APRIL 2010 ISSUE 128 CONTENTS VAT Cutoff-dates and rulings

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1 APRIL 2010 ISSUE 128 CONTENTS ANTI-AVOIDANCE Sham transactions DIVIDENDS TAX Share buy-backs EMPLOYEES TAX Taxation of non-residents entertainers and sportspersons EXCHANGE CONTROL Tax and other issues related to foreign assets VAT Cutoff-dates and rulings SARS NEWS Interpretation notes, media releases and other documents ANTI-AVOIDANCE Sham transactions Many decisions of South African and foreign courts, in the context of tax and otherwise, have described particular transactions as being a sham. The word sham is often used in judgments without explanation, as though its meaning was selfevident and as though the legal consequences of a transaction being a sham are clear. Both of these assumptions are unwarranted. The criteria for the existence of a sham, the precise meaning of the word, and the legal consequences of a transaction being so characterized by a court of law, are far from self-evident. In Raftland (Pty) Ltd v Commissioner of Taxation [2008] HCA 21, the High Court of Australia put the word sham under a strong lens, and the judgment contains a lengthy and illuminating discussion of the concept, its meaning, and its legal consequences. In the court, of first instance, the presiding judge said that A conclusion that a transaction is a sham means that it may be ignored and regard had to the real transaction. On appeal, the High Court of Australia, said (at para 101) that it is essential for this court to grapple with the issue of sham, and pointed out that in Paintin and Nottingham [1971] NZLR 163 at 175 it had been held that the mere invocation of sham does not render a transaction suspect, still less ineffective. Integritax Issue 128 April 2010 SAICA, 2010 page 1

2 The High Court observed (at para l06) that it has been held in the United States that the courts cannot ignore the fact that tax laws affect the shape of nearly every business transaction. Businesses plan their affairs around the realities of competition and tax liability. Subject to the law, that is a taxpayer s right and went on to say that the United States Supreme Court has developed a doctrine akin to sham to enhance the power of a judge to disregard artificial transactions. In Sharment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449 the Australian Federal Court, after reviewing the authorities on the concept of a sham, said per Lockhart J that A sham is... for the purposes of Australian law, something that is intended to be mistaken for something else or that is not really what it purports to be. It is a spurious imitation, a counterfeit, a disguise or a false front. It is not genuine or true, but something made in imitation of something else or made to appear to be something which it is not. It is something which is false or deceptive and the High Court went on to say that Important to this description is the idea that the parties do not intend to give effect to the legal arrangements set out in their apparent agreement, understood only according to its terms. In Australia, this has become essential to the notion of sham, which contemplates a disparity between the ostensible and the real intentions of the parties. The courts must therefore test the intentions of parties, as expressed in documentation, against their own testimony on the subject (if any) and the available objective evidence tending to show what that intention really was. In the United Kingdom case of Bridge v Campbell Discount Co Ltd [1962] AC 600, Lord Devlin said that When a court of law finds that the words which the parties have used in a written agreement are not genuine, and are not designed to express the real nature of the transaction but for some ulterior purpose to disguise it, the court will go behind the sham front and get at the reality. The concept of a sham was further refined by Diplock LJ in Snook v London and West Riding Investments Ltd [1967] 2 QB 786 at 802 where he said that If it has any meaning in law, [sham] means acts done or documents executed by the parties to the sham which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create.... [F]or acts or documents to be a sham, with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating. No unexpressed intentions of a shammer affect the rights of a party whom he deceived. Attempts have been made to broaden the base on which a transaction can be disregarded as being a sham, so as to extend the concept beyond the narrow criteria proposed by Diplock LJ in this latter dictum. To this end, the courts of the United Kingdom developed the concept of fiscal nullity which applies where steps having no commercial or business purpose other than tax avoidance are inserted into a Integritax Issue 128 April 2010 SAICA, 2010 page 2

