Andersen Tax Review — March 2021

Author: Ernest Marais

Service: Andersen Tax


Notable Tax Law updates covering South African case law, legislation, SARS and global tax developments.

Case Law

Medtronic International Trading S.A.R. L v CSARS (33400/2019) 2020 Zagpphc

The applicant sought an order from the court to review two rulings taken by the respondent, in terms of the Promotion of Administration of Justice Act, 2000 (“PAJA”), the common law, section 33 of the Constitution and the principle of legality. The first ruling is that the respondent would not consider the applicant’s application for remission in terms of section 39(7)(a) of the VAT Act. The second ruling was the respondent opted not to withdraw this ruling in terms of section 9 of the Tax Administration Act. It was held by the court that the applicant proved that the respondent erred in their application of the law when making these rulings. This was because there was no provision that allows them to make such a ruling and the circumstances considered by the respondent were unsuitable. The decision made by SARS was therefore set aside and the applicant was successful.

Legislation

Changes to Various Retirement Acts

(read the full document here)

Annuitisation of the Provident Fund – provident funds and provident preservation fund will now be treated in the same manner as pension, pension preservation, and retirement annuity funds.

Free Portability of Retirement Funds – transfer from retirement savings to provident and provident preservation funds from other funds would not trigger any tax.

Retirement Annuities – members can now access their benefit (after discontinuing contributions) if the member’s interest is R15 000 or less (previously R7000).

Commutation of living annuity for terminating Trusts - An annuitant can now choose a trust to be a beneficiary of their living annuity on his or her death.

Tax Directives – Individuals and Tax Practitioners will be able to request previously issued tax directives that are not older than 3 years.

Income Tax Act, 1962

Section 12N: Draft Interpretation Note – Deductions in respect of improvements to land or buildings not owned by a taxpayer. Section 12N which gives allowances for improvements to land and buildings not owned by a taxpayer but where a taxpayer holds a right to use or occupation. These improvements must be done under PPP (Public Private Partnership), a lease agreement with the state and the state will own that land. Click here to access full Draft Interpretation Note.

General Note 22 (Issue 2): Paragraph (c) Benefit Funds – has become obsolete due to changes in legislation.

Interpretation Note 113 – Apportionment of surplus and minimum benefit requirements: Pension Funds Second Amendment Act – this contains clarification on the tax handling of the former members, existing pensioners, actuarial surplus allocations or distributions made to members and employers by funds under the provisions of sections 15B, 15C, 15D or 15E of the Pension Funds Act. Click here to access full Interpretation Note.

The following general notes have been withdrawn:

  • General Note 14 (Issue 2) – Housing loans and guarantees (s.99)
  • General Note 15 – Funds registered in the former TBVC states
  • General Note 17 (Issue 2) – Standard rules
  • General Note 26 – Deductibility of administration costs
  • General Note 27 – Amendments and revised rules
  • General Note 28 – Group life benefits provided by provident funds
  • General Note – Stop order against benefits transferred from a pension fund to a provident fund
  • General Note 1 – Transfers from pension to provident funds in terms of the 14 September 1990 arrangement.
  • General Note 13 – Retirement from employment
  • General Note 21 (Issue 2) – Application for tax directives (benefits that include pre- 1 March 1998 vested rights)
  • Recoupment: Assets in a deceased estate was withdrawn on 4 March 2021 due to amendments to the provisions that govern deceased estates in the Income Tax Act, with effect from 1 March 2016. Read the access the full Interpretation Note here.

Updated Average Exchange Rate encompassing that amounts that are noted in foreign currency must be converted to Rands by using the Average Exchange Rate.

Access more info: Table A, Table B and an example of how to calculate the rate.

Travelling allowances in terms of section 8(1)(b)(ii) and (iii) have been amended. The allowances can be accessed here on page 4.

The determination of meals and incidental costs in terms of section 8(1)(a)(ii) has been amended to R139 per day.

South African Revenue Services

TCS changes in respect of Foreign Investment Allowance (FIA) and Emigration

There will no longer be any financial emigration.

Any applicant who had their MP336(B) submitted on or prior to 28 February 2021 will be able to receive a Tax Compliance Status for purposes of emigration.

Applicants from 1 March 2021 must apply through the SARS TCR01 “Emigration” Application process.

From 1 March 2021 applicants who wish to receive their retirement benefits must prove that they have been non-resident for an uninterrupted period of 3 years.

Update on Trade Testing

SARS has begun the process of establishing Tax Directives process and trade testing in terms of Independent Software Vendor (ISV). Testing is between 24 March 2021 till 22 April 2021 with the goal of launching the software in the first quarter of the year.

Contributed Tax Capital

The Corporate Income Tax guide has been changed to provide taxpayers with much needed clarity with regards to the Contributed Tax Capital section to capture only the movement of funds for the current year or the aggregation of all movement of funds since 1 January 2011.

SARS requests that employers organize their data for the annual Employers Filing Season

This data must include the Monthly Employer Declarations submitted, payments made and Tax Certificates (IRP5/IT3) for the tax year from 1 March 2020 to 28 February 2021. Employers will have the period between 1 April 2021 to 31 May 2021 to ensure the data is submitted.

Tax developments from around the world

Toolkit on Tax Treaty Negotiations

The Platform for Collaboration (PCT) is a joint collaboration between the IMF, OECD, World Bank Group and the UN. They have released a Toolkit on Tax Treaty Negotiations. It entails how to decide if a treaty should be established, steps on how to conduct negotiations and what countries should do after the negotiations. The Toolkit can be accessed here.