Tax Break: South African tax for professionals

Professor Pieter van der Zwan | South African Tax Specialist

Tax Break is a podcast for any professional who works with South African tax regularly. This includes tax practitioners, tax professionals, financial managers (FMs), financial directors (FDs), CFOs, accountants, auditors, lawyers and corporate finance advisors. The host is Professor Pieter van der Zwan, a South African chartered accountant, who lectures the masters programme in tax at a South African university. He has 20 years experience in advising companies, high net worth individuals, accountants, lawyers and corporate finance professionals on South African tax and IFRS. In each episode he discusses a topic or a recent development in South African tax including new cases, changes to the legislation, SARS guidance and topics that often surface in his consulting practice. And each episode is only 10-15 minutes long, just enough for you to listen to during your coffee break!

  1. 5d ago

    Deducting another group company's expenses: section 11(a)

    Can one group company deduct the operating costs of another under section 11(a) of the Income Tax Act? This episode examines a tax court judgment on a South African subsidiary of a US-listed group that paid the care and maintenance costs of a related chrome mine, Clarice Mining, and claimed those costs as a deduction. The episode sets out the facts: the chrome offtake agreement, the plant the taxpayer built on the mine's premises, and the clause that made the taxpayer liable for the mine's operating costs if it went into care and maintenance, as happened in 2018 to 2020. Two categories of expense were in dispute: production costs paid before care and maintenance and set off against the chrome price, with the unrecovered portion claimed as a bad debt, and the care and maintenance costs, for which there was no right of recovery. Pieter works through the section 11(a) requirements. On "actually incurred", he asks whose liability was being deducted when the invoices were issued to the mine, and whether the court dealt with the taxpayer's own obligation under the offtake agreement or only with paying another company's expenses. On the production of income requirement, he considers from whose perspective the link to income must be tested, whether paying to secure a future chrome supply points to expenditure of a capital nature, and where section 23H fits. On the trade requirement, he examines the court's distinction between current and future trading activities. He closes with the court's view of care and maintenance expenditure as unredeemed capital expenditure under section 36, the finding of an impermissible avoidance arrangement, the SARS submission on dualism, and what a clear recharge agreement should do to manage this risk in a group. 00:15 Group expenses, recharges and who claims the section 11(a) deduction02:00 Facts: US-listed group, Clarice Mining, chrome offtake agreement and care and maintenance04:30 Two categories of expense: production costs, bad debts and care and maintenance costs06:45 Actually incurred: invoices in another company's name and the two obligations08:30 Production of income: payer's perspective, capital nature and section 23H10:45 Trade requirement: own trade, current versus future trading activities12:00 Care and maintenance, section 36 unredeemed capex, impermissible avoidance and dualism15:50 Recharge agreements and take-home points for group expenses You are welcome to join my weekly mailing list for articles about the same topic as the podcast at: https://tax.pvdz.co.za/#signup If you work with South African tax as an auditor, accountant, lawyer, wealth planner or corporate finance professional, this episode is for you. Contact me at pieter@pvdz.co.za for feedback or tax advice. More resources at https://tax.pvdz.co.za. Keywords: section 11(a) deduction, Income Tax Act, group expenses, recharge agreement, actually incurred, production of income, capital nature, care and maintenance, section 23H, impermissible avoidance arrangement, tax court, South African tax

    Deducting another group company's expenses: section 11(a)

  2. Oct 15

    Remittance of percentage-based penalties: section 213 TAA

    Can a 10% late payment penalty be remitted, and on what grounds? This episode of Tax Break works through the percentage-based penalties imposed under section 213 of the Tax Administration Act (TAA) and the permutations for requesting remittance. Pieter starts with what these penalties are and where they sit in Chapter 15 of the TAA, alongside fixed amount penalties. He traces the provisions in other tax Acts that give rise to them: section 39 of the VAT Act for late VAT payments, paragraph 6 of the Fourth Schedule to the Income Tax Act for late employees' tax and provisional tax, the deeming of underestimation penalties as percentage-based penalties, and section 6A of the Securities Transfer Tax Administration Act for late STT. The episode then moves to remittance under section 215 and the three permutations in the legislation. The first requires reasonable grounds, remedied non-compliance and a first incidence. Pieter explains why the definition of first incidence trips taxpayers up: the 36-month look-back, whether a prior Chapter 15 penalty of a different kind counts, what happens if the earlier penalty was remitted under section 218, and whether having used the first incidence relief before matters. The second permutation applies to amounts under R2 000. The third is exceptional circumstances under section 218, where Pieter sets out the list in section 218(2) and the threshold that the circumstance must have rendered the taxpayer incapable of complying. He also raises a possible fourth ground found in other Acts, using the underestimation penalty as the example. Pieter draws on his own experience of why clients describe these penalties as sticky and closes with three take-home points for anyone requesting remittance. 00:15 Introduction02:50 Section 213 TAA and Chapter 15 administrative penalties04:00 Where the penalties arise: VAT Act section 39, Fourth Schedule paragraph 6, STT Administration Act section 6A04:55 Remittance under section 215 TAA05:40 Permutation one: reasonable grounds and the first incidence definition07:50 Permutation two: penalties under R2 00008:30 Permutation three: exceptional circumstances under section 21810:30 A possible fourth ground: the underestimation penalty11:00 Take-home points If you work with South African tax as an auditor, accountant, lawyer, wealth planner or corporate finance professional, this episode is for you. Contact me at pieter@pvdz.co.za for feedback or tax advice. More resources at https://tax.pvdz.co.za. Keywords: percentage-based penalties, section 213 Tax Administration Act, remittance of penalties, section 215 TAA, section 218 exceptional circumstances, first incidence, Chapter 15 administrative penalties, late payment penalty, section 39 VAT Act, underestimation penalty provisional tax, Securities Transfer Tax Administration Act, South African tax

