South Africa’s Ambiguous Exchange Control Climate

by | Oct 4, 2023 | BTCLQ, BTCLQ V14 I3

South Africa’s Ambiguous Exchange Control Climate

Author: Robyn Berger & Esther Geldenhuys

ISSN: 2219-1585
Affiliations: Tax Executive, Bowmans Attorneys; Senior Associate, Bowmans Attorneys
Source: Business Tax & Company Law Quarterly, Volume 14 Issue 3, 2023, p. 15 – 22

Abstract

Although the South African Minister of Finance announced in the 2020 Budget speech that sweeping reforms would be enacted to relax the South African exchange control system, it is now three years later, and no meaningful relaxation of exchange control has occurred. Rather, investment into South Africa remains plagued by exchange control laws, which result in costly and time-consuming processes for foreign investors. In January 2021, a long-awaited change to the exchange control rules was enacted, with the relaxation of the so-called ‘loop structure’ rules. Many investors jumped at the opportunity to take advantage of this relaxation and restructured their existing South African assets so that they would be owned by approved foreign structures. The relevant parties then, in line with the prescribed rules, reported the transactions to the Financial Surveillance Department of the South African Reserve Bank (FinSurv), via their Authorised Dealers. The FinSurv did not simply acknowledge receipt of the reported information as expected under the law. Rather, the FinSurv elected to reject applications submitted under the respective circular, without withdrawing the circular, leading to much uncertainty in the market, especially for those investors who have already restructured their assets, triggered taxes on the restructure and paid the taxes. Further, it appears that South Africa’s negative rating and greylisting, by the Financial Action Task Force (FATF), has triggered a stricter application of the existing exchange control regime, with more frequent application of the penalty regime by the FinSurv to identified contraventions. In the past, South African corporates were able to regularise an exchange control contravention with the FinSurv without difficulty. The process was relatively straight forward. However, lately, the responses received from the FinSurv to requests for regularisation (including to standard commercial transactions) are vague with the result that the matter does not seem to reach finalisation. The responses provided suggest that the applicant may still be subject to further investigation and ultimately may be subject to financial penalties. This is only one of the challenges such applicants face.

Protecting the Public Purse with Moral Tax Administration

by | Oct 4, 2023 | BTCLQ, BTCLQ V14 I3

Protecting the Public Purse with Moral Tax Administration

Author: Fareed Moosa

ISSN: 2219-1585
Affiliations: Associate Professor: Department of Mercantile & Labour Law, Faculty of Law, University of the Western Cape
Source: Business Tax & Company Law Quarterly, Volume 14 Issue 3, 2023, p. 23 – 29

Abstract

This article engages with the scourge of tax immorality, an unsavoury practice adversely affecting state resources which puts South Africa’s democracy and its social transformation programme at risk. This article argues that tax immorality must be combatted head-on. To this end, it is contended that the bilateral and multi-lateral co-operation agreements concluded by the government of South Africa with their counterparts in Africa and beyond are insufficient to effectively combat tax non-compliance in all their manifestations. This is because there is no single reason for taxpayers acting in breach of their duty to the fiscus. As a result, it is argued by the author that a multi-pronged approach is needed which demands of tax administrators that they be innovative in their thinking and creative in their strategies. The nub of the thesis advanced is that, in practice, there is a correlation between, on the one hand, failure by tax authorities to fulfil their tax administration obligations with integrity and, on the other, failure by some taxpayers to comply with their tax related duties. It is further argued that conduct un-associated with a dignified tax administrator, and which may well contribute to tax immorality, includes hostility towards taxpayers, disrespect for the law and the rule of law, abuse of power, coercion, partiality, bias, threats, unethical behaviour, maladministration, and corruption. Conduct of this nature is antithetical to the final Constitution, 1996 and its democratic values and principles, all of which apply in the realm of tax administration being a facet of public administration governed by the Constitution. Finally, the author concludes that the South African Revenue Service can promote tax compliance by ensuring that it operates efficiently as an institution and that its officials act in accordance with the law and without favour, and with fairness, honour, dignity, decency, responsiveness to taxpayers’ needs, and open-mindedness.

Foreign Pension Schemes: There be dragons, and some confusion — Part 1

by | Oct 4, 2023 | BTCLQ, BTCLQ V14 I3

Foreign Pension Schemes: There be dragons, and some confusion — Part 1

Author: Des Kruger

ISSN: 2219-1585
Affiliations: Consultant, Webber Wentzel, Adjunct Professor, University of Cape Town
Source: Business Tax & Company Law Quarterly, Volume 14 Issue 3, 2023, p. 30 – 49

