Taxation

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An analyis of the tax implications for an employer and employee of a deferred compensation scheme.
(1999) Pardy, Louise.; Mitchell, Lindsay David.
No abstract available.
The analysis of sugar tax on sugar–sweetened beverages in South Africa: a comparative study with Mexico, Denmark and Illinois Cook County.
(2019) Perumal, Tarryn.; Schembri, Christopher Carmelo.
No abstract available
An analysis of the South African tax incentive for research and development and an international comparison.
(2010) Price, Shane Terrence.; Schembri, Christopher Carmelo.
The promotion of science & technology and the creation of an enabling environment for countries innovation systems has been a growing worldwide trend in developed countries, with 21 out of 30 member countries of the Organisation for Economic Co-operation and Development (OECD) currently utilising some form of tax incentive program aimed at encouraging investment in research and development (R&D) by private industry. 1 Encouraging R&D and associated innovation is generally seen as an effective tool in advancing science and technology, which in turn leads to the creation of new products and services, an increase in international competitiveness of local business, direct foreign investment and social spin-offs in the form of increased employment and economic growth? R&D is, however, expensive and involves high levels of technical risk, with the costs and risk involved often outweighing the potential profit. Consequently, many businesses choose not to perform R&D, which has resulted in governments of most developed countries having implemented various incentives to encourage private business to undertake R&D. These incentives can take the form of either direct incentives (grants, soft loans, subsidies etc) or indirect incentives (such as tax incentives). Tax incentives effectively subsidise the costs of R&D, making it a more attractive and profitable alternative for business. Developed countries, including: the United States of America (US), the United Kingdom (UK), Japan, China, Canada and Australia have all adopted a combination of both direct and indirect incentives, with various tax incentive measures receiving much attention in the last 2 decades. In South Africa the legislation providing for R&D tax incentives has been substantially amended in recent years through a number of Taxation Amendment Acts,] culminating in the enactment of s lID of the Income Tax Act 58 of 1962 (the Act). The aim of this dissertation is to critically examine the current South Afi'ican tax incentive scheme as contained in sliD, focusing on the eligibility requirements of that incentive. In addition, the dissertation will highlight design features and characteristics of the incentive, particularly in respect of its generosity, predictability, simplicity, administration and targeting. 4 The design and characteristics of the South African incentive is then compared to those of three different countries: the UK, Australia and Canada.s Based on the analysis and comparison, certain lessons are identified for South Africa6 and various opinions are advanced on the effectiveness of the current structure and whether particular aspects of it could be improved going forward.
The analysis of value added tax, the effects of zero-rated VAT and exempt supplies and a look into who benefits more, the rich or the poor.
(2021) Mjindi, Wandisa.; Schembri, Christopher Carl.; Bosch, Shannon Joy.
No abstract available.
Capital versus Revenue: a critical discussion on the correct test to be applied in determining the nature of an asset for income tax purposes.
(2019) Quarsingh, Quentin Silvanus.; Schembri, Christopher Carmelo.
No abstract available
The challenges arising from the application of the ‘gross income definition to illegal income.’
(2017) Maboko, Kulani.; Schembri, Christopher Carmelo.
Abstract available in PDF file.
The common law conduit pipe principle: should we retain this principle in our South African law?
(2018) Zwezwe, Mlungisi.; Schembri, Christopher Carmelo.; Bosch, Shannon Joy.