    Remittance of percentage-based penalties: section 213 TAA

  3. Oct 8

    Dividend stripping and the GAAR: CGT and USPs

    Does the July 2026 tax court judgment on dividend stripping and the general anti-avoidance rule (GAAR) mean these transactions can no longer be done? This episode answers a listener's question about that case and reads it against section 22B of the Income Tax Act, paragraph 43A of the Eighth Schedule and the current understatement penalty (USP) regime. The episode starts with the facts: seven appeals combined into one, seven shareholders of a property company funded by shareholder loans rather than share capital, holding companies introduced under section 42, a dividend declared equal to the full value of the business, a subscription by a new shareholder that diluted the existing shareholders to 0.1%, and a sale of the remaining shares. SARS applied the GAAR to tax the dividends as sales proceeds, and the court found for SARS. Rather than repeating the GAAR analysis covered in earlier episodes, the discussion looks at three broader questions. What tax law does and does not do when you ask whether a transaction may be done. Why the February 2017 implementation date matters, given that the specific dividend stripping rules in section 22B and paragraph 43A came into effect on 19 July 2017 and were refined in 2019 for dilutive structures. And what the judgment says about understatement penalties: the court's description of the taxpayer's position as an error of legal judgment, the bona fide inadvertent error defence and the Thistle and Coronation judgments, and how the penalty table currently treats impermissible avoidance arrangements and substantial understatements. The episode closes with what to take home when reading a case like this against the law as it was then and as it stands now. Timestamps:00:15 Introduction and the listener question on dividend stripping and the GAAR03:15 Facts of the tax court case: dividend, subscription, dilution and sale06:40 What tax law does and does not do07:30 Section 22B and paragraph 43A: the 19 July 2017 effective date and the 2019 amendments10:30 Understatement penalties: error of legal judgment and bona fide inadvertent error12:30 The penalty table now: impermissible avoidance arrangements and substantial understatements14:00 Take-home points If you work with South African tax as an auditor, accountant, lawyer, wealth planner or corporate finance professional, this episode is for you. Contact me at pieter@pvdz.co.za for feedback or tax advice. More resources at https://tax.pvdz.co.za. You can subscribe for my weekly mailer at  Keywords: dividend stripping, GAAR, general anti-avoidance rule, section 22B, paragraph 43A, Income Tax Act, understatement penalty, USP, bona fide inadvertent error, impermissible avoidance arrangement, Tax Administration Act, South African tax

    Dividend stripping and the GAAR: CGT and USPs

  4. Sep 17

    Interest deduction limitations: section 23M of the Income Tax Act

    When does section 23M of the Income Tax Act limit the interest a company can deduct on debt owed to a creditor in a controlling relationship, and why is it not just a cross-border rule? This episode of Tax Break highlights three pointers for identifying whether s 23M applies. Pieter starts with the origin of the provision in the 2013 Amendment Act alongside the OECD BEPS Action 4 work on interest deductibility, and the early commentary linking it to thin capitalisation, transfer pricing and the withholding tax on interest. The first pointer is the controlling relationship requirement: the 50% equity share or voting rights test, and the wider list in s 23M(2) that reaches indirect controlling relationships and funding from other entities in the same group. He explains why the group structure and the route the funding takes both matter. The second pointer is the requirement that the interest not be subject to tax in the lender's hands, the deeming ratio where withholding tax on interest is reduced below 15% under a tax treaty, and two domestic examples.  The third pointer concerns the impact of s 23M: specifically, what is considered interest for this provision goes beyond contractual interest to items such as foreign exchange losses and IFRS 16 lease interest embedded in section 11(a) lease payments. This is the last episode before a short break. Tax Break returns in October. 00:10 Introduction04:06 Origins of s 23M 05:47 Pointer one: controlling relationships 07:20 Pointer two: interest not subject to tax09:00 Pointer three: the expanded definition of interestIf you work with South African tax as an auditor, accountant, lawyer, wealth planner or corporate finance professional, this episode is for you. Contact me at pieter@pvdz.co.za for feedback or tax advice. More resources at https://tax.pvdz.co.za. Keywords: section 23M, interest deduction limitation, controlling relationship, subject to tax, withholding tax on interest, section 9D controlled foreign company, tax EBITDA, IFRS 16 lease interest, foreign exchange losses, OECD BEPS Action 4, Income Tax Act, South African tax

