Theses and Dissertations
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- ItemThe foreign business establishment exemption and other aspects of section 9D of the Income Tax Act(2018) Ismail, FaizelThis research report considers a number of practical issues that arise in relation to the enforcement of section 9D of the Income Tax Act No. 58 of 1962 (“ITA”) read together with complementary provisions of the Tax Administration Act No. 28 of 2011 (“TAA”). More particularly, this research report considers the following issues: the onus and burden of proof under section 9D; the scope of SARS’ power under section 46 of the Tax Administration Act No. 28 of 2011 (“TAA”) to request information in order to give effect to section 9D; the interlinking definitions in terms of section 9D; whether an outsourcing business model can constitute the primary or core operations of a CFC for the purposes of determining whether the CFC qualifies for the ‘foreign business establishment’ exemption under section 9D status; and, if the issue of whether a CFC correctly claimed an FBE status during the years of assessment be revisited by SARS, particularly in respect of years of assessment which have prescribed. It is submitted as follows. Section 46 of the TAA provides SARS with the effective procedural powers to ensure compliance with section 9D. SARS is however required to provide the taxpayer with grounds for assessment with sufficient and reasonable detail in order to enable the taxpayer to understand the basis of and reason for such assessment and respond appropriately thereto. SARS is constrained by a three-year prescription period (from the date of an original assessment) for issuing additional assessments unless SARS can demonstrate that the taxpayer committed a fraud or misrepresentation which caused SARS failure to properly assess the taxpayer. The onus is on the taxpayer to show, on a preponderance of probability, that the decision/s of SARS in terms of section 9D against which it appeals is/are wrong. There is an arguable case for contending that the active management of service providers and agents may constitute the primary operations for purposes of determining whether an FBE arises in relation to a CFC.
- ItemThe implementation of Section 139(1) of the Constitution in the Ngaka Modiri Molema District Municipality(2017) Kampi, ZoliswaThe Ngaka Modiri Molema District Municipality (NMMDM) is situated in the North West Province, South Africa. It has persistently been placed under provincial administration (s139 (1) of the Constitution) and continuously resisted the interventions including taking legal actions against the North West Provincial Executive. The objectives of the research study were to explore and provide insights into the factors that informed and impacted the planning and implementation of s139(1) interventions in the NMMDM, and to explain how these factors either promoted or undermined the success of these interventions. From the literature review undertaken, the researcher drew critical themes and concepts that underpin the research study. The leadership and governance theories provided the theoretical perspectives and the principal-agent theory underscored the conceptual framework. In line with the exploratory nature of the research study, the qualitative research method was preferred and the NMMDM was adopted as a single case study to get a deeper understanding of the intricacies involved in the planning and implementation of s139(1) interventions. The researcher obtained the primary data through semi-structured interviews with the municipal leadership and used document analysis to gather secondary data. The research findings revealed the richness and complexity of the local government discourses. Through analysing the results of these discourses, a number of critical aspects that informed and impacted these interventions in the NMMDM emerged. These aspects range from the nature of to the quality of support provided to the NMMDM prior to the interventions. These include the communication of the directives and notices to assume responsibility, details given on the rationale for the interventions, political dynamics and their influence on reactions to the interventions, capacity of the province to plan and implement the interventions, and perceptions of the impacts of the interventions. Nevertheless, it is not the intention of the research study to generalise the findings but to present them as they manifested in the NMMDM.