3 composite transaction (See for example, Furniss v Dawson [1984] AC 474). It has been suggested that this should be viewed as a species of the sham concept. However, the concept of fiscal nullity has not found favour outside the United Kingdom. Indeed, even within the United Kingdom, the label of sham is attached only where parties intended to create rights and obligations different from those appearing in their documents. In the New Zealand decision of Paintin and Nottingham [1971] NZLR 163 at 175, Turner J made it clear that, in New Zealand, the word sham does not apply to a transaction where the parties to a transaction intend it to have effect according to its tenor. A wrong direction In Minister of National Revenue v Cameron [1974] SCR 1062, the Supreme Court of Canada adopted the approach to sham expressed in Snook. Shortly thereafter, in Minister of National Revenue v Leon [1977] 1 FC 249 at 256, the Federal Court of Appeal, in a significant deviation from the Snook principles held that If [an] agreement or transaction lacks a bona fide business purpose, it is a sham. It took some seven years for the courts to backtrack on this regrettable and confusing detour, but in Stubart Investments Ltd v The Queen [1984] 1 SCR 536, the Supreme Court of Canada per Estey J emphasised that the subjective element of deceit was the core element in a sham. He said in this regard that a lack of business or commercial purpose was insufficient to evidence a sham and that an additional, subjective element was needed. Thus This expression [ sham transaction ] comes to us from decisions in the United Kingdom, and it has been generally taken to mean (but not without ambiguity) a transaction conducted with an element of deceit so as to create an illusion calculated to lead the tax collector away from the taxpayer or the true nature of the transaction; or, simple deception whereby the taxpayer creates a facade of reality quite different from the disguised reality. In the same decision, Wilson J noted that A transaction may be effectual and not in any sense a sham... but may have no business purpose other than the tax purpose. These dicta put the concept of a sham back on the correct track as importing, not the lack of a genuine business purpose which is an entirely different notion but a transaction involving a deliberate and deceitful attempt to disguise the real agreement between the parties. PricewaterhouseCoopers IT Act: s 80A s 80L Integritax Issue 128 April 2010 SAICA, 2010 page 3

4 DIVIDENDS TAX Share buy-backs The complexity of a tax system may in some instances result in the fiscus receiving amounts of tax that may not be legally due. One instance in which this may arise is when a JSE listed company buys back its own shares through the JSE. When a natural person who holds shares as an investment sells those shares, the capital gain made on disposal of those shares (reduced by 75%) are included in his taxable income, which will potentially lead to a maximum rate of tax of 10% (25% x 40%) on such capital gains. However, when a company buys back its own shares, and finances the buy-back out of retained earnings, the proceeds received by the shareholder for the sale of those shares to the company are classified as a dividend for tax purposes subject to secondary tax on companies (STC) payable by the company, and exempt from tax in the hands of the erstwhile shareholder. When such a buy-back is effected directly from the shareholders in general as opposed to a purchase in the open market, the company typically issues a circular to shareholders informing them of the tax implications of the buy-back. In the absence of such a notification, a well-informed taxpayer will likely know what inquiries to make to determine whether amounts received in a share buy-back will be a capital receipt or a dividend as he at least knows who is purchasing the shares from him. The position is, however, a lot more difficult when a JSE-listed company buys back its own shares through a broker on the JSE and not directly from its shareholders. In this instance, the company does not know from whom it is purchasing the shares and the selling taxpayer does not know to whom he is selling the shares. This barrier prevents the purchasing company from notifying the applicable selling shareholder of whether the proceeds on disposal are a dividend or whether he is still liable for capital gains tax. Thus, in the absence of any indication to the contrary, the compliant taxpayer renders a tax return in which he discloses the disposal as a capital gains tax event on which he is liable to tax while the company buying the shares will have taxed itself on the amount of any dividend resulting from the acquisition of its own shares. SARS thus gathers 20% in tax instead of only 10%. This anomaly will probably disappear when the new dividends tax is introduced, because the company will become liable to withhold the dividends tax from the amount payable to the shareholder if the buy-back is financed out of retained earnings, and the shareholder will effectively be notified whether the amount received constitutes or includes a dividend. PricewaterhouseCoopers IT Act: s 64B Integritax Issue 128 April 2010 SAICA, 2010 page 4