    Interest deduction limitations: section 23M of the Income Tax Act

  5. Sep 10

    Fixing bona fide errors on tax returns: USP risks

    Understatement penalties (USP) and bona fide inadvertent errors after the amendment to section 222 of the Tax Administration Act (TAA): if you correct an error on a return that has already been assessed, has the amendment created a new risk? The request for correction function on SARS eFiling, and the objection route where an assessment has already been audited or verified, have been the standard ways to fix a return. Pieter van der Zwan revisits how section 222 protected a taxpayer who came forward with a bona fide inadvertent error, and how the Thistle and Coronation judgments widened the concept of bona fide inadvertent errors to positions taken on tax advice. Section 222 was amended at the end of last year and the bona fide inadvertent error ground now sits in section 223(3)(a), tied to the definition of a substantial understatement (the greater of 5% of tax properly chargeable or R1 million). Pieter shares his concern regarding the effect that the amendment may have on correcting true errors. The episode considers why the correcting an error may carry more exposure, where the voluntary disclosure programme (VDP) enters the picture, and the question that Pieter thinks the amendment leaves open. Timestamps00:10 Introduction 02:50 Request for correction and objection under the previous section 22205:10 Thistle and Coronation: tax advice as a bona fide inadvertent error06:30 Amended section 222 and section 223(3A)09:47 Substantial understatement threshold: 5% or R1 million example15:10 Reasonable care and USP exposure below the threshold15:40 Key takeaways If you work with South African tax as an auditor, accountant, lawyer, wealth planner or corporate finance professional, this episode is for you. Contact me at pieter@pvdz.co.za for feedback or tax advice. More resources at https://tax.pvdz.co.za. Keywords: understatement penalty, USP, bona fide inadvertent error, section 222 Tax Administration Act, section 223(3)(a), substantial understatement, request for correction, reasonable care, objection, voluntary disclosure programme, Thistle case, South African tax

    Fixing bona fide errors on tax returns: USP risks

  6. Sep 3

    Reportable arrangements: section 35 of the Tax Administration Act

    Reportable arrangements (RAs) under section 35 of the Tax Administration Act are often overlooked by advisors, and frequently only surface when an accountant reaches the "reportable arrangement" question on the tax return. This episode of Tax Break sets out what reportable arrangements are, where they are found in the legislation, and what to do when a transaction is reportable. Reporting an arrangement to SARS on form RA01 does not change the tax treatment of the transaction. It flags arrangements with features SARS wants to see, which also tells advisors that a risk exists and should be addressed in the advice given. Section 35(1) is conceptual and fact-specific. Examples include arrangements with a tax deduction but no accounting expense (or accounting revenue but no gross income), and arrangements with tax avoidance characteristics such as round tripping or offsetting elements. Section 35(2) allows SARS to list arrangements by public notice, which it did in 2016. The thresholds in that notice are not high, so reportable arrangements are not limited to large transactions. The episode highlights four items from the 2016 public notice that come up regularly: hybrid equity instruments under section 8E if the prescribed period were 10 years; share buybacks exceeding R10 million where shares are issued within 12 months (dividend stripping risk); acquiring a controlling interest in a company with an assessed loss exceeding R50 million (section 103(2) risk); and payments exceeding R10 million to non-residents rendering services in South Africa (permanent establishment risk). Exclusions are covered, including the tax benefit threshold and the exclusion where the tax benefit is not the main or one of the main benefits. A participant must report within 45 business days, and written confirmation that another participant has reported may relieve the obligation. Non-reporting penalties are fixed monthly amounts that can range from roughly R600 000 to R3.6 million over 12 months. Timestamps 00:10 Introduction: why reportable arrangements are missed01:03 About Tax Break and the tax question tool on the website02:54 What reportable arrangements are and what reporting means04:31 Section 35(1) arrangements: tax vs accounting differences, avoidance features06:48 Section 35(2) and the 2016 public notice07:57 Section 8E hybrid equity instruments09:16 Share buybacks over R10 million10:00 Controlling interest in companies with assessed losses over R50 million10:55 Payments to non-residents over R10 million12:00 Exclusions12:45 Who reports, 45 business day deadline, RA0113:36 Penalties for non-reporting14:00 SummaryIf you work with South African tax as an auditor, accountant, lawyer, wealth planner or corporate finance professional, this episode is for you. Contact me at pieter@pvdz.co.za for feedback or tax advice. More resources at https://tax.pvdz.co.za. Keywords: reportable arrangements, RA01, section 35 Tax Administration Act, SARS public notice 2016, section 8E hybrid equity instruments, share buyback dividend stripping, assessed loss section 103(2), permanent establishment non-residents, reportable arrangement penalties, South African tax

