Browsing by Author "Thiart, Cara"

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    A critical analysis of the foreign services reportable arrangement provision of the Tax Administration Act of South Africa
    (AOSIS Publishing, 2020) Oosthuizen, Marlene; Thiart, Cara
    Background: An additional reportable arrangement was added to South African tax legislation by way of a public notice in section 2.6 of the Government Gazette no. 39650 of 3 February 2016 (hereafter referred to as the foreign services reportable arrangement provision). This reportable arrangement relates to service fee payments made by a South African resident (or non-resident with permanent establishment in South Africa) to a non-resident. The services include consultancy, construction, engineering, installation, logistical, managerial, supervisory, technical and training services. Aim: The aim of this study was twofold: to critically analyse the reportable arrangement provision by examining undefined terminology contained in this provision and to develop a decision tree that may assist taxpayers in the application of this provision. Setting: Relevant South African literature and tax partners, directors and tax managers at leading audit and legal firms in South Africa. Methods: The study commences with a review of available South African literature in an attempt to define the terms ‘arrangement’ and ‘anticipated’, as applied in the foreign services reportable arrangement provision and continues with survey research to validate some of the conclusions drawn in the literature review. Results: From the literature review it was determined that although there are South African literature available providing persuasive value to the meaning of some of the undefined terms used in the foreign services reportable arrangement provision, there is no single consolidated source of information which clarifies the exact meaning of the terms in the context of this provision. Hence, survey research was performed to apply the available South African literature in the context of the foreign services reportable arrangement provision. The majority of the respondents in the survey research agreed and validated the assumptions and conclusions drawn from the literature review. Conclusion: It is therefore submitted that the presented findings may contribute to the limited existing South African literature on the foreign services reportable arrangement provision.
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    Die omvang van rente onderhewig aan, en die tydsberekening en koers van die heffing van terughoudingsbelasting op rente ingevolge artikel 50A-H van die Inkomstebelastingwet, no. 58 van 1962
    (Stellenbosch : Stellenbosch University, 2015-12) Thiart, Cara; Van Wyk, Ellane; Stellenbosch University. Faculty of Economic and Management Sciences. School of Accounting
    ENGLISH ABSTRACT: Section 50A-H of the Income Tax Act 58 of 1962 (hereafter referred to as the Act) contains the stipulations regulating the reinstitution of a withholding tax on interest in South Africa. The section can be found in Chapter II in section IVB of the Act and the effective date is 1 March 2015. Until the introduction of the withholding tax on interest, any interest of a South African source, apart from two exceptions, paid to non residents are exempt from normal tax. The purpose of the exemption is to encourage foreign investment. Since the exemption does not create a fair balance between the attraction of foreign investment and the need to protect the tax base against potential erosion, a withholding tax on interest is reinstated. Due to uncertainty with regard to the meaning of certain concepts and phrases that are used in Section 50A-H, this research assignment was aimed at defining the meaning of the phrase “due and payable”, as used in section 50B. The second aim was to define the meaning of the phrase “subject to tax” as used in Section 23M, as in some instances it is linked to section 50E, which is part of Part IVB. The third aim was fourfold and is related to the scope of interest that is subject to section 50A-H. Firstly, research was done on the meaning of the concept “interest” as the concept is not defined specifically in Part IVB. Secondly, the treatment of interest received in the form of an annuity was researched. Thirdly, research was done on the effect that the application of a South African discretionary trust that distributes interest to non-resident beneficiaries can have on the stipulations of section 50A-H. Two aspects were researched, namely if a trust distribution constitutes a payment as described in article 50B, and whether a non-resident beneficiary is entitled to the exemption contained in section 50D(1) if the interest is received via a South African discretionary trust. Lastly, research was done on the interaction between and contradictory wording of section 50D(3) and 10(1)(h). It was determined that the phrase “due and payable” means the right to demand immediate payment of a said amount. In the context of section 50B it means that withholding tax with interest must be withheld when the non-resident has the right to demand immediate payment of the interest and not when the interest accrues to the non-resident on a daily basis with regard to section 24J. It was determined that actual payment of tax is required before a said amount is considered to be “subject to tax”. In the context of section 23M, where section 50E provides for a withholding rate of 0 percent, the limitation on the interest deduction will be applicable. Considering common law interest and interest as defined in both section 24J of the Act and section 11 of the model convention of the OECD, it was determined that the stipulations of section 50A-H are applicable to interest as described in section 24J. This finding was confirmed by proposed amendmendt to the Act. It was furthermore determined that interest received in the form of an annuity is subject to both normal and withholding tax. It was determined that the contradictory wording used in section 50D(3) and section 10(1)(h) may result in double non-taxation of a specified amount of interest in certain specific circumstances. It was determined that a distribution by a trust will in all probability qualify as a payment as is described in section 50B. Consequently, a trust must withhold withholding tax on interest if a distribution of South African interest income to a non-resident beneficiary occurs. In the investigation to determine whether a non-resident beneficiary is still entitled to the exemption as contained in section 50D(1) if the non-resident has received the interest via a South African discretionary trust, the concept of fiscal transparency was the deciding factor. It was determined, due to South African law, that the legal form of the trust cannot be disregarded. This could result in a non-resident being held liable for withholding tax on interest where it is distributed through a trust even though the trust received the interest from an exempt entity. It is suggested that this study highlighted principles that may possibly clarify the confusion surrounding the uncertainties. This information could be useful for role players in the South African tax environment if issues arising from the deficiencies in practice emerge and/or if legislature considers amendments to section 50A-H.
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    An exploratory study of the effect of country-by-country reporting ambiguities on Johannesburg Stock Exchange-listed companies
    (AOSIS Publishing, 2018) Thiart, Cara; Nel, George F.
    Background: South Africa issued regulations implementing country-by-country (CbC) reporting standards for multinational enterprises (MNEs) on 23 December 2016. Country-by-country reporting will be applicable to all MNEs with a group revenue in excess of R10 billion. Aim: The aim of the study was twofold: to identify ambiguities that might influence the filing obligation and subsequent scope of CbC reporting in South Africa and to quantitatively measure the potential impact of any identified ambiguities. Setting: This study used data from Johannesburg Stock Exchange-listed companies. Methods: The study commences with a review of the relevant regulations and other applicable literature and continues with a quantitative analysis exploring alternative interpretations deduced from this review. Results: The review identified conflicting interpretations of how companies can be categorised as an MNE Group or not, as well as in measuring the revenue threshold. An analysis of the group structures and annual reports of a selected sample of 78 companies showed that the scope of CbC reporting will depend on the definitions applied to an MNE Group and revenue. Conclusion: Further guidance is needed to determine whether non-controlling entities must be considered as Constituent Entities, as well as how to measure revenue (i.e. whether only the International Financial Reporting Standards [IFRS] 15 revenue line item should be used or whether other income should also be included).