5 EMPLOYEES TAX Taxation of non-resident entertainers and sportpersons With the growth in the film industry in South Africa, some interesting tax issues may arise around non-residents working in South Africa in this industry. The general understanding is that non-resident entertainers and sportspersons are subject to a final withholding tax of 15%, but this is not always the case. It is important to determine the services that the non-residents will be rendering in the film production, the nature of the contractual relationship, the country of residence and where they will be paid, as all of these criteria determine the tax implications for the non-resident working in South Africa. The other issue which must be considered by a South African company utilising the services of a nonresident is whether or not there is any withholding obligation on the South African entity, either in terms of the tax on foreign entertainers and sportspersons, or in terms of the normal employees tax (PAYE) withholding rules. Taxation of non-residents In principle, non-residents of South Africa are taxed on income which is sourced in South Africa or which is deemed to be from a source in South Africa. The place where services are rendered is typically treated as the source of the income derived for such services. Therefore, any remuneration paid for services rendered in South Africa would be taxable here on a source basis, unless the nonresident qualifies for relief under an applicable double tax agreement (DTA). Depending on whether or not the entertainers are employees, independent contractors or render services through an offshore entity, different tax implications could arise resulting in various tax compliance obligations. Withholding tax on foreign entertainers and sportspersons The taxation of foreign entertainers and sportspersons is dealt with in terms of sections 47A and 47B of the Income Tax Act No. 58 of 1962 (the Act). Section 47B of the Act allows for the deduction of a final withholding tax levied at 15% on all amounts received or accrued, which are payable to nonresident entertainers and sportspersons in respect of his or her personal activities exercised in South Africa as an entertainer or sportsperson. Where this tax is applicable, all remuneration received for services rendered in South Africa, is subject to a final tax of 15%. For this purpose, an entertainer or sportsperson is defined as including any person who for reward performs any activity as a theatre, motion picture, radio or television artiste or a musician; takes part in any type of sport; or takes part in any other activity which is usually regarded as of an entertainment character. The definition of an entertainer is quite wide, and for example would clearly apply to actors in a film production. In the case of non-resident actors, they would be subject to the 15% final tax imposed on fees for services rendered in South Africa, and South African residents who pay such amounts to the non-resident actors would be obliged to withhold the tax from such payments. This withholding tax would, however, not apply if the actor was an employee of a South African resident employer and was physically present in South Africa for more than 183 days during any 12- month period commencing or ending in the tax year in which the personal activity is exercised. In such a case, the normal income tax rules would apply, rather than the 15% withholding tax. Integritax Issue 128 April 2010 SAICA, 2010 page 5

6 It is important to note that where an entertainer or sportsperson renders services through an offshore entity, the withholding tax may still apply to the entertainer or sportsperson even if the payment for the services accrue to another non-resident. This principle is also confirmed in Article 17 of the OECD Model Convention, which allows the state of source to tax the entertainer or sportsman even where the income from personal activities accrues to another person. We have confirmed with the Non-Resident Entertainers Unit at the South African Revenue Service ( SARS ) that they would not regard, for example, a film director as an entertainer for purposes of the application of section 47B. Therefore, for example, it would seem that non-resident directors and other crew members of a film production team would not be subject to the 15% withholding tax, but would instead be subject to income tax on their South African sourced income according to the normal rules, subject to treaty relief where applicable. In such cases, the individual would be required to register for income tax in South Africa, settle any tax liability by way of provisional tax payments (or employees tax where applicable) and claim DTA relief in his/her income tax return, if such relief is available. If a film crew member was a resident of a country with which South Africa has concluded a DTA and was employed by a foreign employer, they might qualify for DTA relief under Article 15 of an applicable DTA depending on the circumstances. Typically, DTA relief would apply and there would be no tax in South Africa if the employee was present in South Africa for not more than 183 days in any 12-month period commencing or ending in the tax year concerned, and was paid by a non-resident employer and the remuneration was not borne by a permanent establishment of the employer in South Africa. However, specific DTAs may differ in this regard. Where the non-resident is not an employee, but contracts as an independent contractor or renders services through a company or other entity, treaty relief from South African income tax must be sought under Article 14 (Independent Personal Services) or Article 7 (Business Profits) of the relevant DTA. (PAYE) withholding obligation In cases where the 15% final withholding tax does not apply, it should be considered whether any employees tax withholding obligation falls on an employer in terms of the Fourth Schedule to the Act. Where a non-resident individual is employed by a South African employer, the employer would be obliged to withhold employees tax. However, where an individual working in South Africa is employed by a non-resident employer which does not have a South African representative employer (i.e. a resident agent having authority to pay remuneration on its behalf), then there would be no obligation upon the foreign employer to withhold PAYE. If the non-resident individual contracts to a South African entity as an independent contractor, nonresidents are deemed to be employees for employees tax purposes and PAYE should be withheld from their remuneration. Where the non-resident renders services through a company or other entity, the South African entity which utilises the services of the non-resident should consider whether the entity is a personal service provider and is subject to employees tax at a rate of 33%. Where the individual or entity qualifies for DTA relief under Articles 14 or 7, a directive should be obtained from SARS. Integritax Issue 128 April 2010 SAICA, 2010 page 6