- ItemIncome tax treatment of the transfer of contingent liabilities during the sale of a business(2018) Boakye, StephenThe objective of this report is to analyse the South African income tax consequences of the assumption of contingent liabilities such as leave pay provisions and bonus provisions during the transfer or sale of a business. This report will consider two methods utilised to transfer contingent liabilities as part of a sale of a business. An analysis of how these two methods have been derived will be performed as part of this report. The report will then consider the income tax implication of the transfer of contingent liabilities under each of the methods. Overall, this report will critically analyse the income tax implications of the assumption of contingent liabilities during the sale of a business. A business generally consists of assets and liabilities. Businesses are often sold as a single unit although for income tax purposes, a distinction would have to be made on the particular assets sold.1 The current South African Income Tax Act caters for the income tax implication of selling assets in a business.2 It however seems to be silent on the income tax implications in instances where liabilities including contingent liabilities are assumed as part of the sale of assets.3 As a result, the income tax implication is subjected to the general tax principles which sometimes yield uncertainties from a taxpayer’s perspective. In an effort to clarify uncertainties in relation to the income tax implication of the assumption of contingent liabilities as part of the sale of a business, the South African Revenue Service in December 2016 released Interpretation Note 94. This report will, firstly, test the legal nature of Interpretation Notes with specific reference to reliance being placed on such Interpretation Notes in relation to the interpretation of the Income Tax Act
- ItemA critical analysis of the vat apportionment method in the banking sector in South Africa(2018) Chitando, Makgolane KutlwanoValue-Added Tax (VAT) has the standing of being a fairly simple tax. Where vendors solely supply taxable goods and services, the VAT on expenditure acquired for the sole mandate of making taxable supplies may be recovered from the VAT imposed on their output. VAT is therefore a tax on the value added at every stage of production. Accordingly, the tax is levied on the value of the final product but is collected in small portions from each part in the supply chain. ―In the banking sector, consumers are not purchasing financial services from the bank, so there is no sale on which VAT must be imposed. This has resulted in the VAT exemption of financial transactions as it is difficult to define the value added of financial services‖. (Mirrlees et al 2011:196). The exemption of financial transactions raises a number of complicated issues for banks as there is a requirement to apportion input credits. This is common to all countries operating a VAT system, although the basis of apportionment differs. The intention of this research report is to draw a distinction between the taxing of financial services in South Africa compared to other countries. This research report will analyse the appropriateness of the apportionment method approved by SARS for the banking sector in light of the concept of direct attribution of costs. Through an analysis of the foreign treatment on the matter of VAT apportionment and the taxation of financial transactions, this study will seek to determine whether the taxation of financial transactions in the South African VAT System and the VAT apportionment method approved by SARS for the South African banking sector is consistent with international best practice
- ItemUsing business models to drive classification: the case of debt instruments in the financial services sector(2018) Holmes, DominiqueFaithfully representing financial instruments in financial statements is critical to the sustainable functioning of the global economy. This was highlighted in the aftermath of the Global Financial Crisis (GFC) where the relative financialisation of the global economy was implicated as contributing to the crisis (Barth and Landsman, 2010; Laux, 2012; Zhang and Andrew, 2014). Following the GFC, efforts to develop an improved accounting standard for reporting financial instruments were accelerated (IASB, 2014). This culminated in the release of IFRS 9 which uses the business model to determine the accounting treatment of financial assets. The standards’ predecessor, IAS 39, used the concept of management’s intention to determine accounting classification. This was perceived as being unnecessarily complex (IASB, 2008). Accounting commentators question whether the move to a business model basis is in substance different from management’s intention (Leisenring et al., 2012). Arguing that representing a contractually identical asset differently, based on its use, potentially undermines faithful representation and impairs comparability. This has led to questioning whether the use of a financial asset has the ability to alter its economic substance (Leisenring et al., 2012; Barth, 2013). This thesis explores IFRS 9’s logic of using the business model to determine the classification of financial assets in the financial services sector. Initial insights are obtained by conducting detailed interviews with some of South Africa’s leading practical and technical minds. These insights pertain to differences between management’s intention and the business model, whether a financial asset can be ‘used’ and how this may impact the economics of the financial. This research finds that financial assets can be used by financial institutions for various purposes. These are consistent with the business models of IFRS 9. Further, this thesis finds that communicating these alternate ‘uses’ is important to represent the differing economics of those assets. Participants also indicate that the business model enhances comparability through enabling comparison between similar business models, as opposed to accounting for identical financial assets in the same way. This thesis contributes to the growing calls for research into business models in financial reporting (EFRAG, 2010; Nielsen and Roslender, 2015). This thesis is also the first to provide the perceptions of South African experts on IFRS 9’s logic of using the business model as a method for classifying, measuring and presenting financial instruments.