by Commissioner requiring returns for assessment…

I was caught really flat footed recently when, in a meeting, I was asked whether the client, who buys and sells residential property and is VAT registered, must charge VAT on each sale. I knew the answer was “No”, but an alarm bell rang in the back of my head, because I had accepted that as common knowledge and had never gone to source, the VAT Act, to confirm it. I promised to go to source and report back. Well, I had to report back that nowhere in the Act, does it state in simple terms that the trade of…

SARS seems to be trying everything in the book to squeeze more out of those who pay tax. Now it’s all about assessed losses. If your company had an assessed loss at the beginning of any year, it could carry it forward as a deduction against future taxable income provided it traded in that year. This remains the case for companies whose taxable income is less than R1m. However, for those whose taxable income exceeds R1m the set-off is limited to 80% of the taxable income. Evidently, although s20 is not absolutely clear on this, the balance of the assessed…

Tax

The tax allowances for solar systems

Does a Personal Services Provider have to charge VAT?

Is a swallow’s nest in South Africa a Primary Residence for CGT purposes?

How to declare your R100 000 donation on your company’s tax return

The hidden double CGT effect of an s42 transaction

Can just a Capital Gain pass through the conduit principle and be taxed in the hands of a beneficiary?

Is a cellphone allowance taxed?

Now there’s no way around it. Your trust must register as a taxpayer.

If I earn over R1m a year from AirBnB, must I register for VAT?

On what date does the seller become liable for CGT on the sale of fixed property.

All Import Export licenses suspended

A profound change to Company Tax returns

Can a JV register for VAT?

Tax residence – the full picture

SARS Administrative penalties on dormant companies

Must an importer or an exporter be VAT registered?

Market value for connected transactions

Must a trust register as a taxpayer?

If I trade in residential property must I charge VAT?

Assessed losses that won’t carry forward

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