December 2014


Editor's Note - December 2014 Editor's Note December 2014

There was another 100 year anniversary this year – that of income tax. It is said that heated debate followed the introduction of the resolution placed before Parliament by Minister of Finance and Defence, Jan Smuts. Quite understandable... Finally a divided House saw 64 "aye" votes to 31 "nays".

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The birth of the first Income Tax Act Tax December 2014

Some things never change. Several of the newer additions to the current Income Tax Act were borrowed and adapted from Australian, Canadian and, especially in the case of VAT, New Zealand tax statutes. Well, our very first Income Tax Act (28 of 1914) was based on the New South Wales Act.

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Clearing up some misconceptions about foreign tax credits Tax December 2014

It is a universal principle that where certain types of income are received by a person from a foreign source, the payer in that foreign country is obliged to withhold tax. This is almost standard when it comes to payments like dividends, interest and royalties but some countries also impose withholding taxes on other types of income, such as fees from certain types of services.

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Stolen money can be taxing Tax December 2014

Taxpayers incur expenditure and losses through theft or fraud on a daily basis. This is an unfortunate reality of doing business in South Africa. There are many ways in which money can be stolen from a business. An employee may steal money or there may be a break-in or robbery at the business premises. Money may be stolen through unlawfully altering a cheque or unauthorised access to internet banking. The theft or fraudulent loss of money from a business has income tax implications for both the victim and the thief.

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Miner or manufacturer? The plot thickens Tax December 2014

A recent decision in the Johannesburg Tax Court (Case No 13410 – August 2014) adds to the confusion that surrounds the question of whether a person is carrying on "mining activities" or "manufacturing activities".

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VAT on contractual damages Tax December 2014

This article discusses the applicability of VAT in a claim for contractual damages. The position in South African law is that delictual or consequential damages are generally not subject to VAT.

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Security SPVs and tax neutrality Tax December 2014

Despite the bad press that special purpose vehicles (SPVs) received during the Enron scandal, they are still an everyday feature of many financial structures. They are commonly used in project finance transactions and in respect of employee incentive schemes, and normally serve a specific business purpose: they are generally created to be independent, bankruptcy remote vehicles and allow the financiers in syndicated loan transactions to share the proceeds of the security provided by the borrower. For example, a typical greenfields renewable energy project might have several financiers and "Security SPVs" would typically be an integral part of the financing arrangements required by the financiers of such a project.

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Assuming rehabilitation liabilities Tax December 2014

During December 2013, SARS released a draft discussion paper in which it set out its application of the relevant tax law in relation to the tax treatment of the purchaser and seller when contingent liabilities form part settlement of the purchase price of assets acquired as part of a going concern. SARS states that the document was prepared in light of recent judgements delivered by local and foreign courts in addition to numerous requests for clarity on the issue.

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Foreign property investments: controlled foreign company issues Tax December 2014

In terms of the ordinary business practices of property companies, it is not uncommon to outsource property and asset management functions to third party property and asset managers.

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The cost of tax evasion Tax International Law December 2014

The purpose of this article is to raise awareness among taxpayers and the community at large about the "cost" of tax evasion and to highlight the main consequences of this practice.

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Coming to the UK: tax planning Tax International Law December 2014

Who should read this and why?

This article is relevant to non-UK domiciled individuals who become resident in the UK. Advice should be taken pre-residence, otherwise tax planning opportunities are lost.

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A reverse incentive theory for patents Intellectual Property December 2014

The Incentive Theory is the most popular explanation for why the patent system is a good thing for society. According to the Incentive Theory, innovating is inherently risky and expensive and so we need to provide incentives to encourage innovation. Without incentives, no profit-driven company would invest in research and development (R&D), knowing that the output of their R&D could immediately be copied by a company that had not incurred the cost of development.

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Trade marks – a key decision Intellectual Property December 2014

South Africa had its first keywords trade mark decision recently. This is a decision that deals with the question of whether or not it's lawful for a company to purchase as a keyword (think Google Adwords) a word that is the trade mark of a competitor, which has the effect that anyone searching that word will, in addition to the so-called 'natural results' that come up, see adverts placed by the company that bought the keyword.

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Seek and ye shall find Intellectual Property December 2014

In Cochrane Steel Products v M-Systems Group 39605/13 ZASGHC 29/10/14, Cochrane Steel Products sought an interdict against M-Systems for bidding on its brand name CLEAR VU as a Google Adwords search keyword. The applicant did not have a trade mark registration for its mark and accordingly relied on an action based on unlawful competition. Specifically, it alleged passing off and a species of unlawful competition, "leaning on".

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Public interest and prohibited conduct: a juggling act? Competition Law December 2014

The South African Competition Act (89 of 1998), like many of its counterparts in the developing world, incorporates traditional competition law principles with public interest considerations. The concept of public interest is woven into and features prominently in various parts of the Act.

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