More than a decade has passed since the ‘common law conduit pipe principle’ was introduced into our South African law of taxation. Following this introduction in 1938, a trust has in some situations operated as a retainer or saver of the identity of certain types of amounts from the point the trust receives each amount type up until that amount exits the trust. Consequently these amounts are not exposed to normal tax even when they finally reach the hands of their beneficial owner. This principle was later incorporated into the Income Tax Act 58 of 1962 by the insertion of both section 25B and para 80 of the Eighth Schedule to that Act. With the passage of time and taxpayers becoming more and more knowledgeable and consistently strategizing new ways of avoiding triggers of certain types of taxes, they realised that the conduit pipe principle could easily be manipulated within a discretionary trust to obtain various tax benefits. As a result of these tax benefits the use of discretionary trusts in South Africa is constantly on the rise. However, their continued use was first brought into question after the 2013 National Budget speech in which it was indicated that these types of trusts would no longer operate as a conduit pipe. This suggested the repeal of section 25B and para 80 of the Eighth Schedule. The doing away with the conduit pipe principle in our law of taxation has necessitated the imposition of the question whether its real purpose and value is properly understood. The National Treasury and SARS do not appear to fully comprehend this purpose – the purpose seems to be to facilitate the avoidance of normal tax. Hence the aim of this study is to attempt to determine the true purpose and value of this principle within our tax law system. This study realises this objective by embarking on an in-depth analysis of Armstrong v Commissioner for Inland Revenue 1938 AD 343 which introduced this principle into our South African law of taxation. This study successfully found that the true purpose of the ‘conduit pipe principle’ is to rule out the possibility of double taxing the amount which has already suffered the consequences of tax at its originating source when it subsequently lands in the hands of its beneficial owner. This means that through the conduit pipe operation of a trust there is assurance that each identity of amount is protected against being lost between the time that amount is paid to the trust and the time the trust pays it over to the beneficiary who will also take advantage of the exempt status of that amount in his hands. This tax benefit is only available if the amount is paid over in the year of assessment during which the trust received it – otherwise it gets caught up in the normal tax net in the beneficiary’s hands. Trustees successfully escape this trap by insisting on making this payment within the same tax period the trust received the amount. The study also looked at the current normal tax treatment of the income that is inclusive of both local dividend(s) and interest from investment(s) and analysed the tax impact these types of amount have on reducing the taxable income of both a discretionary trust and its beneficiary. A comparison was made from a current income tax treatment point of view with the hypothetical time when the conduit pipe principle is finally abolished. It was discovered that beneficiaries of these types of trusts would be taxed more than they are currently being taxed as the dividends and basic interest exemption under the Income Tax Act 58 of 1962 would no longer be available to them. A discretionary trust would no longer be an ideal tool to use in a tax avoidance strategy but will still be a good shelter for the protection of assets. This study further concludes that the conduit pipe principle should be retained in our law because it abolition was apparently recommendation on the basis of its true purpose being misunderstood for tax avoidance rather than avoidance of imposing double tax on an amount that has already been taxed at its source.
A comparative analysis of residence issues in income tax and a case study of Nigerian and South African legal system.
(2015) Idris, Nuhu Musa.; Williams, Robert Charles.
In exercising income tax jurisdiction, the state can choose to have a link with the personality of the income earner who resides within its territory whether or not the income was derived from a source within its territory (residence-based taxation). No universal rules for determining the tax residence of a person (either natural or juristic) for tax purposes apply in all circumstances. Thus, the states have different definitional rules of residence as contained in their respective income tax legislation and as interpreted by their courts. The global economic integration makes taxpayers move freely and exploit ambiguity created by the divergence of definition of tax jurisdiction between the States. The research explores the possibility of achieving cooperation amongst the States in delimiting the scope of their substantive and enforcement tax jurisdiction without losing their sovereignty. The cooperation envisioned by this research is a departure from the traditional approach, where the focal point of achieving cooperation is either bilateral or multilateral tax treaties. that focus on protecting the tax base of the party-state, ignoring the taxpayers who face conflicting claims due to inconsistencies in the definitional rules. The research argues that the cooperation could be achieved through comparative analysis of the definitional rules in order to ascertain the level of convergence and divergence and how they could extend mutual respect for each other’s tax sovereignty and balance their interests against that of the taxpayers in defining the tax residence. For the purpose of in-depth analysis, the research is restricted to Nigeria and South Africa. Nigeria has adopted the residence-based system at the inception of its income tax system, while South Africa initially adopted sourced-based system but later switched to the residencebased system. Thus, the two states operate residence-based tax system. They are also parities to Bilateral Treaties in order to resolve the double taxation inherent in the system. However, the conflict remained unresolved. The thesis found that the definitional rule of tax residence is not universal. Traditionally, the States adopted the bilateral tax treaty regime to resolve the potential jurisdictional caused by the diversity. However, the reality of the economic viii integration foists a challenge on that regime. Hence, the current move towards a multilateral tax treaty, which also runs against the tenet of the states’ tax sovereignty. Therefore, there is a conflicting interface between the need for the States’ cooperation in designing their tax residence rules and the states’ tax sovereignty. The research revealed that a comparative analysis of the diverse definitional rules balances the two conflicting interests. The comparison of the Nigerian and South African regimes bring home the significance of the comparative analysis. It is found that the two regimes operate different and irreconcilable rules on the definition of tax residence. While, the South African regime is closer to the global trend, the Nigerian rules are complex and inconsistent, which could have impacted the existing double taxation agreement (DTA) between Nigeria and South Africa.
