While income tax legislation and accounting standards generally operate independently of each other, the legislature in South Africa has gradually increased the reliance placed on accounting standards in tax laws. This article considers the relevance of the accounting treatment of transactions for South African taxpayers and highlights why it is important that taxpayers, or their advisors, should have an understanding of both tax law and accounting standards.

Entities that have tax losses are likely to find themselves in a position where they have to consider whether to recognise a deferred tax asset for these losses in their financial statements. This decision is normally contentious. In the current economic conditions, it may be subject to even more scrutiny from auditors.  This article provides a brief recap of the key considerations that are relevant to determine whether a deferred tax asset can be recognised or not.

Taxpayers may deduct an allowance for certain future expenditure in terms of section 24C, despite not having incurred the expenditure yet. At the centre of this provision is a requirement that the future expenditure in respect of which the allowance is deducted must, firstly, be funded from the income that arose from a contract and, secondly, be incurred by the taxpayer in the performance of its obligations under such contract. This article reviews some recent case law where these requirements were considered.

Lenders may face increasing difficulty in recovering debts in the current business conditions. The deterioration of the prospects of recovery has tax implications. These implications depend on a number of factors. This article provides a brief overview of the tax considerations that are relevant in respect of bad or doubtful debts.

Debt restructuring arrangements are likely to become more prevalent in the current economic conditions in South Africa.  This article provides an overview of the relevant tax considerations that taxpayers should bear in mind when entering into arrangements that provide debt relief.

Deferred tax reflects the future tax consequences that will arise when an entity’s assets and liabilities realise.  The IFRIC recently considered how an entity should determine the deferred tax implications of an asset if the recovery of the economic benefits associated with it will have multiple distinct tax consequences. This article briefly reviews the IFRIC’s agenda decision and its relevance in South Africa.

Many businesses resumed operations on 1 June 2020, subject to compliance with the regulations issued under the Disaster Management Act. A number of specific tax relief measures have been announced by the government. These have been well covered by commentators. This article highlights some more general tax considerations that may be relevant to the measures that businesses need to implement to comply with the Alert Level 3 regulations. ​

Investments in foreign operations often include shareholder loans denominated in foreign currencies. Telkom disposed of such a shareholder loan at a substantial loss. It applied a disposal rate to deduct this as an exchange loss against its taxable income. SARS disallowed the deduction on the basis that it represented a loss that was beyond the scope of section 24I, which deals with gains or losses on foreign exchange transactions. The Supreme Court of Appeal considered this dispute and provided valuable guidance on the interpretation of tax legislation in the process. This article provides a brief review of this aspect of the judgment in the Telkom case.

The Budget Review published by the National Treasury on 26 February 2020 surprised many commentators when no significant tax rate increases were proposed. That document contains specific tax proposals that may have a significant impact on those affected by it. This article reviews a selection of these proposals that taxpayers should be aware of and look out for in the 2020 tax law amendment cycle.

Taxpayers may deduct an allowance for certain obligations to incur future expenditure in terms of section 24C of the Income Tax Act.  This provision has been the subject of a number of recent cases, the latest being C:SARS v Clicks Retailers (Pty) Ltd. In this case the SCA ruled in favour of SARS in relation to the application of section 24C to obligations in terms of a customer loyalty scheme. This article briefly reviews this case and the reasoning followed by the court.