Faculty of Commerce, Law and Management (ETDs)
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Item A critical analysis of the foreign business establishment exemption and its role in the prevention of base erosion and profit shifting(University of the Witwatersrand, Johannesburg, 2023) Vally, Ra’eesahSection 9D of the Income Tax Act 58 of 1962 sets out the controlled foreign companies rules. This section contains anti-avoidance provisions that seek to prevent South African tax residents shifting their taxable income to foreign countries by way of a controlled foreign company. In terms of section 9D the net income of controlled foreign companies is taxed in the hands of the South African residents in proportion or their shareholding, unless the amount is subject to one of the specific exemptions. One such exemption is the foreign business establishment exemption. This exemption has been criticised as the definition of foreign business establishment is not adequate. The criticism arises from the fact that many controlled foreign companies meet the definition of a foreign business establishment by default even though they do not constitute a bona fide foreign business establishment. This paper critically evaluates this exemption considering the OECD BEPS Pillar Two Rules, the Income Tax Act 58 of 1962 and the Mauritian and UAE substance standards and whether the rules of this exemption should be more specific and stringent. The substance standards were found to be more stringent in comparison to the FBE definition and therefore enhanced the FBE definition. The scope of the Pillar Two blueprint meant that many South African companies would more likely than not be scoped out of its realms and therefore would not assist in enhancing the FBE definitionItem A comparative analysis of income tax provisions applied to cross border secondment arrangements in South Africa and the UK(2022) Sibeko, ThulileThe world has in recent years become increasingly interconnected as a result of massively increased trade and cultural exchange, and cross-border mobilisation is more frequently discussed in many companies. Most multi-national companies have a global mobility policy in place, which sets out the parameters for cross-border employment. As the internationalisation of South African business activity sped up enormously over the last half century, cross border employment will be one of the priorities for South African multinational companies as well as the South African Revenue Service (‘SARS’). (Mohan, 2016.) The purpose of this report is to examine and compare the legislative, administrative and judicial approaches to cross border employment in South Africa and contrast this with those adopted and endorsed by the United Kingdom. This report will also analyse the implications of an entity creating a permanent establishment through secondment contracts and also tax implications for the employees. The report will provide a comprehensive analysis of the income tax provisions applicable to the residency and non-residency of both the entity and the individual, thus analysing the definition of a resident in s 1 of the Income Tax Act 58 of 1962 in South Africa and UK section 1A(4) of the Finance Act of 2019 in the United Kingdom. The United Kingdom has been rated one of the top countries where South Africans would like to work and to which South Africans would like to emigrate (BusinessTech, 2020). The United Kingdom is also one of South Africa’s main trade partners (IOL Business, 2020). South Africa has a double tax agreement with the United Kingdom. South Africa and the United Kingdom are on a progressive tax system. (SARS 2021) (Brady, 2019)Item An analysis of the income tax provisions applied to the tax exemption for Foreign Employment Income(2021) Gumede, WendyThe taxation of foreign employment income has been a major issue in South Africa and the amendment toS10(1)(o)(ii) of the Income Tax Act 58 of 1962 (‘the Act’) has presented more complications. S 10(1)(o)(ii) stated that all income received in respect of services performed outside of South Africa was free from taxation in South Africa if the employee performing such services was based outside of South Africa prior to 01 March 2020:“...(aa) for a period or periods exceeding 183 full days in aggregate during any period of 12 months; and (bb) for a continuous period exceeding 60 full days during that period of 12 months, and those services were rendered during that period or periods...”1 (Income tax Act 58 of 1962) In the 2017 budget speech the finance minister, Pravin Gordhan, highlighted that in 2016 there had been a R30 billion shortfall in taxes collected. This was primarily due to Personal Income Tax, Value Added Tax(VAT) and Customs Duties. Amongst other proposals to reduce the shortfall, he proposed that the S10(1)(o)(ii) exemption of the Act be repealed as the exemption on foreign employment income appeared to be “excessively generous”. That meant that foreign employment income would be fully taxed, with the only relief available being a tax credit for foreign taxes paid. Several members of the sector and the general public wrote to the finance minister requesting that the draft change be reconsidered. The National Treasury responded and took into consideration some of the comments submitted by the public. One of the National Treasury’s response was to extend the date that the amendment to S10(1)(o)(ii) was set to come into effect to 01 March 2020.Another response was to increase the value of the amount to be exempted to R1.25 million instead of R 1 million for the year of assessment ending February 2021( National Treasury 2017a). The purpose of this report is to discuss how the amendments of S 10(1)(o)(ii) of the Act came about, how it will impact South African expatriates and possibly have them consider ceasing residency in South Africa, the benefits and process of ceasing residency. It is also to examine the legislative, administrative and judicial approaches of the taxation of foreign employment income. This report includes a comparative calculation of a South African tax resident working in another country compared to when that individual has ceased residency and lives in a country that South African expatriates are known to likely emigrate to as they either already work there or a country that has a strong economic structure