A comparative analysis of the taxation of dividends between South Africa and Mauritius.
(2015) Robb, Daniel Peter Derek.; Schembri, Christopher Carmelo.; Bosch, Shannon Joy.
The aim of this dissertation was to determine whether there was any benefit to shareholders (corporate or individuals) in utilising offshore structures in Mauritius to minimise their ultimate dividends tax liability. Due to multiple factors, including the lack of prolific secondary sources in Mauritius, the dissertation was written, for the most part, from a South African perspective. In undertaking this study, a comprehensive review of dividends tax was undertaken (excluding dividends in specie and dividends from listed companies) under South African law, Mauritian law and the tax treaty that is effective between the two jurisdictions. A brief analysis of the Agreement between the Government of the Republic of South Africa and the Government of the Republic of Mauritius for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, which is set to become effective on 1 January 2016 was also undertaken. In each chapter, a review was performed, analysis was made and practical examples were given in order to give the reader a better understanding of the practical application of the analysis. Comparisons were made using different commonly used entities such as companies (including Global Business License 1 and 2 companies) trusts, foreign trusts and also individuals. The dissertation provided examples of each of these types of entities in order to show the effectiveness of utilising Mauritius’ low tax rates and generous provisions in the tax treaty between South Africa and Mauritius. The study revealed that, without making any comments on the cost of setting up offshore structures, offshore structures could in certain circumstances, if properly structured, substantially reduce a shareholders dividends tax liability. The study did however also reveal that such structures would have to be legitimate foreign business enterprises to avoid the complex anti-avoidance provisions provided in the South African Income Tax Act No 58 of 1962 such as the controlled foreign company provisions which, in certain circumstances, attribute the net income of the offshore company to the shareholder(s). The dissertation described certain important principles which would need to be complied with by the shareholder and the foreign entity concerned, in order to avoid the pitfalls associated with such structures, including the very important place of effective management tests. The dissertation therefore had a positive result and could benefit any high net worth individual or company seeking to minimise its dividends tax burden.
A critical analysis of the balance between effective tax collection and permissible tax avoidance provided by legislation.
(2020) De la Rey, Chrichan.; Schembri, Christopher Carmelo.; Bosch, Shannon Joy.
Abstract available in PDF.
A critical analysis of the effectiveness of taxation regulation of cryptocurrencies in mitigating the facilitation of tax evasion in South Africa.
(2021) Singh, Pratista Yudvir.; Swales, Lee Jay Edwin.; Bosch, Shannon Joy.
In finance, law and technology, change is an inevitable result of development. Whilst governments, legal authorities and financial regulatory bodies may be sceptical or hesitant to accept the natural progression of technology, the digital revolution will not regress, but merely continue to thrive against a background of hostility. Thus, the importance of regulatory structures which effectively standardise digital innovations is reflected through the necessity thereof. It is submitted therefore, that it is wise to mitigate the consequences of the ineffective regulation of digital innovations. One such innovation which has been exponentially gaining traction in the field of technology is that of cryptocurrency.1 This research explores the need for effective cryptocurrency regulation by examining the necessity of a solid legal regulatory foundation upon which it may be integrated into the financial sphere in South Africa.2 Submissions will be made that it is insufficient to merely impose superficial legal regulations on cryptocurrency without accounting for various factors of consideration where the novelty of cryptocurrency is concerned in relation to the nature thereof. In SA specifically, taxation authorities3 have been implementing regulations regarding cryptocurrency, which will be analysed and evaluated through this research. In the likely event of cryptocurrency becoming a primary medium of transacting, the taxation regulations thereof must be effective to mitigate any negative effects (of insufficient and ineffective regulation) for taxpayers and the fiscus. It is imperative that regulatory bodies such as the legislature and the South African Revenue Service,4 ensure that the regulation of cryptocurrency in SA is effective so that any lacunae in existing legislation which could yield negative consequences for taxpayers and/or