Abstract

Given South Africa’s present political and economic position, a significant number of wealthy taxpayers are either engaged in making contributions to foreign pension schemes or are contemplating doing so. As the heading to this article suggests, the South African tax implications that arise when a South African resident taxpayer embarks on this journey are complex and confusing. Whilst SARS has provided some guidance in terms of a binding class ruling, this guidance is limited to the position where the South African participants participate in the foreign pension scheme as vested beneficiaries — not the general position. The ruling nevertheless provides some indication of SARS’ views as regards the application of the law in these circumstances. However, SARS neatly side-stepped the real issue, namely that a strict application of the law results in double taxation in certain instances by declining to rule on the application of section 25B of, and paragraph 80 of the Eighth Schedule to, the Income Tax Act, 1962. This article explores the South African tax implications that are triggered for South African residents in consequence of their participation as discretionary beneficiaries in these foreign pension schemes. The next article will explore the position of South African residents that participate under a vested beneficiary regime — the situation addressed in SARS’ binding class ruling. The South African implications that arise are wholly dependent on the rights and obligations that are established under the foreign pension scheme rules. However, as a general proposition it may be said that under a discretionary scenario the South African participants are required to make regular contributions to the foreign pension scheme, although lump sum contributions are allowed in certain instances. The contributions are then accounted for in a bespoke account, as is any accretion in value. When the time comes for payment of the retirement benefits, the trustees have a discretion as to the nature and value of the payments — but the participant has a right to request the trustees to exercise their discretion in a specific manner. The article concludes in the first instance that the contributions made by the South African participants do not constitute a donation that is subject to donations tax. As regards accretions in value in the bespoke account, the article argues that until the trustees exercise their discretion to make payment of the retirement benefits, no amounts can be said to have been received or accrued to the South African participants. Once the trustees exercise their discretion to pay the South African participants either an annuity or a lump sum, South African income tax or capital gains tax is triggered. A possible double taxation conundrum arises should any income or capital derived by the foreign pension scheme have previously vested in the South African participant. On death, it is strongly arguable that the amount standing to the credit of the South African does not form part of the deceased South African participant’s estate for estate duty purposes, or an asset for capital gains tax purposes.

Nature of rights, permission and permits to minerals under the Mineral and Petroleum Resources Development Act 28 of 2002: a novel two-fold test?

by | Sep 14, 2023 | TSAR, TSAR 2023 I4

Nature of rights, permission and permits to minerals under the Mineral and Petroleum Resources
Development Act 28 of 2002: a novel two-fold test?

Author: PJ Badenhorst

ISSN: 1996-2207
Affiliations: Associate Professor of Law, Deakin University, Australia; Honorary Professor of Law, Nelson Mandela University
Source: Tydskrif vir die Suid-Afrikaanse Reg, Issue 4, 2023, p. 615 – 630
https://doi.org/10.47348/TSAR/2023/i4a1

Abstract

In die Registrasie van Aktes Wet 47 van 1937 word ’n onderskeid getref tussen saaklike regte wat registreerbaar is in die aktesregister en persoonlike regte wat nie aldus registreerbaar is nie. Die wetgewer het nuwe kategorieë regte ten aansien van minerale in die Mineral and Petroleum Resources Development Act 28 van 2002 geskep. Sodanige prospekteerregte en mynregte word as beperkte saaklike regte deur die wet aangemerk terwyl die aard van toestemmings en permitte ten aansien van minerale nie omskryf word nie. Die wet verg dat prospekteerregte en mynregte geregistreer moet word. Die Wet op die Registrasie van Myntitels 16 van 1967 maak voorsiening vir die registrasie van prospekteerregte en mynregte en die aantekening van toestemmings en permitte ten aansien van minerale. Die registrasie van regte in die akteskantoor is vergelykbaar met die registrasie van regte in die Minerale en Petroleum Titels Registrasiekantoor. Ten einde te bepaal of ’n reg ’n saaklike reg en dus registreerbaar is in die akteskantoor, maak die howe gebruik van ’n tweeledige toets, naamlik die subtraction from the dominium-toets en die bedoelingstoets.
Die subtraction from the dominium-toets word ook deur die howe en sommige akademici gebruik om te bevestig dat prospekteerregte en mynregte inderdaad saaklike regte is. Toestemmings en permitte ten aansien van minerale word by analogie, met ’n beroep op die subtraction from the dominium-toets, ook as saaklike regte beskou. Daar bestaan egter ook beskouings dat permitte en toestemmings eerder persoonlike regte of regte sui generis is, veral omdat die wet in verskeie opsigte self onderskei tussen regte ten aansien van minerale aan die een kant en permitte of toestemmings aan die ander kant.
In die artikel word betoog dat ’n vermindering van bevoegdhede ingevolge die subtraction from the dominium-toets nie regtig plaasvind indien regte, toestemmings en permitte toegeken of uitgereik word deur die staat nie. Voorts word betoog dat die toets nie gebruik kan word om die aard van regte, toestemmings of permitte te bepaal nie. Daar word voorgestel dat ’n alternatiewe toets, die sogenaamde subtraction from the imperium-toets gebruik word. Daar word verder aangetoon dat die staat uit hoofde van vermeende voogdyskap (of imperium) ingevolge die Mineral and Petroleum Resources Development Act oor ’n reeks bevoegdhede beskik. Wanneer regte, toestemmings of permitte ten aansien van minerale toegeken of uitgereik word, vind daar eerder ’n beperking van bevoegdhede van die staat se imperium as die eiendomsreg van die eienaar van die grond plaas. ’n Beperking van inhoudsbevoegdhede van die eienaar van die grond vind slegs plaas as byvoorbeeld ’n huurkontrak ten aansien van die grond met ’n mynboumaatskappy aangegaan word. Daar word ook aangetoon dat die bedoelingstoets nie suksesvol gebruik kan word om die aard van regte, permitte en toestemmings ten aansien van minerale te bepaal nie. Die tradisionele privaatregtelike eienskappe van saaklike regte en persoonlike regte word met redelike gemak toegepas op regte, toestemmings en permitte ten aansien van minerale.
Die toekenning van prospekteerregte en mynregte as ’n administratiewe handeling word ook kortliks bespreek om aan te toon dat sodanige toekenning slegs neerkom op ’n administratiewe vergunning om ’n notariële kontrak te sluit en te registreer (al is prospekteerders en myners statutêr daartoe verplig).
Met ander woorde, dit is bloot ’n vergunning om voort te kan gaan en om ’n saaklike reg te verkry. Daar word ook aangetoon dat tydens registrasie van prospekteerregte of mynregte sodanige administratiewe vergunning, wat nie ontginningsbevoegdhede tot inhoud het nie, nie omgetower word in ’n saaklike reg nie, net soos ’n persoonlike reg ingevolge ’n koopkontrak van grond kragtens geykte reg nie omgetower word in ’n saaklike reg tydens registrasie in die aktesregister nie.