7 In conclusion, the determination of any withholding obligations for South African companies using the services of non-resident entertainers and sportspersons requires careful analysis of the contractual agreements, as well as any applicable DTA provisions and the Fourth Schedule to the Act. South African companies contracting with non-residents could well have withholding tax obligations without being aware of this. Edward Nathan Sonnenbergs IT Act: s 47A, s 47B Articles 7, 14, 15 and 17 of the OECD Model Tax Convention Editorial Comment: Although this article appears to deal with all non-resident entertainers and sportspersons, it must be noted that there are special rules relating to participants in the 2010 FIFA World Cup and these special rules need to be consulted where applicable. Integritax Issue 128 April 2010 SAICA, 2010 page 7

8 EXCHANGE CONTROL Tax and other issues related to foreign assets In view of the relaxation in exchange control announced by the Minister of Finance in the Medium- Term Budget Policy Statement, presented to Parliament during October 2009, South African residents may now invest up to R4 million abroad. Questions are often raised as to the fiscal consequences of making an investment abroad and, furthermore, the manner in which such investment should be structured. In addition, it must be remembered that during 2003, qualifying persons were allowed to apply for exchange control and tax amnesty, which attracted approximately applications. The window period for applying for amnesty has long since passed, but the tax consequences flowing from the applications submitted to the authorities are complex and are often misunderstood. This article seeks to identify some of the issues that should be considered when reviewing the tax consequences arising out of funds owned by an offshore trust, for which the donor applied for and received amnesty, as well as the consequences facing a South African investor choosing to place their foreign investment allowance in an off-shore trust. Exchange control Currently, as pointed out above, private individuals who are taxpayers in good standing and over the age of 18 years, may invest up to an amount of R4 million outside the Common Monetary Area ( CMA ), comprising South Africa, Lesotho, Namibia and Swaziland. It must be remembered that before the funds may be transferred from South Africa to the foreign country, the investor must obtain a tax clearance certificate (in respect of foreign investments) from the South African Revenue Service ( SARS ), which is to be presented to the investor s local bank. Besides the R4 million foreign investment allowance, exchange control is prepared to consider applications by private individuals to invest in fixed property located in member states of the Southern African Development Community, comprising Angola, Botswana, Democratic Republic of the Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe. Income earned on the foreign investments made under the allowance available may be retained abroad by South African residents and there is no requirement to inform the exchange control authorities of such income. Clearly, the income will attract South African tax which requires the investor to disclose that income for tax purposes to SARS. South African investors are, under no circumstances, allowed to utilise the foreign investment allowance or any other funds held legitimately abroad for the purpose of reinvesting those funds directly or indirectly back into the CMA for any purposes whatsoever. Thus, a South African investor is prohibited from advancing funds from South Africa to a foreign trust with the purpose of on-lending those funds to a South African entity or individual. South African companies are now permitted to invest up to R500 million abroad. An application must, in such cases, be submitted to an Authorised Dealer, that is, the Exchange Control Department of the company s commercial bank. It must be noted that the allowance is only available to South African companies and is aimed at encouraging the expansion of South African operations in foreign countries. The purpose of the allowance available to companies is not to allow natural persons to invest in passive investments personally, but is aimed at encouraging South African companies, creating similar operations to those in place in South Africa, in a foreign country for the ultimate benefit of the South African economy. Integritax Issue 128 April 2010 SAICA, 2010 page 8

