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Tax & Legal Highlights

Providing weekly updates on the latest tax and legal developments in South Africa.

1. What you need to know: Tax deductions for home office expenses and your 2021 tax return

Written by Anthea Scholtz, Director; Claudia Gravenorst, Associate Director and Siya Tshangana, Consultant: Global Employer Services, Deloitte Africa Tax & Legal

Due to the COVID-19 pandemic, you, as an employee, may have had to work from home during the 2021 tax year and you may have incurred additional expenses to run your home office. Given that the 2021 tax filing season is now open, you need to assess whether you are permitted to claim certain of these expenses as a tax deduction in your 2021 tax return.

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2 The Draft 2021 Taxation Laws Amendment Bill and the Draft 2021 Tax Administration Laws Amendment Bill

On 28 July 2021 National Treasury published the Draft 2021 Taxation Laws Amendment Bill and the Draft 2021 Tax Administration Laws Amendment Bill which give effect to the 2021 budget proposals announced on 24 February 2021. The draft bills are open for public comment. Comments are to be made in the form of written submissions by close of business on 28 August 2021.

Click here for a series of highlights aimed at providing an overview of the more pertinent tax proposals.

3. New section 11(j) provisions are not same old, same old

Written by Louise Vosloo, Director: Deloitte Africa Tax & Legal

With effect from 1 January 2019, the doubtful debt allowance provisions contained in section 11(j) of the Income Tax Act, 58 of 1962 (the Act) were amended. While taxpayers who apply IFRS 9 have been grappling with these changes for some time, other taxpayers may not have realised the extent to which the amendments practically alter the determination of the allowances that they may claim.

Before 1 January 2019, the doubtful debt allowance was a discretionary allowance, i.e., whether and how much allowance could be claimed as a deduction was at the discretion of the Commissioner for the South African Revenue Service (SARS).

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4. Value-added tax: Closing the compliance gap

There has recently been renewed focus by the South African Revenue Service (SARS) on value-added tax (VAT) in an effort to close the tax revenue gap. It is important to ensure that transactions are treated correctly from a VAT perspective to avoid unnecessary disputes and potential assessments for VAT, penalties and interest.

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5. Is carbon sequestration a viable option for reducing carbon tax?

Natural features such as trees, plants, and bodies of water play a critical ecological role in urban areas by providing vital ecosystem services offering benefits to surrounding populations including food and fuel, pollination, water purification, nutrient cycling and carbon sequestration.

Carbon sequestration has the potential to yield good carbon tax savings when implemented in the correct manner.

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6. VAT input tax: The immediate and not the ultimate purpose is important

Written by Severus Smuts, Director: Indirect Tax Leader, Deloitte Africa Tax & Legal

While there have been a number of European cases dealing with input tax, the South African courts have laid down the principles that apply to input tax deduction (and the payment of imported services valued- added tax [VAT]).

An unreported judgment delivered by the Tax Court in June 2019, which dealt with a dispute of millions of Rands in VAT disallowed by the South African Revenue Services (SARS), has brought the sections of the Value-Added Tax Act (the VAT Act) dealing with exempt supplies, in particular financial services, into the spotlight.

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7. The Draft 2020 Taxation Laws Amendment Bill and Draft 2020 Tax Administration Laws Amendment Bill open for public comment

On 31 July 2020 National Treasury published the Draft 2020 Taxation Laws Amendment Bill and the draft 2020 Tax Administration Laws Amendment Bill which give effect to the 2020 Budget proposals announced on 26 February 2020.

Click here to read and download a summary of the more pertinent tax proposals.

8. Digital services tax in Africa – The journey so far

Written by Norman Mekgoe, Director and Mohamed Hassam, Senior Manager; International Tax, Global Business Tax Services, Deloitte Africa Tax & Legal

As the COVID-19 pandemic disrupts economies across the globe, companies in the traditional industries, such as mining and manufacturing, are struggling to contain losses and avoid cutting jobs.

The economic slowdown naturally translates into declining revenues for tax authorities across the globe, which will most likely lead to revenue authorities across the world to look at other sources from which to collect taxes. From an African perspective, this will be exacerbated by the fact that most countries on the continent have commodity-based economies that are reliant on high commodity prices which in turn are dependent on supply and demand.

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9. Creation of permanent establishment as a result of the COVID-19 pandemic

Written by Norman Mekgoe, Director, Murray Terwin, Senior Manager, and Khodani Tshidzumba Assistant Manager; International Tax, Global Business Tax Services, Deloitte Africa Tax & Legal

The COVID-19 pandemic has led to unprecedented lockdown measures being imposed around the world. These measures have included the closure of borders, restricted movements of people and cancellation of visas. As a result, many employees are required to work from home and, in some cases, away from the country of their employment. A question that arises is whether a permanent establishment (PE) can be created for a company in other countries as a result of some of its employees being forced to work from such other countries because of COVID-19 measures.

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10. Home office expenses

Written by Anthea Scholtz, Partner: South Africa and Western Cape Tax & Legal Regional Leader, Claudia Gravenorst, Senior Manager: Global Employer Services and Sharon Matombo, Senior Consultant: Global Employer Services, Deloitte Africa Tax & Legal

The COVID-19 pandemic has necessitated many employees to work remotely from their homes during the lockdown period. This in turn has meant that employees had to ensure that a space, or part of their home, was set up in such a manner that it was conducive for them to work from home effectively and productively.

In this article, we provide a brief overview of the requirements that need to be met in order to claim a tax deduction for home office expenses.

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11. Disclosure of uncertain tax positions

Written by Hildegarde Cronje, Director: Global Business Tax Services, Deloitte Africa Tax & Legal

IFRIC 23 Uncertainty over Income Tax Treatments applies to entities subject to International Financial Reporting Standards (IFRS) and deals with the disclosure, recognition and measurement of Uncertainty over Income Tax Treatments in an entity’s annual financial statements (AFS).

IFRIC 23 applies to financial years commencing on or after 1 January 2019, with earlier application permitted. It deals with income taxes within the scope of IAS 12 Income Taxes; therefore other taxes such as value-added tax, employees’ tax and customs and excise duties are not included. However, entities should note that where, for example withholding taxes represent IAS 12 income taxes as defined, then such withholding taxes would fall within the ambit of IFRIC 23.

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12. Understanding the tax implications of termination payments to mobile employees

Written by Angelique Worms, Director and Global Employer Services Leader, and Jaco la Grange, Associate Director: Global Employer Services, Deloitte Africa Tax & Legal

The income tax implications of termination payments made to employees who have worked in more than one country for the same employer group are complex and need to be considered with care.

It is part of economic life that employers sometimes have to retrench employees. Multinational groups often employ mobile employees, meaning employees who work in more than one country for their employer group. Where such mobile employees are retrenched, the payment of a termination package to the retrenched employee may trigger tax obligations for the employee and employer company in more than one country.  A termination package typically includes one or more of the following components: a payment in lieu of notice, a bonus, and a severance payment.

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13. The interpretation of tax legislation

Written by Le Roux Roelofse, Director: Global Business Tax Services and National Technical Leader, and Mia Heymann, Assistant Manager: Legal, Deloitte Africa Tax & Legal

The correct approach to statutory interpretation in general, and specifically the extent to which a court may have regard to an administrative body’s (such as SARS) interpretation of legislation, was considered by the Constitutional Court in the recently reported case of Marshall and Others v Commissioner, South African Revenue Service 2019 (6) SA 246 (CC) (25 April 2018).

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