A critical investigation of the interaction between sections 8(4)(a), 9H and paragraph 40 of the eighth schedule of the income tax act No. 58 of 1962 versus the current practice of The South African Revenue Service

Section 9H and paragraph 40 of the Eighth Schedule of the Income Tax Act No. 58 of 1962 (‘the Act’) determines that a person is deemed to dispose of all of his assets (bar a few exceptions) at market value when that person ceases to be a South African resident or passes away, respectively. This deemed disposal is treated as a disposal event for capital gains tax purposes in terms of the Eighth Schedule of the Act. The question that arises is whether this deemed disposal event gives rise to a recoupment in terms of section 8(4)(a). In practice there currently seems to be uncertainty with regard to this issue, as there are different interpretations and applications of these provisions. This article investigates the interaction between sections 8(4)(a), 9H and paragraph 40 of the Eighth Schedule in order to determine whether a section 8(4)(a) recoupment should be included, or not, in the taxpayer’s gross income according to paragraph (n) of the gross income definition found in section 1 of the Act.

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Exploring the South African tax consequences of a residential property lottery

South African Journal of Economic and Management Sciences ◽

10.4102/sajems.v21i1.1951 ◽

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.

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Capital Gains Tax in Theory and Practice

VISION Journal of Indian Taxation ◽

10.17492/vision.v1i1.2417 ◽

2014 ◽

Vol 1 (1) ◽

Author(s):

S. M. Jawed Akhtar

Keyword(s):

Real Estate ◽

Income Tax ◽

Market Value ◽

Capital Gains ◽

Theory And Practice ◽

Present System ◽

Capital Gains Tax ◽

Preferential Treatment ◽

Theoretical Issues

Capital gains arise from the sale of assets other than those held in the ordinary conduct of business. For example, gains from the sale of a house by the house owner are capital gains while gains from appreciation in the value of houses held by a real estate dealer are ordinary gains of business. A decrease in the value of an asset is called a capital loss. In India, capital gains tax is levied within the framework of Indian Income Tax Act, 1961. Sections 45 to 55A of the Act relate to the taxation of capital gains. Since capital gains are not annual accruals from a given source but represent appreciation in the market value of assets over a period of time, they are treated on a different footing. The preferential treatment is given to long-term capital gains only. This paper examines the various theoretical issues associated with the taxation of capital gains and the present system of taxing capital gains in India.

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South African Income Tax Implications For Income Earned In Virtual Worlds

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v26i2.284 ◽

2010 ◽

Vol 26 (2) ◽

Cited By ~ 2

Author(s):

SJ Pienaar ◽

TL Steyn

Keyword(s):

South African ◽

Virtual Worlds ◽

Income Tax ◽

The United States ◽

Business Environment ◽

Point Of View ◽

Future Research ◽

Font Size ◽

The South ◽

Gross Income

There has been a significant increase in the number of internet business and e-commerce transactions over the last few years.  More recently, the development of virtual worlds on the internet has become an important feature of the business environment.  Although some research has been conducted in the United States of America into the tax consequences of income earned in virtual worlds, no such research has been conducted in South Africa.  This study adds to the American research by providing a critical analysis of the topic from the South African tax perspective.  The specific aim of the study was to determine whether income earned by South African residents from structured and unstructured virtual worlds respectively would qualify as gross income in terms of the South African Income Tax Act 58 of 1962.  It builds on previous international research, but offers a new perspective from the South African point of view. The study will make a valuable theoretical contribution to the application of the basic principles of gross income, and will deal with a brand new concept which did not exist when the principles were laid down.  The research was limited to determining whether the income earned in virtual worlds by South African residents who are taxed on their world-wide income would be included in gross income as defined by the South African Income Tax Act.  Capital gains tax consequences were not considered in any transaction where the income was classified as being of a capital nature.  Also excluded were deductions available to taxpayers in terms of the income included in gross income, and there is no detailed discussion  on when a taxpayer would be regarded as engaging in virtual worlds as a hobby as opposed to conducting a business.  Future research could be extended to this particular area.  This research concluded that most transactions in virtual worlds resulting in income would qualify as gross income under the South African Income Tax Act.  At this stage, the only possible disqualification in terms of the South African gross income definition appears to be income received “of a capital nature”.