9 Donations tax Should the South African resident choose to contribute the foreign investment allowance to an offshore trust, donations tax will become payable on the funds so donated in accordance with section 54 of the Income Tax Act, Act No. 58 of 1962, as amended (the Act). Currently, the first R of donations made by a taxpayer are exempt from donations tax in accordance with section 56(2)(b) of the Act. Thus, were the investor to donate their foreign investment allowance of R4 million to a foreign trust, donations tax would be payable at the rate of 20% on the amount of R3.9 million, that is, donations tax of R Under section 56 of the Act, the donations tax is required to be paid to the Commissioner: SARS within three months or such longer period as the Commissioner may allow from the date on which the donation takes effect. It is, therefore, not in the interests of the investor to donate funds to a foreign trust as this will result in donations tax becoming payable. Loans to a foreign trust or company Instead of donating the funds to a foreign trust, the South African resident may advance the funds to either a foreign company or trust. In these circumstances, it is important that the South African resident receives interest on the loan advanced to the foreign entity, at a market-related rate, which interest will be taxable in South Africa. Where the investor fails to levy interest on the loan advanced to a foreign entity, the provisions of section 31 must not be overlooked. The effect of section 31, which contains the transfer pricing and thin capitalisation rules, will result in the South African investor being taxed on imputed interest equal to a market-related rate of interest that would be charged by a resident to a non-resident as if such persons were dealing on an arm s length basis. Thus, the investor should either charge the foreign entity interest at a market-related rate or will be subjected to tax on deemed interest under section 31 of the Act. Editorial comment: The imputed interest may not exceed the actual income of the trust. Section 7 deeming provisions Where the investor makes an interest-free loan available to a foreign trust, SARS can rely on section 7(8) of the Act to deem any income derived by the foreign trust to be taxable in the hands of the investor. Thus, if the foreign trust receives the foreign investment allowance from the South African resident via an interest-free loan and acquires fixed property from which rentals are earned or purchases interest-bearing bonds, the income derived by the trust will, in such circumstances, fall to be taxed in the hands of the investor in South Africa. Investment in a foreign company Where the investor chooses to acquire shares in a foreign company and that company utilises the funds received from the foreign investment allowance to acquire foreign assets, any income derived by that company will, generally, under the controlled foreign company rules contained in section 9D of the Act, be fully taxed in the hands of the investor in South Africa. As pointed out above, if the investor makes an interest-free loan available to a foreign company in which they are interested, the investor will be deemed to have received interest at a market-related rate under section 31 of the Act. Eighth Schedule attribution rules The Eighth Schedule to the Act contains the so-called attribution rules which mirror the deeming income rules contained in section 7 of the Act. Thus, where an investor makes an interest-free loan available to a foreign trust and the trust realises a capital gain on the disposal of assets owned by it, that gain may, in certain circumstances, be attributable to and thus taxed in the hands of the South African investor. This is in accordance with the provisions contained in paragraph 72 of the Eighth Schedule to the Act. The attribution rule applies where a resident has made a donation, settlement or Integritax Issue 128 April 2010 SAICA, 2010 page 9

