Browsing by Author "Nel, Rudie"
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- ItemCloud computing activities : guidelines on the South African income tax classification(AOSIS Publishing, 2016) Steenkamp, Shene; Nel, RudieThe classification of income from cloud computing activities, according to the substance-over-form doctrine, is fundamental to the application of the correct taxation source test. The designation of IaaS, PaaS and SaaS, the three main cloud computing service models, clearly denotes the form of cloud computing activities as that of a service. However, the nature of cloud computing inherently raises the question of whether or not cloud computing income should not rather be classified as income from leasing activities or the imparting of know-how. In fact, the findings of this study suggest the classification would not necessarily always be that of a service. The possible classification as lease income can be either income from the lease of tangible computer hardware and/or of intellectual property (royalty income). The aim of this study was to formulate guidelines to assist in the correct classification of income from cloud computing activities. This was achieved by performing doctrinal research based on the South African and international literature.
- ItemCloud computing activities : South African normal tax source determination(AOSIS Publishing, 2016) Nel, Rudie; Steenkamp, SheneThe location-independent nature of cloud-based transactions results in many source-related difficulties for normal tax purposes. This study considered the source determination for each of the possible classifications of cloud-based income (lease, service and royalty income, and/or income from know-how) by performing a doctrinal study based on South African and international literature. This study identified and formulated the challenges in applying traditional source tests in the context of cloud-based transactions. These challenges stem from the potential absence of physical presence of the provider in the country of consumption, in contrast to traditional source tests where physical presence indicate a tax presence; as well as the location-independent nature of cloud-based transactions from the perspective of both the provider and the consumer. The findings of the study suggest that the source determination for cloud-based transactions could be based on the source of the payment or residency of the payer, rather than the physical location.
- ItemDebt capitalisation : an analysis of the application of section 24BA of the Income Tax Act(University of Pretoria, 2018) Janse van Rensburg, Pieter; Nel, RudieDie kapitalisering van skuld in ruil vir die uitreiking van aandele is ’n algemene verskynsel en kan op drie wyses geskied, naamlik deur die direkte uitreik van aandele (met of sonder kontantvloei), deur skuld-vergelyking en deur die omskepping van skuldinstrumente in aandele. Alhoewel bestaande literatuur aandag aan die toepassing van skuld-verminderingsbepalings in die Inkomstebelastingwet skenk, is daar egter ’n gebrek aan voldoende inligting oor die mate waartoe artikel 24BA van die Inkomstebelastingwet op die verskillende metodes van skuld-kapitalisering van toepassing kan wees. Die artikel ondersoek die moontlike toepassing van artikel 24BA op skuldkapitalisering. Elk van die metodes van kapitalisering word individueel ontleed aan die hand van die vereistes van artikel 24BA. Die artikel bevind dat met skuldvergelyking as metode van skuldkapitalisering, verskille tussen die waardes van inskrywingslening (wat voortspruit uit die inskryf op aandele) en die markwaarde van aandele wat uitgereik word tot toepassing van artikel 24BA aanleiding kan gee. Op grond van die bevinding word daar aan die hand gedoen dat indien die omstandighede nie voorsiening maak vir verligting van die toepassing van artikel 24BA nie, kan skuldvergelyking as ’n minder gunstige metode van skuldkapitalisering beskou word.
- ItemDebt reduction : indicative factors in classification as a donation for income tax purposes(AOSIS Publishing, 2016) Nel, Rudie; Herron, AndreaDebt reduction in business is recognised for the economic relief afforded to the debtor involved. The new debt reduction regime was introduced in the Income Tax Act (section 19 and paragraph 12A of the Eighth Schedule) with the aim of minimising the tax impact so as not to negate the economic benefit. The new regime introduced an exclusion for debt reduced by way of a donation and uncertainty exists on instances where this exclusion would apply. This article considered four broad categories of factors indicative in the classification of a debt reduction as a donation (inadequate consideration; gratuitous waiver; intent and motive; classification as connected persons) and concluded with the formulation of such factors. The classification as connected persons is regarded as the most indicative of a debt reduction being classified as a donation, which could result in tax arbitrage if the creditor and debtor are taxed at different rates on the taxable income result of the debt reduction.
- ItemDividend cession and dividend distribution : the South African VAT implications(AOSIS, 2017) Haupt, Estian; Nel, RudieAn intuitive approach when considering the VAT implications of a dividend cession, which relates to a share, could be to classify it as a financial service and thus exempt from VAT. The fact that debt factoring, another cession transaction, has been noted as an exempt supply could support the intuitive approach in favour of a financial service. Pursuant to different interpretations and in an attempt to triangulate evidence, the meaning of ‘equity security’, ‘equity share’ and ‘security’ from three different tax acts were considered. Findings suggest a dividend cession is not a financial service and consequently a taxable supply for VAT purposes. This finding supports the normal tax view of National Treasury that a dividend cession constitutes an income stream independent from the underlying share and thus ordinary revenue. Findings provide guidance on the value of supply provisions and also enunciate that the subsequent dividend distribution in specie could result in VAT implications.
