scholarly journals The value-added tax implications of the temporary change in use adjustments by residential property developers: an international comparative study

2019 ◽  
Vol 18 (3) ◽  
pp. 46-65
Author(s):  
H Du Preez ◽  
A E Klein
Keyword(s):  
South Africa ◽  
New Zealand ◽  
South African ◽  
Cash Flow ◽  
Value Added ◽  
Residential Property ◽  
Value Added Tax ◽  
Residential Properties ◽  
International Comparative ◽  
Property Developers

Residential property developers sometimes struggle to dispose of newly built residential premises, because of an oversupply of residential property in the market and decreased sales in recent years. Many developers have switched from speculation (when residential properties are built to be sold) to investment (when properties are retained to generate rental income). Some developers only lease out newly constructed dwellings temporarily in anticipation of selling them later at a more favourable price. Units may be held with the ultimate goal of selling them, creating taxable supplies. In South Africa, these changes in the use of residential property have value-added tax (VAT) consequences that result in a negative cash flow. In the 2010 Budget Speech, amendments to the harsh VAT legislation were proposed. 6This study examined the South African VAT legislation applicable to property developers during the period when residential properties are let out. The findings suggest that the current South African VAT legislation relevant to changes in the use of residential properties is harsher than that in New Zealand or Australia, but that the proposed amendments offer some degree of relief. However, even with these amendments, there is insufficient relief, and another possible solution is proposed.

scholarly journals DUTY FREE NOT VAT FREE Master Currency v CSARS (155/2012) [2013] ZASCA 17 (20 March 2013)

Obiter ◽  
2014 ◽  
Author(s):  
Carika Keulder ◽  
Thabo Legwaila
Keyword(s):  
South Africa ◽  
South African ◽  
Value Added ◽  
Value Added Tax ◽  
Free Zone ◽  
Goods And Services ◽  
Competitive Price ◽  
Zero Rate ◽  
The Republic ◽  
Free Area

In Master Currency v CSARS ((155/2012) [2013] ZASCA 17 (20 March 2013)) the court had to address the question of whether services supplied by Master Currency were subject to a zero rating. This case is of particular interest as it addresses the VAT implications of services supplied in a duty-free area of an airport. Hence, it was questioned whether a service rendered in a duty-free area will be subject to VAT.A duty-free area or zone is an area or zone within which goods and services may be supplied without being subject to customs duties. The IBFD International Tax Glossary defines “Duty-free zone” as follows: “[z]one usually next to an international port or airport where imported goods may be unloaded, stored and reshipped without payment of customs duties or other type of indirect tax, provided the goods are not imported” (140). The importance of this definition is that it specifically refers to “other type[s] of indirect taxes” also not being leviable in the duty-free area. It is important to note that the Customs and Excise Act (91 of 1964) does not define “duty free” or “duty-free area”.The South African value-added tax (hereinafter “VAT”) is a tax on the consumption of goods and services in the Republic of South Africa. Accordingly, the Value-added Tax Act 89 of 1991 (hereinafter “the Act”) and, accordingly, references to sections in this note are to sections of the Act, unless otherwise expressly stated, provides for three instances where goods and services will be considered to be consumed in South Africa and thus be subject to VAT. The first instance will be when a vendor supplies goods or services in the course or furtherance of an enterprise in South Africa. The second instance is when goods are imported into South Africa by any person, and lastly when imported services are supplied to any person in South Africa. The supply of domestic goods and services is taxable in terms of section 7(1)(a) of the Act. Imported goods and services are subject to VAT firstly because they are destined for consumption in South Africa. Moreover, it is essential for these goods and services to attract VAT consequences, otherwise imported goods and services would enjoy a competitive price advantage over equivalent local goods and services as the latter would be subject to VAT in terms of section 7(1)(a). Thus the taxation of imported goods and services creates an equal competitive footing with the domestic goods and services. Bearing in mind that VAT is a tax on consumption it follows that exportation of goods and services from South Africa are subject to tax at a zero-rate as the consumption will not take place in South Africa. As a general matter, the supply of these goods is taxable in the country where they are destined to be consumed. The zero-rating ensures that no double taxation ensues in that an exporter will not be taxed in South Africa and again in the export country (“export country” refers to any place that is outside South Africa).

scholarly journals Exploring the South African tax consequences of a residential property lottery

2018 ◽  
Vol 21 (1) ◽  
Author(s):  
Silke De Lange ◽  
Danielle Van Wyk
Keyword(s):  
South Africa ◽  
South African ◽  
Income Tax ◽  
Capital Gains ◽  
Residential Property ◽  
Research Approach ◽  
Exploratory Research ◽  
Capital Gains Tax ◽  
The South ◽  
Residential Properties