the fiscus are adequately addressed and effectively mitigated. From a taxation perspective, it is submitted that one of the main negative consequences of the lack of effective regulation of cryptocurrency is the potential of tax evasion. Tax evasion in relation to cryptocurrency will be analysed and discussed in this research based on the nature of cryptocurrency. The lack of cryptocurrency regulation is also cause for concern among taxpayers who use cryptocurrency without surety of how the proceeds therefrom will be taxed. Recommendations will thus be made regarding the implementation of a legislative definition of cryptocurrency to provide preliminary regulatory clarity on the taxation of cryptocurrency. This research envisages that the lack of understanding and effective regulation of cryptocurrency in SA should also be addressed by advisory, regulatory and authoritative bodies insofar as these bodies taking active steps to resolve the confusion surrounding the categorisation of cryptocurrency is concerned. The effectiveness of taxation regulations (or rather, the lack thereof) of cryptocurrency in SA will therefore be examined through this research, by analysing existing plans, proposed policies and new legislation as well as criticising the lacunae in the law which exist in cryptocurrency regulation. Furthermore, this research aims to prove that cryptocurrency regulation in SA is inadequate and ineffective. This issue will be explored in a holistic sense in order to assert that the lack of adequate cryptocurrency regulation is in fact a global issue. The legislation addressing the taxation of cryptocurrency in SA will be evaluated in order to ascertain whether the relevant legislative provisions will be sufficient in addressing the issues related to the taxation of cryptocurrency and tax evasion specifically, and subsequently used to prove that cryptocurrency regulation is in fact insufficient. In addressing the issues explored through this research, it is proposed that the nature of cryptocurrency must be considered as the foundation upon which the legislature constructs cryptocurrency regulations. From a practical perspective, it is proposed that a formal definition of cryptocurrency be implemented in legislation (in order to provide further clarity on the taxation treatment thereof) and a provision be inserted in legislation addressing the taxation treatment of cryptocurrency. It is also recommended that the UK and Germany be looked towards for cryptocurrency regulation in terms of SARS implementing an interpretation note thereon as well as ensuring that the content of the interpretation note/position paper is formulated in accordance with the UK government’s position paper on the taxation treatment of crypto assets. This research proposes that authoritative bodies must ensure cohesion regarding the categorisation of cryptocurrency as well as regulation thereof in order to provide clarity on cryptocurrency regulation as well as ensure the effective regulation thereof.
A critical analysis of the law that governs the taxation of public benefit organisations (PBOs): a case study of South Africa and Zimbabwe.
(2018) Rice, Johannes.; Schembri, Christopher Carmelo.; Bosch, Shannon Joy.
No abstract available.
A critical analysis of the personal liability of representative taxpayers.
(2015) Francis, Natasha.; Schembri, Christopher Carmelo.
Abstract not available.
A critical analysis of the retrospective introduction of tax legislation.
(2018) Campbell, David Lawrence.; Schembri, Christopher Carmelo.
No abstract available.
A critical and comparative analysis of the expression "ordinarily resident" as a criterion for determining the place of residence of an individual in the context of income tax legislation in South Africa and certain other juristictions.
(2016) Hardie, John Andrew.; Williams, Robert Charles.
The nexus between a natural person’s income and their liability to tax in South Africa on their income, regardless of the location of its source, subject to statutory relief and international agreements, is the individual’s status as an income tax resident in South Africa. The criterion for determining the place of residence of an individual in the context of income tax can be uncertain and difficult to determine due to the case law approach imposed by the definition of the term ‘resident’ in the Income Tax Act. Through an analysis of the legislation, case law and guidelines, primarily in South Africa and the United Kingdom, the dissertation queries whether the current legislation and case law in South Africa is adequate to deal with the determination of the place of residence of an individual in the context of income tax legislation in South Africa and if a new statutory definition of residence should be considered.
A critical commentary and analysis of South African tax legislation affecting the different offshore investment structures that are available to residents.
(2002) Terry-Lloyd, Jaqueline Jo-Ann.; Mitchell, Lindsay David.