- ItemDividend cession – investigating the South African tax implications(AOSIS, 2019) Haupt, Estian; Nel, RudieOrientation: The South African tax legislation in respect of dividend cession. Research purpose: The objective of this article was to investigate the tax implications of a dividend cession for the cedent, cessionary and declaring company involved in the cession in order to provide guidance regarding the tax implications arising from such cession. Motivation for the study: The introduction of specific anti-avoidance provisions and amendments to tax legislation complicated the tax treatment of a dividend cession. Current literature and guidance contains a brief reference to the capital gains tax implications, while other guides deal exclusively with the dividends tax implications. Based on the lack of definitive guidance of other taxes resulting from a dividend cession, this investigation is considered necessary. Research approach/design and method: This study involved an interpretative analysis of the tax legislation and incorporates other literature on the research objective to describe the tax implications as a result of dividend cession. The mode of inquiry for this study is qualitative in nature and follows a doctrinal research method. Main findings: Findings suggest that although the classification of a dividend cession could be a usufruct (a real right), the practical tax implications with reference to dividends could not have been the intention. The submission is therefore that the tax implications should be as a personal right. Furthermore, the introduction of specific anti-avoidance provisions resulted in an instance of possible double taxation which was noted, which is submitted as a possible unintended consequence as a result of legislation amendments. Practical/managerial implications: The practical value of the article lies in the guidance in respect of the tax implications which taxpayers could consider in transactions pertaining to dividend cession. Contribution/value-add: Instance of double taxation documented and submitted as possible unintended consequence which could inform further debate on the topic.
- ItemDividends in specie : the granting of services or the right of use of assets(University of Pretoria, 2019) Kok, Michael; Nel, RudieDividends in specie are not defined by the Income Tax Act, which could result in uncertainty whether the granting of services or the right of use of assets to shareholders would be included in the ambit thereof. The uncertainty could result in the opportunity for dividends tax to be avoided and could also result in applicable deductions, claimed by the declaring company, not being recouped for tax purposes. This article investigated whether the granting of services or the right of use of assets to shareholders would constitute dividends in specie for purposes of the Income Tax Act by considering the South African perspective as well as guidance based on international practices. The article submits that a broad interpretation of the meaning of “dividend” and “in specie” in the Income Tax Act supports the granting of services or the right of use of assets as constituting dividends in specie. Furthermore, the context of the provisions contained in the Income Tax Act considered in this article, does not indicate findings contrary to the broad interpretation of the meaning of “dividend” and “in specie”. The guidance obtained from investigating international practices of selected countries also indicated that the granting of services or the right of use of assets constitute dividends or shareholder benefits on which shareholders are taxed. This article concludes that the granting of services or the right of use of assets would constitute dividends in specie and that the specific guidance on the valuation of such benefits in terms of the Seventh Schedule to the Income Tax Act, could possibly be extended to the application in the context of dividends tax.
- ItemDonations in kind : an investigation of the value for purposes of section 18A of the Income Tax Act(AOSIS, 2019-07-29) Nel, Rudie; Klopper, NicoletteOrientation: The tax deductibility of donations in kind in terms of the Income Tax Act No. 58 of 1962 in South Africa. Research purpose: The aim of this article is to critically analyse the provisions of section 18A(2) (a)(v) of the Income Tax Act No. 58 of 1962 to determine the value, if any, to be indicated on a section 18A receipt. It is also investigated whether the donee or donor is responsible for determining the fair market value, if such value should be included on a section 18A receipt. Motivation for the study: Addressing uncertainty regarding which amount, if any, should be included on a section 18A receipt for tax purposes in respect of a donation in kind. Research design, approach and method: This article involves a non-empirical interpretative analysis of tax legislation and other literature. The mode of inquiry for the article is qualitative in nature and follows a doctrinal method, which is closely associated with tax research. Main findings: This article highlights the possible ambiguity in the interpretation of section 18A(2)(a)(v) of the Income Tax Act No. 58 of 1962 and that the term ‘nature’ could be construed as including a value. Practical/managerial implications: The donor would have certain tax implications preceding a section 18A deduction which would require the donor to determine the fair market value and could enable the donor to also indicate such fair market value in respect of a donation in kind to the donee. Contribution/value-add: This article contributes to literature by highlighting the uncertainty in respect of the interpretation of tax legislation relating to section 18A.
