Taxpayers who find themselves in a loss-making position often intuitively assume that as long as they are not liable to pay tax, they would not be exposed to understatement penalties. The Tax Court recently held that there was prejudice to SARS where a taxpayer who remained in an assessed loss position, even after adjustments by SARS. Taxpayers in assessed loss positions must exercise the same care as any other taxpayer in preparing their tax returns and ensuring that they take reasonable tax positions.

The National Treasury published the Budget Review 2021 on 24 February 2021. This article considers some of the proposals for tax amendments that the National Treasury intends to make as part of the 2021 legislative cycle.

The National Treasury recently released bills that contain the amendments to the tax laws for the 2020 legislative cycle. This article reviews the amendments the relate to preference shares in estate planning structures, the exemption for employer-provided bursaries and VAT neutral re-organisation transactions. It is necessary to consult with your regular tax advisor on the effect of all the amendments in this legislative cycle that are relevant to your particular circumstances to avoid unanticipated tax surprises in future.

Section 42 of the Income Tax Act provides roll-over relief for asset-for-share transactions. Taxpayers who apply this roll-over relief should understand the full tax implications of the relief, both immediately and in future. This article considers the deferral mechanism employed by section 42 and its practical implications.

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.