Background: Disposing of a residential property by way of a lottery sounds peculiar, but a number of these transactions relating to residential properties in South Africa have recently taken place. As this is not an ordinary way of disposing of and acquiring residential property, it is submitted that it is necessary to explore the tax consequences resulting from such a transaction. Aim: The objective of this article is to explore some of the most pertinent South African tax consequences of such a residential property lottery transaction, from the viewpoint of the owner (‘seller’) who disposes of the residential property and the winner (‘purchaser’) who acquires the residential property in terms of the lottery. Setting: This article examines existing literature in a South African income tax environment to explore the tax consequences resulting from a disposal and acquisition of residential property by way of a lottery. Methods: A non-empirical study, which entails the study of the various South African tax provisions and an application thereof to the facts of the lottery transaction, was conducted. A doctrinal research approach was followed within the realm of exploratory research. Results: Disposing of and acquiring residential property by way of a lottery results in a number of actual tax consequences, as well as a number of uncertainties regarding taxes (referred to as uncertain considerations). Conclusion: The conclusion is reached that the possible tax consequences of such a transaction can create tax risks or can result in unintended tax consequences relating to inter alia income tax (including capital gains tax), transfer duty and donations tax. The insights provided in this article do not always result in conclusive answers but they may, however, result in further research to be conducted, and a number of such areas for further research were identified. Should residential property lottery transactions occur more frequently in South Africa in future, it is recommended that the South African Revenue Services (SARS) issues clear guidance on the tax treatment from the perspective of the owner and the winner of such a transaction to ensure that any uncertainties are dealt with correctly.

scholarly journals Belasting op toegevoegde waarde: Gevolge van kliëntelojaliteits-programtransaksies vir verskaffers

2013 ◽  
Vol 6 (3) ◽  
Author(s):  
Sophia Brink
Keyword(s):  
South Africa ◽  
South African ◽  
Value Added ◽  
Common Phenomenon ◽  
Financial Loss ◽  
The South ◽  
Value Added Tax ◽  
Local Literature ◽  
Loyalty Programme

Client loyalty programmes are a common phenomenon in the South African market. Despite the fact that client loyalty programmes have been prevalent in South Africa since the 1980s, the South African Revenue Service has issued minimal guidance on the value-added tax treatment of client loyalty programme transactions. The main objective of the research was to determine whether South African client loyalty programme suppliers correctly account for client loyalty programme transactions for value-added tax purposes. In order to meet this objective, available local literature was analysed to determine the proposed value-added tax treatment of a client loyalty programme transaction. The proposed correct value-added tax treatment was compared with a survey circulated to a population of client loyalty programme suppliers in South Africa. The comparison indicated that in practice the Value-Added Tax Act 89 of 1991 is not always interpreted correctly. This incorrect tax treatment could result in financial loss to the client loyalty programme supplier as taxpayer

Conserving inequality: How private conservation and property developers ‘fix’ spatial injustice in South Africa

2021 ◽  
pp. 251484862110663
Author(s):  
Lerato Thakholi ◽  
Bram Büscher
Keyword(s):  
South Africa ◽  
South African ◽  
Environmental Sustainability ◽  
Structural Inequality ◽  
Conservation Property ◽  
Private Profit ◽  
Ethnographic Data ◽  
Housing Estates ◽  
Property Developers

In 2016, South Africa launched its National Biodiversity Economy Strategy. This strategy aims to facilitate the development of a ‘wildlife economy’ as a solution to unemployment, loss of biodiversity and rural development. Central to the strategy is the role of private conservation actors, who keenly posit their commercial model as the best way to achieve these objectives. This stands in sharp contrast to recent critiques that suggest that private conservation reinforces structural inequality by denying access to land and perpetuating unjust labour conditions. Using ethnographic data from the South African Lowveld region that includes the Kruger National Park, the paper takes these points further by arguing that a rapidly growing alliance between private conservation and property developers actively conserve inequality by maintaining and even extending spatial injustice in the region. Two popular recent manifestations of this alliance in particular, share block systems that distribute ownership of access to real estate in private reserves and wildlife housing estates, have established new conservation-property linkages that entrench capitalist socioecological fixes. Not only do these initiatives lead to further engrained spatial injustice, we conclude that this conservation-property alliance at the centre of the ‘wildlife economy’ also willingly sacrifices environmental sustainability on the altar of white conservation imaginations and private profit.

scholarly journals The Nature of Payment Problems in the New Zealand Construction Industry

2011 ◽  
Vol 11 (2) ◽  
pp. 22-33 ◽  
Author(s):  
Thanuja Ramachandra ◽  
James Olabode Rotimi
Keyword(s):  
New Zealand ◽  
Construction Industry ◽  
Cash Flow ◽  
General Construction ◽  
Court Cases ◽  
Significant Percentage ◽  
Construction Companies ◽  
Financial Obligations ◽  
Specific Construction ◽  
Property Developers

