Archive for the 'Tax' Category

Tax clearance certificates

Untitled-7A tax clearance certificate (TCC) is a document issued by SARS confirming that the applicant’s tax affairs are in order.

TCCs are required for tender applications, to reflect “good standing”, for foreign investment, and for emigration purposes.

The Tax Administration Act, which came into effect on 1 October 2012, contains requirements and time frames for the issue of tax clearance certificates. SARS has also issued guidelines in this regard.

TCCs pertaining to tenders and “good standing” are of particular importance for many of our clients since these TCCs are often required by businesses in order to bid for a tender or render a particular service. Following is a brief overview of the application process and requirements relating to these two types of TCC.

In any application for a TCC, for whatever purpose, the reason for the application must be properly stated. The TCC is only valid for one year from the date of issue, provided the taxpayer remains compliant with SARS requirements. The proviso confirms that SARS is entitled to withdraw a TCC at any time if it was issued in error or if it was obtained on the basis of fraud, misrepresentation or non-disclosure of material facts.

SARS requires certain conditions to be met before a TCC is issued. These conditions are that:

  • the taxpayer must have registered for income tax prior to applying for a TCC;
  • the taxpayer should have no outstanding debt for any taxes (including income tax, Value Added Tax (VAT), dividend tax, administrative penalties and employees’ tax);
  • any deferred arrangements made are being adhered to;
  • all returns and/or declarations are up to date and in the process of being assessed by SARS;
  • all tax reference numbers must be active and correct, e.g. the tax reference number must not be deregistered or suspended on the SARS system; and
  • the registration details on the application form (TCC-001) must correspond with the information on the SARS system.

It is important to bear in mind that SARS has 21 business days following the submission of an application to issue or decline a TCC and that, to be on the safe side if one is in a hurry, the full period should be allowed for. It goes without saying that, to avoid an application being declined, one should be 100% sure that one’s tax affairs are indeed in order before applying for a TCC.As we are dealing with these applications on a regular basis we invite you to contact our Tax Compliance Department at tax@asl.co.za if you have any queries about TCCs, or if you wish to submit an application for a TCC.

Advertisements

SARS going fishing?

Untitled-6In an article in Business Day of 16 May 2013, Evan Pickworth refers to “Open-ended fishing expeditions by the South African Revenue Service (SARS)”, and we can certainly identify with all he said.

Aside from the issues raised in the article we have experienced an increased tendency by SARS to approach our clients directly, without first approaching us as the tax practitioner representing the client. Unfortunately this practice is not following set rules since in some instances we receive copies of correspondence, while in other instances the first we hear about any SARS correspondence is the concerned and sometimes traumatic calls and emails we receive from clients when approached directly by SARS.

We can testify that SARS has placed much emphasis on collections, sometimes even raising the threat of legal action with taxpayers while payments have not yet fallen due or are still being / could still be disputed.

We realise that this state of affairs might cause uncertainty and undue concern with our clients and therefore invite you to forward any SARS correspondence to our Tax Compliance Department at tax@asl.co.za for verification and follow-up.

We will advise you whether any amount is in fact due, and request you to be patient while we deal with the matter.

Taxation of trusts and a look into the crystal ball

27 February 2013 – the day on which the Rubicon was crossed as far as the taxation of trusts is concerned.

Although not much was said, we heard enough in Minister Pravin Gordan’s budget speech that day to know that things are about to change. At stake is the conduit principle that is currently applied with regard to trusts and which ensures that income earned retains its nature when redistributed. In terms of proposals made in the budget speech, the conduit principle might fall away.

While we expect draft legislation to be published sooner rather than later, we thought it prudent to explain the anticipated changes in basic terms by means of an example:

Mr A’s family trust realises capital gain of R1 000 000 and interest income of R100 000 in the current year of assessment. He is 58 years of age, has no other taxable income in his personal capacity, and he has four grandchildren. We have already established that the trust will be distributing income to these five individuals (Mr A and his four grandchildren), to achieve maximum tax efficiency.

  • Scenario 1 – Conduit principle in effect. Capital gain and interest income is distributed equally between all five individuals, and all are taxed based on this distribution.No capital gains tax or income tax will be applicable, due to the utilising of exempt portions of interest received and capital gains.
  • Scenario 2 – Conduit principle no longer applies. Same amount distributed but now as normal income.R156 640 tax due in total and payable to SARS by the five individuals.

Conclusion

The consequences of the proposed change are far-reaching. If you are aware of a possible transaction in the foreseeable future involving a trust, that will result in capital gains or other income that is out of the ordinary, please contact your relationship director as a matter of urgency to enable us to plan properly before the event occurs.

Further developments around this matter will be covered in our newsletter in the coming months.

Source: Arnold Scholtz                                                         

ASL_1


Follow ASL on Twitter

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 10 other followers

Advertisements