10 other disposition to any person which is not a resident. The rule will apply where the investor makes an out-and-out donation to a trust, or advances funds to a non-resident trust on an interest-free basis. Where the capital gain is attributable to a donation, settlement or other disposition, the gain will fall to be taxed in the hands of the South African resident investor. Realisation of foreign currency assets Where the South African investor acquires foreign assets personally, and subsequently disposes of those assets, CGT will arise on the gain realised on the disposal of those assets. In addition, if the proceeds received on the sale of the foreign assets are retained abroad, and returned to South Africa at a time when the Rand has declined in value, a further capital gain will arise which will fall to be taxed in accordance with the rules contained in paragraphs 84 to 96 of the Eighth Schedule to the Act. The rules regulating the CGT consequences on the realisation of foreign currency assets are complex, and fall beyond the scope of this article. However, investors need to be aware of the fact that where funds are held in one currency and converted into another, CGT will become payable in South Africa on such an event. Furthermore, as and when foreign assets are repatriated to South Africa, CGT will arise should the base cost of the foreign currency asset be less than the proceeds received at the time that the assets are converted into South African Rand. Estate duty Where the investor chooses to invest in foreign assets personally, any increase in value of the foreign assets will constitute part of the estate of the person upon their death. Where funds are advanced to a foreign trust or a foreign company owned by a foreign trust, the growth in the assets will not belong to the investor in South Africa personally and will, therefore, not constitute part of the person s assets for estate duty purposes. It must be remembered that where a person received amnesty pertaining to assets owned by a foreign trust, the fact that amnesty was obtained does not detract from the fact that the foreign assets are owned by a foreign trust and, which, therefore, fall outside of the natural person s estate for estate duty purposes on that person s death. Where the investor acquires the foreign assets personally, any increase in value in the foreign assets will, therefore, attract estate duty on the death of that person. Assets for which amnesty was obtained Applicants who received amnesty on foreign assets owned personally or via a foreign trust must not overlook the fact that any income derived on those foreign assets continues to be taxable in South Africa. The income derived by a foreign trust for which amnesty was obtained will fall to be taxed in South Africa so long as the amnesty applicant remains alive. Upon the person s death, the person is deemed to have disposed of the assets owned by the trust for CGT purposes and any income received by that trust after the death of the person, will no longer fall into the South African tax net. Thus, any income or capital gains realised by a foreign trust for which amnesty was secured, continues to be taxable in South Africa whilst the applicant is alive. Once the amnesty applicant passes away, the beneficiaries of the foreign trust will only be taxable in South Africa to the extent that they receive amounts from the trust, which have not previously been taxed in South Africa. It is important that the trustees of the foreign trust disclose the nature of awards to beneficiaries in South Africa so that those persons may properly comply with the tax laws of the country. Clearly, where the beneficiaries receive income from the foreign trust which was not previously taxed in South Africa, such income will fall to be taxed in this country. Where, however, the awards relate to amounts taxed in the hands of a deceased amnesty applicant, no further tax can arise on such amounts. Where the beneficiary receives the award of capital gains realised by the foreign trust on the disposal of foreign assets, such amounts will attract CGT in South Africa at a Integritax Issue 128 April 2010 SAICA, 2010 page 10

11 maximum rate of 10%. The trustees of the foreign trust should, therefore, ensure that they make adequate disclosure to beneficiaries in South Africa so that they fully understand the nature of awards received for tax purposes in South Africa. Conclusion The increase in the foreign investment allowance from R2 million to R4 million represents an opportunity for South Africans to invest reasonable sums abroad. It is important when deciding to invest off-shore, that the investment is structured correctly so as to manage the income tax and estate duty consequences that will arise from that investment. Furthermore, the CGT rules relating to foreign currency assets are complex and must not be overlooked. Edward Nathan Sonnenbergs IT Act: s 7(8), s 31, s 54, s 56(2)(b), para 72, para of the Eighth Schedule Medium-Term Budget Policy Statement 2009 Integritax Issue 128 April 2010 SAICA, 2010 page 11