The aim of this dissertation is to provide a detailed and critical commentary on and analysis of South African tax legislation affecting the different offshore business or investment structures available to residents of South Africa so as to establish which is the most tax efficient structure. The different business structures analysed in this dissertation included the following: • Sole proprietorships. • Partnerships. • Companies. • Trusts. The principle provisions of the Income Tax Act dealt with in this dissertation include the following: • Section 9D. • Section 9E. • Section 9F. • Section 25B(2A). • Paragraph 80 of the Eighth Schedule. The following three countries have been selected as countries of investment choice: • The United Kingdom (a ' designated country'). • Kenya (not a ' designated country'). • The Isle ofMan (a tax haven).
A discussion of the concept of the 'place of effective management' in the context of South African law, using internationally established principles of corporate residency from the United Kingdom, Europe and Australia as guidelines to formulating this concept in South African law.
(2002) Maharaj, Reshika.; Mitchell, Lindsay David.
The aim of this dissertation is to carry out the following: • Discuss the concept of residency in South Africa and the evolution to the residence basis of taxation in South Africa. • Examine the Organisation for Economic Co-operation and Development's (OECD) stance on the concept of 'effective management'. • Examine the laws of the United Kingdom, certain European countries and Australia with regard to the concepts of 'management and control', 'management or control', ' place of effective management' and 'effective management'. • Formulate a definition of the term 'place of effective management' in South Africa using these guidelines obtained from the various countries discussed.
The effect that SARS procedures contained in the Tax Administrative Act has on taxpayer’s constitutional rights.
(2019) Ouderajh, Leona Elisha.; Schembri, Christopher Carmelo.; Bosch, Shannon Joy.
No abstract available.
The effectiveness of a trust as a tax planning tool in light of our current legislation and proposed ammendments.
(2016) Harriparsad, Rajeev.; Schembri, Christopher Carmelo.
Due to length and time constraints, this dissertation will briefly examine and provide an overview of how recent proposed amendments may effect the use of a Trust as a tax avoidance tool. Trusts have recently been a source of debate following the proposals made by in our Budget Speeches and the proposals by the Davis Tax Committee. The abolition of the “Conduit Pipe Principle,” together with a stricter approach on income distributed and retained by a trust have been recommended. This dissertation will provide a historical overview on the increased taxation of trust income as evidenced by our legislation. The continuous amendments of our legislation has attempted to curb any avoidance by those adopting the use of a trust. The radical proposals made by the Davis Tax Committee in their First Interim Report seem to disregard our current economy and the need for incentives investment. The continued echo’s of reform in our annual Budget Speeches have fuelled concern that our government will eventually consider tightening the taxation of trusts. This discussion provides a historical background of the development of the legislation which currently governs the normal taxation of trusts. Tax practitioners have adopted the use of a trust to further tax avoidance. A brief discussion on our legislation commencing from the Act of 1941 to our current legislation will show that our government has taken steps to close every loophole as adopted in tax avoidance. An explanation on the deeming provisions and Section 25B of the Income Tax Act 58 of 1962 is required to understand the impact of the proposals by the Davis Tax Committee. An understanding of Practice Note 23 needed to comprehend the “Conduit Pipe Principle.” The repealing of Section 25B can only be understood after a detailed explanation of the principles as currently practised. A critique on the relevance of the current proposal will conclude the dissertation. This will be done in light of our current financial climate and based on the need to solidify our tax base as opposed to the need to reform.
The en commandite partnership as a tax structuring tool.
(1999) Brown, Daryn.; Mitchell, Lindsay David.
The aim of this technical report is to provide a detailed and critical review of the suitability of the en commandite partnership for tax structuring both generally and specifically. The report takes cognisance of the requirements that a financial institution might consider in its determination of the utility of the en commandite partnership as a tax structuring tool in a structured or corporate finance environment. The report begins with an overview of the primarily legal requirements for the creation of a valid partnership. It then considers specifically whether the en commandite partnership is able to take the place of the 'Lessor Trust Arrangement' and researches specific issues germane to the enquiry. Specific legislation dealing with en commandite partnerships is then researched and includes a commentary on the provisions of s 24H and s 8(5)(a) of the Income Tax Act. Practical examples of the use of the en commandite partnership are then considered which challenges the concept of traditional loan finance and suggests the capital contribution as a tax efficient alternative. A consideration of the possibility of a challenge under the anti-avoidance provisions of the Income Tax Act concludes the report.

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