- ItemThe effect of investor-level tax reform on payout policies : evidence from companies listed in selected sectors on the Johannesburg Stock Exchange(Stellenbosch : Stellenbosch University, 2021-12) Nel, Rudie; Wesson, N.; Steenkamp, Lee-Ann; Stellenbosch University. Faculty of Economic and Management Sciences. University of Stellenbosch Business School.ENGLISH SUMMARY : Tax reform in a country offers an opportunity to investigate the effect of taxes on payout policies in support of the tax and tax clienteles theory as an explanation for paying dividends. Tax reform in South Africa since 2011 contains the amendment of the definition of dividend, the introduction of dividends tax, and consecutive increases in tax rates. The extensive nature of the tax reform, including an amendment relating to the share repurchases by companies listed on the Johannesburg Stock Exchange, offers a unique setting for conducting empirical research in South Africa. The research question of this study was whether the payout policies of selected companies listed on the Johannesburg Stock Exchange were adjusted on the basis of investor-level tax reform. An empirical research design, which was quantitative in nature, was pursued to provide descriptive and explanatory evidence in order to answer the research question. The four research objectives of this study focused on the after-tax values of payout methods, the timing of dividend declarations, the trend and composition of total payout, and the relationship between investor tax preference parameters and payout methods. This study is submitted as the first study of its kind to be conducted in a South African context, and in particular, from the perspective of a developing country and emerging market. For selected listed companies (excluding secondary listings on Johannesburg Stock Exchange as well as companies in the resources and financial sectors) the financial reporting periods from 2006 to 2019 were considered. The central year of interest in this study was 2012 when dividends tax was introduced in South Africa on 1 April 2012. An overview of tax reform and the after-tax values of payout methods enunciated the increased role of taxes as a result of the conflicting tax preferences of investors (individuals, corporates, and institutions) for different payout methods (dividends, capital distributions, additional shares, and share repurchases). Eight propositions in respect of a tax effect on payout policies were also informed by the overview of tax reform and after-tax values. Support for these propositions was considered based on the results of research objectives as evidence of whether payout policies were adjusted on the basis of investor-level tax reform. The timing of interim dividends declared during 2012 was found to have been postponed and supported by a tax explanation which suggested that payout policies were adjusted in a year of investor-level tax reform. The trend and composition of total payout during the post-2012 period were also found to have differed from the pre-2012 period in support of propositions based on tax reform and after-tax values. Ordinary dividends were increasingly used as a payout method during the post-2012 period with a decrease in the use of payout methods other than ordinary dividends. The increase in the value and frequency of electing scrip dividends (additional shares with a cash alternative) during the post-2012 period suggests an adjustment of payout policies which confers more flexibility to investors to manage their financial interests, including tax considerations. The relationship between changes in payout methods, profitability, and three categories of investor tax preference parameters (individuals, corporates, and institutions) since 2012 was also investigated by means of regression analyses. Regression results found changes in the investor tax preferences of corporates as the most statistically significant of all three categories of investors considered in explaining changes in dividends. This finding supports a proposition based on a dividends tax exemption afforded to corporates and consecutive increases in the effective rate at which capital gains of corporates are taxed. Furthermore, regression results revealed the presence of a top individual investor in companies to be associated with lower payout methods other than dividends. This finding supports the rent extraction hypothesis which posits that top shareholders could prefer to extract private benefits of control rather than payout that equally benefit all shareholders. The finding further extended to include directors based on the fact that directors represent top individual shareholders by an overwhelming majority. This study contributes to corporate finance literature by providing empirical evidence that suggests that the payout policies of selected companies were adjusted on the basis of investor-level tax reform. An effect of investor-level tax reform on payout policies is submitted on the basis of the fact that payout policies were adjusted. Evidence from South Africa as a developing country and emerging market further contributes to literature on dividend policy practices in emerging markets. The data collected, the data collection method, and limitations of this study could serve as a basis for future research into the effect of taxes on payout policies.
- ItemThe income tax deductibility of indirect empowerment measures relating to Black Economic Empowerment (BEE) in South Africa(Academic Journals, 2013-07) Acker, Tim; Nel, RudieWhen an entity incurs expenditure relating to indirect empowerment measures of broad-based black economic empowerment (‘BEE’) (that is the preferential procurement, enterprise development, skills development and socio-economic development categories on the BEE scorecard), there are differing opinions on whether or not these expenditure will be deductible in terms of the South African Income Tax Act. The current study considered types of expenditure and the reasons for incurring expenditure towards indirect BEE empowerment measures. Four issues were identified that could preclude a deduction in terms of the general deduction formula (section 11(a)) – notably, that expenditure has to be in the production of income. The conclusions drawn as to the deductibility of expenditure are summarised as a best practice guideline for taxpayers. Even though expenditure towards indirect empowerment measures has been found to be deductible in most cases, there are exceptions. The study concludes with proposed best practice guidelines which could provide guidance in respect of the deductible of this type of expenditure.
