Friday, February 5, 2016
On February 3, the South African Revenue Service (SARS) issued a Public Notice providing a revised list of all reportable tax arrangements under the Tax Administration Act, 2011 (TAA).
The TAA empowers SARS to identify arrangements that could have the effect of enabling the avoidance or postponement of liability for taxes on income, or reducing that liability.
The relevant sections of the TAA provide that every company or trust that derives, or will derive, any tax benefit in terms of a reportable arrangement must report that arrangement to SARS within 60 days, so that the agency is able to evaluate it from an anti-avoidance point of view at an early stage of its implementation.
For example, reportable arrangements originally foreseen in the TAA have three characteristics: where the calculation of interest and other finance charges in an arrangement is wholly or partly dependent on the tax treatment of that arrangement; where provision has been made for the variation of such finance charges should "the actual tax treatment differ from the anticipated tax treatment;" and where the potential amount of the variation contemplated in such a provision, referred to above, exceeds ZAR5m (USD315,240).
The Notice issued by SARS includes a number of other arrangements that have been subsequently identified by the agency. For example, the list contains any arrangement in the terms of which a company buys back shares from one or more shareholders for an aggregate amount of at least ZAR10m, if that company has issued or is to issue any shares within 12 months of entering into the arrangement.
Also included are arrangements in which a resident makes contributions or payments to, or acquires a beneficial interest in, a trust that is not a resident, where the amount of the contributions, payments or the value of the interest exceed ZAR10m; and where a controlling interest is acquired in a company that has carried forward, or expects to carry forward, a balance of assessed losses exceeding ZAR50m.
In addition, an arrangement is reportable if a person that is a resident pays an amount exceeding ZAR1m to an insurer under the law of any country other than South Africa; or if the arrangement is expected to give rise, or has given rise, to foreign tax credits, if those credits exceed an aggregate amount of ZAR10m.