Catching Up With PATC’s Owner & Tax Expert: Gavin Bacon

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As you may well know,  in recognition of Gavin’s vast experience and Tax Degree, The Office of the Registrar for the Republic of South Africa appointed Gavin in 2017 as a Commercial Member of the Tax Court for a period of five years – an appointment Gavin was honored to accept.

In an effort to keep up-to-date with the needs of the Tax Court, Gavin attends Tax Court meetings to re-establish his membership, ongoing support and commitment to the Tax Court, with the same dedication he has brought to the industry for the past 3 decades – and counting! He by no means ‘works for the other team’ instead utilising his founded knowledge to better serve the community and his clients. (more…)

Foreign Currency Transactions

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A foreign-currency transaction is one that requires settlement, either payment or receipt, in a foreign currency. When the exchange rate changes between the original purchase or sale transaction date and the settlement date, there is a gain or loss on the exchange. Whoever views the denominated currency (the currency the transaction takes place in) as the foreign currency takes the gain or loss. Companies that make many foreign-currency transactions may buy a forward currency contract to get a guaranteed rate. Businesses with few foreign-currency transactions are more likely to convert currency on the spot, or current, rate.

Individual investors who are considering participating in the foreign currency exchange (or “forex”) market need to understand fully the market and its unique characteristics. Forex trading can be very risky and is not appropriate for all investors. (more…)

Valuation of Shares, Goodwill & Members Interest

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a bird’s eye view of a desk with a laptop, a chart, some books and a succulent on itShares:

The valuation date value of shares listed on a foreign recognized exchange that are not listed on the JSE must be determined on the same basis as local shares. However, unlike local shares the market value of the shares is based on the ruling price on the last business day preceding valuation.

The methods of valuation depend on the purpose for which valuation is required. Generally, there are three methods of valuation of shares; (more…)

Requirements in terms of the Companies Act in Respect of Annual Financial Statements

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desk with a laptop and calculator in a woman’s handsPrivate or personal liability companies that are required to audited by the Companies Act, 2008 or regulation 28 must file a copy of the latest approved Audited Financial Statements on the date that they file their annual return with the CIPC.

The following private companies are required to have their annual financial statements audited;

  • Any private or personal liability company if, in the ordinary course of its primary activities, it holds assets in a fiduciary capacity for persons who are not related to the company, and the aggregate value of such assets held at any time during the financial year exceeds R5 million;
  • Any private or personal liability company that compiles its financial statements internally (for example, by its financial director or one of the owners) and that has a Public Interest Score (PIS) of 100 or more;
  • Any private or personal liability company that has its financial statements compiled by an independent party (such as an external accountant) and that has a Public Interest Score (PIS) of 350 or more;

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Tax Avoidance vs Tax Evasion

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Tax avoidance is the legitimate minimizing of taxes, using methods included in the tax code. Businesses avoid taxes by taking all legitimate deductions and by sheltering income from taxes by setting up employee retirement plans and other means, all legal and under the Internal Revenue Code or state tax codes.

Most taxpayers use some form of tax avoidance.

For example, individuals who contribute to employer-sponsored retirement plans with pre-tax funds are engaging in tax avoidance because the amount of taxes paid on the funds when they are withdrawn in retirement is usually less than the amount the individual would owe. Furthermore, retirement plans allow taxpayers to defer paying taxes until a much later date, which allows their savings to grow at a faster rate. (more…)

Zero-Rated, Exempt & Deemed Supplies

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Zero-rated supply

– refers to items that are taxable, but the rate of tax is nil on
their input supplies. The government doesn’t tax its retail sale but allows credits for the value-added tax (VAT) paid on inputs. This reduces the price of a good.

Governments commonly use zero-rated goods to lower the tax burden on low-income households by zero-rating essential goods.

NB in South Africa we also have goods that zero-rated because the goods are leading contributors to other manufactured goods and thus a leading part of a broader supply chain. Many food items are designated as zero-rated goods; these food items are sold with a 0% value-added tax. (more…)

Tables of Interest Rates From SARS

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Interest rates charged in terms of the legislation administered by SARS are split into three main categories, i.e. –

  • interest charged on outstanding taxes, duties and levies and those payable in respect of refunds of tax on successful appeals and certain delayed refunds
  • interest payable on credit amounts (overpayment of provisional tax) in terms of section 89quat(4) of the Income Tax Act, 1962
  • interest applicable to a loan denominated in the currency of the Republic, as described in paragraph (a) of the definition of ‘official rate of interest’ in section 1(1) of the Income Tax Act, 1962

For ease of reference, the tables of interest rates are given below in three separate documents, numbered according to the three main categories, i.e. the first group of interest rates can be found in Table 1.

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Steps to Assist With SARS eFiling Disputes

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ACCOUNT RELATED DISPUTE

If you don’t agree with a penalty due to the late payment of taxes and the related interest, follow these three easy steps:

Step 1: Request remission for the penalty by providing reasons for the late payment of tax by submitting a ‘Request for Remission’ via eFiling.

Step 2: If the request for remission is partially allowed or disallowed you may dispute by completing a ‘Notice of Objection’. With your ‘Notice of Objection’ you will need to supply reasons and substantiating documents. (more…)

Rare scenarios for Income Tax Number

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Please take note of the following rare scenarios:

  • An individual can have an income tax number from birth if he / she becomes liable to submit an income tax return or becomes liable for any normal tax. For example, a child born into a wealthy family may be registered for income tax if his / her parents open a trust fund for him / her.
  • In the case of a late estate (upon death of tax payer), the old tax number cannot be used after death of a taxpayer. The executor has to apply to SARS for the new income tax number.
  • In the case of voluntary or mandatory sequestration, the tax payer must apply for a new income tax number from the date of sequestration.

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Employees Taxation For Personal Service Company or Trust

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Employees taxation for personal service company or trust. This is a company (or trust as the case may be) that is not a labour broker, and whose services to clients are performed on its behalf by a connected person;

  •  and such person would be regarded as an employee of the client if the relationship was directly between the person and the client; or
  • the person fails the control and supervision test; or
  • the person fails the regular payments test; or
  • more than 80% of the income of the company/ trust from services rendered is directly or indirectly from the client;

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