- ItemNon-executive directors : employees or independent contractors for both income tax and employees' tax purposes?(AOSIS, 2013) Van Schalkwyk, Linda; Nel, RudieThe concept ‘independent contractor’ is one of the more contentious concepts contained in the Fourth Schedule to the Income Tax Act 58 of 1962, as amended. The classification of a person rendering services as either an ‘employee’ or an ‘independent contractor’ is relevant for both income tax and employees’ tax purposes. The objective of this article is to determine whether non-executive directors (both resident and non-resident) are employees or independent contractors for both purposes, respectively. A comprehensive literature review was done in which the meaning of the concepts ‘non-executive director’ and ‘independent contractor’ was discussed in order to gather information needed for the classification. The statutory and common law tests were then applied to determine the classification of non-executive directors as independent contractors. The conclusion reached is that resident non-executive directors could qualify as ‘independent contractors’ for employees’ tax and income tax purposes. Non-resident non-executive directors of companies are ‘employees’ for employees’ tax purposes and ‘independent contractors’ for income tax purposes.
- ItemThe relationship between investor tax preferences and the payout methods of JSE listed companies(AOSIS, 2022-08) Nel, Rudie; Wesson, Nicolene; Steenkamp, Lee-AnnBackground: Investor tax preference parameters have been included as an explanatory variable for changes in payout methods in developed countries. There is, however, a lack of research in this area in developing countries. Tax reform in South Africa – comprising a change in the tax regime and successive increases in tax rates – offers a unique setting to examine investor tax preference parameters as a contribution to literature. Aim: This study investigated the relationship between investor tax preference parameters (of individuals, corporates, and institutions) and payout methods (namely dividends, capital distributions, additional shares, and share repurchases). Setting: The study used data collected in respect of companies listed on the Johannesburg Stock Exchange (JSE) in South Africa for the financial reporting periods ranging from 2012 to 2019. Method: A regression analysis of panel data was employed to relate the changes in payout methods to changes in profits, investor tax preference parameters, the lagged levels of variables, and ownership concentration dummy variables. Findings: The empirical evidence of this study revealed that investor tax preferences affected dividends as a payout method. This accordingly suggests that the tax differential of dividends and capital gains affect the supply of dividends in South Africa. Conclusion: The study contributes empirical evidence in support of the taxes and tax clienteles theory from a developing country perspective. This could suggest that tax reform in a developing country, in this case, South Africa, has a more pronounced effect on payout methods than in developed countries.
- ItemThe role of tax incentives in reducing CO2 emissions : evidence from vehicle manufacturers(Clute Institute, 2013-05) Nel, Rudie; Du Plooy, JohannThe objective of the study was to consider the role of tax incentives (deductions and allowances in terms of the South African Income Tax Act) in reducing carbon dioxide (‘CO2’) emissions in the automotive industry. The objective was achieved in the light of qualitative empirical evidence obtained from South African vehicle manufacturers. A questionnaire was circulated to nine South African vehicle manufacturers and the responses were interpreted to establish whether current tax incentives provide an incentive to reduce CO2 emissions. Findings highlighted the importance of tax incentives in reducing CO2 emissions and suggest that vehicle manufacturers regard tax incentive-driven policies as the most effective tool in reducing CO2 emissions. However, since it is difficult to qualify for current tax incentives, this approach might not provide the necessary incentive to reduce CO2 emissions. It is recommended that tax incentive policies either be simplified or alternative initiatives be introduced to encourage investments in the reduction of CO2 emissions.
- ItemA study of a feebate policy aimed at vehicle manufacturers to reduce CO2 emissions(The Clute Institute, 2012) Du Plooy, Johann; Nel, RudieAs part of environmental fiscal reform, the South African government introduced a vehicle emission tax during 2010. However, the design of this tax focuses on consumers and might not be as effective in reducing CO2 emissions. A feebate policy is considered as a possible alternative to reduce CO2 emissions. A literature review was performed on the topic of feebate policies that could encourage vehicle manufacturers to invest in energy-efficient technology aimed at reducing CO2 emissions. Based on the literature review a questionnaire was developed and distributed to nine vehicle manufacturers in South Africa. The study specifically focused on vehicle manufacturers as they have the opportunity to design, develop and introduce energy-efficient technology that could reduce CO2 emissions. Results suggest that a feebate policy (that leads to cost savings) is an alternative that could be considered to encourage vehicle manufacturers to invest in energy-efficient technology in order to reduce CO2 emissions.