Lessons to be learned from Only Fools: the protection of fictional characters, parody and pastiche

by | Sep 14, 2023 | TSAR, TSAR 2023 I4

Lessons to be learned from Only Fools: the protection of fictional characters, parody and pastiche

Author: S Karjiker

ISSN: 1996-2207
Affiliations: Anton Mostert Chair of Intellectual Property Law, Professor in Mercantile Law, Stellenbosch University
Source: Tydskrif vir die Suid-Afrikaanse Reg, Issue 4, 2023, p. 631 – 646
https://doi.org/10.47348/TSAR/2023/i4a2

Abstract

Die uitspraak in die Engelse saak Shazam Productions v Only Fools The Dining Experience (“Shazam-saak”) was in twee opsigte ’n grensverskuiwende kopiereg-uitspraak. Dit was die eerste keer dat kopieregbeskerming aan ’n fiksiekarakter onder Engelse reg erken is, en dat sodanige beskerming buite die werk waarin daardie karakter oorspronklik verskyn het, kon bestaan. Tweedens was dit moontlik die eerste keer dat die billike handeling-verwere van parodie en nabootsing teen ’n eis van kopieregskending deur ’n Engelse verhoorhof oorweeg is.
Die uitspraak is noemenswaardig aangesien ’n Suid-Afrikaanse hof tot op hede nog geen erkenning gegee het dat ’n fiksiekarakter ook kopieregbeskerming kan geniet nie. Daardie moontlikheid is nie oorweeg in Rapid Phase Entertainment CC v SABC nie. Die Shazam-saak bied verdere ondersteuning vir die geskiktheid van ’n fiksiekarakter vir kopieregbeskerming, onafhanklik van die werk waarin die karakter voorheen verskyn het. Daar word vertrou dat dit in die Suid-Afrikaanse reg erken sal word.
Die saak is ook om ’n ander rede leersaam, naamlik die voorgestelde invoering van die billike handeling-verwere van parodie en nabootsing, en ’n Amerikaanse-styl stelsel vir billike gebruik, in Suid-Afrikaanse kopieregwetgewing in die Wysigingswetsontwerp op Outeursreg. Die Shazam-saak verskaf ’n paar nuttige kriteria vir die oorweging van daardie spesifieke verwere, en die toepaslikheid van die stelsel van billike gebruik.
Die Shazam-saak is egter nie bo kritiek verhewe nie. Dit lyk of die hof ’n arbitrêre onderskeid getref het deur bepaalde kopieregwerke as literêre werke of dramatiese werke te klassifiseer. Dit is te wyte aan die vreemdheid van Britse kopiereg, waarvolgens literêre werke en dramatiese werke onderling in verskillende kategorieë in die Britse outeursreg val. Hierdie uitgangspunt van die Britse kopieregwetgewing is beslis effe vreemd. Die Suid-Afrikaanse kopiereg is anders in hierdie verband.
Die hof het ook beslis dat, vir die toepassing van die billike handeling-verwere van parodie en nabootsing, dit nie ’n tweeledige toets behels nie. Eerstens, of die inbreukmakende gebruik vir die uitgesonderde doel is, en tweedens, of hierdie tot billike handeling van die werk aanleiding gee. Die hof het bevind dat die ondersoek een saamgestelde beoordeling is, naamlik of die dade waaroor gekla word (dit wil sê parodie of nabootsing) neerkom op billike handeling vir die spesifieke doel.
Daar word aangevoer dat dit nie korrek is nie. Verder word aangevoer dat dit nie nodig is vir ’n hof om direk, as ’n afsonderlike ondersoek, die drie stap-toets te oorweeg benewens ’n spesifieke billike handeling-uitsondering nie.