Delay and loss of payment is a serious problem in the construction industry of many countries. These affect the cash flow of contractors which is critical to meeting their financial obligations. Payment defaults by the principal leads to insolvency of contractors and in turn other parts of the project chain. In recognition of some of these problems, most countries have established payment-specific construction industry legislation and other contractual measures to mitigate the problems, but nevertheless the problem persists. In this context, the paper examines the nature of payment problems in the construction industry in New Zealand. It is part of a larger study, that seeks solutions to payment losses in the construction industry.The study uses two approaches; an analysis of liquidators’ reports, and an analysis of court cases involving payment disputes to determine the magnitude of payment problems on construction parties. The findings are presented using simple descriptive and interpretive analyses. The study finds that trade creditors are impacted negatively (payment delays and losses) by the liquidation of property developers, general construction and construction trade companies. 75% of trade creditors are unable to be paid fully by these categories of construction companies after liquidation proceedings. Liquidation proceedings take an average 18 months before they are finalised. The analysis of court cases found that 80% of payment disputes are between principals and contractors; with considerably significant percentage of disputes resulting in outright loss of payments. Only 40% of the cases are successful, in which case claimants are able to fully recover the amount in dispute. Payment losses are more prevalent in liquidation than delays and unlike in legal disputes, there is no security for those losses. The study finds that construction parties use remedies contained in the security of payment provisions within standard conditions of contract, and legislative documents.

Challenges and progress in integrating knowledge: cases from clothing and textiles in South Africa

2019 ◽  
Vol 24 (1) ◽  
pp. 32-55 ◽  
Author(s):  
Geoffrey Wood ◽  
Christine Bischoff
Keyword(s):  
South Africa ◽  
Knowledge Management ◽  
South African ◽  
Value Chain ◽  
Textile Industry ◽  
Value Added ◽  
Organizational Structures ◽  
Production Networks ◽  
Content Type ◽  
Informal Knowledge

Purpose The central purpose of this paper is to explore how implicit knowledge capabilities and sharing helps secure organizational survival and success. This article explores the challenging in better management knowledge in the South African clothing and textile industry. In moving from a closed protected market supported by active industrial policy, South African manufacturing has faced intense competition from abroad. The ending of apartheid removed a major source of workplace tension, facilitating the adoption of higher value-added production paradigms. However, most South African clothing and textile firms have battled to cope, given cutthroat international competition. The authors focus on firms that have accorded particularly detailed attention to two instances characterized by innovative knowledge management. The authors highlight how circumstances may impose constraints and challenges and how they paradoxically also create opportunities, which may enable firms to survive and thrive through the recognition and utilization of informal knowledge, both individual and collective. Design/methodology/approach This study is based on in-depth interviews, primary company and industry association and secondary documents. Findings The study highlights how successful firms implemented systems, policies and practices for the better capturing and utilization of external and internal knowledge. In terms of the former, a move toward fast fashion required and drove far-reaching organizational restructuring and change. This made for a greater integration of knowledge through the value chain, ranging from design to retail. Successful firms also owed their survival to the recognition and usage of internal informal knowledge. At the same time this process was not without tensions and paradoxes, and the findings suggest that many of the solutions followed a process of experimentation. The latter is in sharp contrast to many South African manufacturers, who, with the global articulation of production networks, have lost valuable knowledge on suppliers and their practices. At the same time, both firms have to contend with an increasingly unpredictable international environment. Research limitations/implications At a theoretical level, the study points to the need to see informal knowledge not only in individualistic terms but also as a phenomenon that has collective, and indeed, communitarian features. Again, it highlights the challenges of nurturing and optimizing informal knowledge. It shows how contextual features both constrain and enable this process. It further highlights the extent to which the effective utilization of external knowledge, and rapid responses to external developments, may require a fundamental rethinking of organizational structures and hierarchies. This study focuses on a limited number of dimensions of this in a single national context but could be replicated and extended into other contexts. Practical implications The study highlights the relationship between survival, success and how knowledge is managed. This involved harnessing the informal knowledge and capabilities of workforce to enhance productivity, in conjunction with improvements in machinery and processes, and a much closer integration of design, supply, production and marketing, underpinned by a more effective usage of IT. Paradoxically, other clothing and textile firms have survived doing the exact opposite – reverting to low value-added cut-and-trim assembly operations. At a policy level, the study highlights how specific features of South African regulation (above all, in terms of job protection), which are often held up as barriers to competiveness, may help sustain the knowledge base of firms. Social implications The preservation and creation of jobs in a highly competitive sector was bound up with effective knowledge management. The study also highlighted the mutual interdependence of employers and employees in a context of very high unemployment and how the more effective usage of informal knowledge bound both sides closer. Originality/value There is a fairly diverse body of literature on manufacturing in South Africa, and, indeed across the continent; however, much of it has focused on challenges. This study explores relative success stories from a sector that has faced a structural crisis of competitiveness, and as such, has relevance to understanding how firms and industries may cope in highly adverse circumstances.

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