    Reportable arrangements: section 35 of the Tax Administration Act

  7. Aug 27

    Are self-insurance premiums tax deductible? The Meiring Citrus judgment

    Are self-insurance premiums deductible? In this episode of Tax Break, I discuss the deductibility aspect of the Western Cape High Court judgment in CSARS v Meiring Citrus (Pty) Ltd.  I cover: The two grounds that SARS abandonedThe court’s conclusion as to whether the taxpayer actually incurred expenditureWhy I disagree with the court's position on expenditureThe court’s position on the capital nature of the premiums paid.If you work with South African tax as an auditor, accountant, lawyer, wealth planner or corporate finance professional, this episode is for you. Contact me at pieter@pvdz.co.za for feedback or tax advice. More resources at https://tax.pvdz.co.za. Keywords: self-insurance premiums, section 11(a) deduction, Meiring Citrus, capital in nature, expenditure actually incurred, Labat Africa, section 23L, experience account, South African tax, Income Tax Act, Western Cape High Court, SARS

    Are self-insurance premiums tax deductible? The Meiring Citrus judgment

  8. Aug 20

    Section 99 prescription: When can SARS reopen a tax assessment after three years? CSARS v Meiring Citrus

    When does prescription protect taxpayers from SARS issuing additional assessments? Section 99 of the Tax Administration Act generally bars SARS from issuing an additional assessment more than three years after the original assessment issued by SARS. Section 99(2) lifts that bar where the tax was not assessed due to fraud, misrepresentation or non-disclosure of material facts. In this episode of Tax Break, I discuss the prescription aspect of the Western Cape High Court judgment in CSARS v Meiring Citrus (Pty) Ltd. SARS issued additional assessments roughly three and a half years after the original 2017 assessment, relying on the non-disclosure of notional interest of R1 197.52 on an experience account under a structured self-insurance policy, and a misrepresentation of the nature of the agreement. I cover: The timeline of assessments, verifications and the audit, and why the dates matter under section 99The two questions in section 99(2): is a listed conduct present, and did it cause the tax not to be assessedThe difference between the Tax Court and High Court analysisAssessment of the materiality of a non-disclosureOpen questions: the role of information provided during a verification, and where taxpayer disclosure ends and SARS's duty to ask for more information beginsPractical lessons on completing the ITR14 accurately, including income statement and balance sheet line items, and why responses to verification requests should not be underestimatedIf you work with South African tax as an auditor, accountant, lawyer, wealth planner or corporate finance professional, this episode is for you. Contact me at pieter@pvdz.co.za for feedback or tax advice. More resources at https://tax.pvdz.co.za.  Keywords: prescription, section 99, Tax Administration Act, additional assessment, SARS audit, Meiring Citrus, non-disclosure, misrepresentation, ITR14, South African tax

    Section 99 prescription: When can SARS reopen a tax assessment after three years? CSARS v Meiring Citrus
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About

Tax Break is a podcast for any professional who works with South African tax regularly. This includes tax practitioners, tax professionals, financial managers (FMs), financial directors (FDs), CFOs, accountants, auditors, lawyers and corporate finance advisors. The host is Professor Pieter van der Zwan, a South African chartered accountant, who lectures the masters programme in tax at a South African university. He has 20 years experience in advising companies, high net worth individuals, accountants, lawyers and corporate finance professionals on South African tax and IFRS. In each episode he discusses a topic or a recent development in South African tax including new cases, changes to the legislation, SARS guidance and topics that often surface in his consulting practice. And each episode is only 10-15 minutes long, just enough for you to listen to during your coffee break!

Information

  • Creator
    Professor Pieter van der Zwan | South African Tax Specialist
  • Years Active
    2024 - 2026
  • Episodes
    95
  • Rating
    Clean
  • Copyright
    © Professor Pieter van der Zwan | South African Tax Specialist
  • Show Website
    Tax Break: South African tax for professionals

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