12 VALUE-ADDED TAX Cut-off dates and rulings Cut-off periods Section 27(1) of the Value-Added Tax Act No. 89 of 1991 (the VAT Act), provides that every tax period for VAT purposes ends on the last calendar day of a month. However, section 27(6) allows vendors to end their tax period on any day that falls within 10 days before or after the last calendar day of a month, provided the Commissioner has granted approval in this regard. Vendors were therefore required to obtain written approval from the Commissioner if they wanted to make use of this concession. SARS issued Interpretation Note No 52 ( IN 52 ) on 14 December 2009 which constitutes a Binding General Ruling in terms of section 41A of the VAT Act. In terms of IN 52, the Commissioner has granted approval in terms of section 27(6) for the cut-off dates of vendors tax periods for certain categories of cut-off dates. This means that vendors are no longer required to obtain written approval from the Commissioner to use cut-off dates other than the last calendar day of a month, provided the cut-off dates fall within the prescribed categories and within 10 days, either side of the last calendar day of a month. These categories are: A fixed day, being a specific day of the week; A fixed date, being a specific date in a calendar month; or A fixed day determined in accordance and consistent with the commercial accounting periods applied by the vendor. With regard to the latter category, the vendor will be required to produce some proof that the chosen cut-off dates are consistent with its commercial accounting periods, for example, Board Minutes. If a vendor changes its VAT cut-off periods from the last calendar day of a month in terms of IN 52, then such cut-off dates must remain unchanged for a period of at least 12 months. Where a vendor wants to apply cut-off dates which do not fall within any one of the prescribed categories, then the vendor must apply for specific written approval from the Commissioner. Rulings withdrawn SARS has systematically withdrawn all the VAT rulings previously published in its VAT rulings register, from August 2009 to November These rulings are therefore no longer binding and may not be relied upon. If a vendor requires clarity with regard to the application of the VAT Act to a specific transaction, the vendor needs to apply for a specific private binding ruling or a binding class ruling to the Commissioner in terms of section 41B of the VAT Act. Edward Nathan Sonnenbergs VAT Act: s 27(1), s 27(6), s 41A SARS Interpretation Note No. 52 Integritax Issue 128 April 2010 SAICA, 2010 page 12

13 SARS NEWS Interpretation notes, media releases and other documents Readers are reminded that the latest developments at SARS can be accessed on their website 28 April 2010 Legal & Policy Draft Customs and Excise rules regarding floating hotels have been published. Comments are due before/on 6 May April 2010 Legal & Policy Interest Rate Table 1 and Table 2 was updated. Table 3 will be updated in due course. 22 April Modernisation: SARS Introduces Third Part Data Filing 21 April 2010 Legal & Policy The prescribed List of qualifying physical impairment or disability expenditure, as well as the form ITR-DD Confirmation of Diagnosis of Disability, was published. 21 April Media Release - SARS announces publication of prescribed list and diagnosis for disability 8 April Legal & Policy - New versions (Afrikaans and English) of the Guide The ABC of Capital Gains Tax for Individuals was published 01 April Media Release - Media Statement by the Minister of Finance, Mr. Pravin Gordhan, on the Preliminary Revenue Results for the 2009/10 Fiscal Year 31 March 2010: Legal & Policy: Draft Guide to Reportable Arrangements has been published for comment by 14 May March 2010 Legal & Policy Income Tax Act, Government Notice determining the date for rendering of employer s returns (EMP 501) for the tax period 1 March 2009 to 28 February March 2010 Legal & Policy Interpretation Note 57 Sale of an enterprise or part thereof as a going concern (VAT) 31 March 2010 Legal & Policy Interpretation Note 55 Taxation on directors and employees on vesting of equity instruments (Income Tax) Integritax Issue 128 April 2010 SAICA, 2010 page 13

14 Editor: Mr M E Hassan Editorial Panel: Mr KG Karro (Chairman), Dr BJ Croome, Mr MA Khan, Prof KI Mitchell, Prof L Olivier, Prof JJ Roeleveld, Prof PG Surtees. The Integritax Newsletter is published as a service to members and associates of the South African Institute of Chartered Accountants (SAICA) and includes items selected from the newsletters of firms in public practice and commerce and industry, as well as other contributors. The information contained herein is for general guidance only and should not be used as a basis for action without further research or specialist advice. The views of the authors are not necessarily the views of SAICA. All rights reserved. No part of this Newsletter covered by copyright may be reproduced or copied in any form or by any means (including graphic, electronic or mechanical, photocopying, recording, recorded, taping or retrieval information systems) without written permission of the copyright holders. Integritax Issue 128 April 2010 SAICA, 2010 page 14