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Inkomstebelastinghantering van kliëntelojaliteitsprogram: Transaksies in Suid-Afrika

Journal of Economic and Financial Sciences ◽

10.4102/jef.v5i2.293 ◽

2012 ◽

Vol 5 (2) ◽

pp. 437-458

Author(s):

Sophia M. Brink ◽

Herman A. Viviers

Keyword(s):

South African ◽

Income Tax ◽

Case Law ◽

International Literature ◽

Common Phenomenon ◽

The South ◽

Related Case ◽

Consumer Benefits ◽

Gross Income ◽

Loyalty Programme

Client loyalty programmes are a common phenomenon in the South African market and, although prevalent in South Africa since the 1980s, the South African Revenue Service has issued no guidance on the income tax treatment of client loyalty programme transactions in the hands of the consumer. Benefits received in the form of goods, services or discounts from a client loyalty programme are currently not subject to normal South African income tax. The main objective of the research was to investigate whether the existing provisions in the Income Tax Act and related case law provide the basis for taxing client loyalty programmes in the hands of the consumer as natural person. In order to meet this objective local and international literature was analysed to determine the correct income tax treatment and it was found that points or miles received by a consumer meet all the requirements of the “gross income” definition and as a result should be taxable.

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Cloud computing activities: Guidelines on the South African income tax classification

Journal of Economic and Financial Sciences ◽

10.4102/jef.v9i1.39 ◽

2017 ◽

Vol 9 (1) ◽

pp. 228-243

Author(s):

Shené Steenkamp ◽

Rudie Nel

Keyword(s):

Cloud Computing ◽

South African ◽

Income Tax ◽

Computer Hardware ◽

Correct Classification ◽

The South ◽

Know How ◽

Cloud Computing Service ◽

Source Test

The 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.

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11. Taxation of trusts and settlements

10.1093/he/9780198823209.003.0011 ◽

2018 ◽

Author(s):

Kathryn Wright ◽

Clare Firth ◽

Lucy Crompton ◽

Helen Fox ◽

Frances Seabridge ◽

...

Keyword(s):

Income Tax ◽

Capital Gains ◽

Capital Gains Tax ◽

Inheritance Tax

Settlements may be created by settlors in their lifetime, or by will, or they may arise under the intestacy rules. This chapter considers the tax implications of such settlements from the perspective of both the trustees and the beneficiaries. It considers each of the three main taxes separately: inheritance tax, capital gains tax, and income tax.

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Benhaus - a landmark decision, one less hoop for contract miners but a clarion call for an overhaul of the South African mining regime

Journal of the Southern African Institute of Mining and Metallurgy ◽

10.17159/2411-9717/1031/2020 ◽

2020 ◽

Vol 120 (8) ◽

Author(s):

K. Thambi

Keyword(s):

South African ◽

Value Chain ◽

Income Tax ◽

Mining Industry ◽

Third Party ◽

Mining Activities ◽

The South ◽

Mining Operations ◽

Tax Legislation ◽

The Right

SYNOPSIS The mining industry has evolved, such that the means of production that were once in the hands of major players or power houses have become equally accessible to smaller entrants, i.e. junior mining companies and contract miners. Contract mining involves contractual relationships between mine owners or mineral right holders and third parties to conduct mining activities on behalf of the right holders. The current mining income tax legislation has been a considerable obstacle to contract miners. Under its terms, they have been viewed as mining on behalf of third-party mineral rights holders. As such, expenditure incurred in relation to contract mining activities was often disallowed by the South African Revenue Service (SARS). However, the recent judgement of the Supreme Court of Appeal, Benhaus Mining (Pty) Ltd v CSARS 2020 (3) SA 325 (SCA) (Benhaus), rightfully or wrongfully, appears to provide clarity regarding the fate of contract miners' involvement in the mining value chain. The taxpayer, a contract miner, was held to be conducting mining operations within the meaning of S15(a) read with si of the Income Tax Act 58 of 1962 (the Income Tax Act). This paper looks at how contract mining has traversed the mining tax landscape, the implications of the Benhaus judgment, and stresses the necessity for clear policy reform to the mining tax regime and equally to legislation framed to give effect to these policies. Keywords: Contract mining, owner mining, tax, DMRE, mining regime reforms.

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An evaluation of the income tax treatment of client loyalty programme transactions by South African suppliers

Journal of Economic and Financial Sciences ◽

10.4102/jef.v8i1.88 ◽

2015 ◽

Vol 8 (1) ◽

pp. 145-164

Author(s):

Sophia Brink

Keyword(s):

South Africa ◽

South African ◽

Income Tax ◽

International Literature ◽

Financial Loss ◽

The South ◽

The Past ◽

Loyalty Programme

The popularity of client loyalty programmes has increased drastically over the past few years, with more than 100 suppliers in South Africa currently making use of them. Despite the fact that client loyalty programmes have been prevalent in South Africa since the 1980s, the South African Revenue Service has issued no specific guidance on the income tax treatment of client loyalty programme transactions. The main objective of the research was to determine whether South African client loyalty programme suppliers treat client loyalty programme transactions correctly for income tax purposes. In order to meet this objective, available local and international literature were analysed to determine the proposed income tax treatment of a client loyalty programme transaction expenditure incurred by supplier for purposes of the client loyalty programme. The proposed correct income 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 Income Tax Act No. 58 of 1962 is treated differently from the proposed treatment. This incorrect tax treatment could result in possible financial loss to the client loyalty programme supplier as taxpayer.

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11. Taxation of trusts and settlements

10.1093/he/9780198787662.003.0011 ◽

2017 ◽

Author(s):

Kathryn Wright ◽

Clare Firth ◽

Lucy Crompton ◽

Helen Fox ◽

Frances Seabridge ◽

...

Keyword(s):

Income Tax ◽

Capital Gains ◽

Capital Gains Tax ◽

Inheritance Tax

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Effect of Corporate Income Tax Incentives on Investment in Rwanda

Management and Organizational Studies ◽

10.5430/mos.v5n4p1 ◽

2018 ◽

Vol 5 (4) ◽

pp. 1

Author(s):

Jean Bosco Harelimana

Keyword(s):

Private Sector ◽

Income Tax ◽

Value Added ◽

Secondary Data ◽

Sampling Technique ◽

Tax Incentives ◽

Capital Gains ◽

Corporate Income Tax ◽

Manufacturing Companies ◽

Capital Gains Tax

The purpose of this study was to establish the effect of corporate income tax incentives on investment using privatesector manufacturing companies in Kigali special economic zone, Rwanda. The study adopted descriptive researchdesign and the study population comprised of thirty-nine manufacturing companies in free zone in Rwanda which areregistered by the private sector. The sample size comprised of 36 private companies determined from a totalpopulation of 39 companies. Only two employees that are acquainted with decision making from each manufacturingcompanies registered by the private sector were targeted hence the target population respondents was 72 respondents.The Stratified random sampling technique was used to select the respondents. Data was collected from both primaryand secondary data using questionnaires and documentation. The findings in the study revealed that tax incentiveshave significant positive effect on investment in private sector manufacturing companies in Rwanda. The p -valuesfor all the variables are lower than 5% this implies that are significant. From the study the p-values are 0.009, 0.000,0.003 and 0.000 for company income tax, capital allowance, value added tax and capital gains tax incentivesrespectively. The capital allowance incentive has the highest t value of 4.656, followed by company income taxincentives with 3.954, and next is capital gains tax incentives with 3.184, while the lowest is the value added taxincentives with 2.954. Based on the empirical evidences and results of the analysis, there is positive and statisticallysignificant relationship between the tax incentives and investments. The study recommends that Government andpolicy makers should concentrate on efforts at ensuring that more CIT incentives and strategies that are specificallyaddressing small and medium enterprises are introduced.

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