Thesis (MComm)--Stellenbosch University, 2000. / ENGLISH ABSTRACT: TAX CONSIDERATIONS OF MERGERS AND ACQUISITIONS During the past few years the South African business environment experienced a considerable increase in corporate mergers and acquisitions. At a corporate tax rate of thirty per cent, the tax implications of mergers and acquisitions have an important impact on the financial success thereof. By way of background information, a short exposition of the characteristics, the various forms and the reasons for the increase, of mergers and acquisitions is provided. Essentially a merger or acquisition entails the acquisition of either the business of, or the shares in, the target company. A comparison is drawn between the tax consequences of the above two options for both parties to mergers and acquisitions. The composition of the purchase price payable by an acquiring company in respect of the acquisition of the target company's business or shares may have far reaching tax consequences. Consequently, the most commonly used arrangements relating to payment of the purchase price are scrutinized from a tax point of view. The bulk of the study consists of an analysis of particular aspects of mergers and acquisitions, which may, depending on how a particular transaction is structured, result in important tax benefits. The analysis is directed towards, firstly, establishing the tax consequences arising from mergers and acquisitions and, secondly, suggesting tax efficient structuring methods or alerting against structuring options that may have detrimental tax results. Some of the proposed tax structuring techniques have tax efficient results for one party to the merger or acquisition, but result in corresponding negative tax effects for the other. There are, however, opportunities to structure a tax efficient transaction in such a way to ensure that both parties share in the tax benefit. lt is even possible to, in respect of certain aspects of mergers and acquisitions, achieve a tax efficient result for both parties to the transaction without any commensurate disadvantage, or without them having to share the benefits thereof. lt is important to evaluate tax planning strategies against the general antiavoidance measures contained in the doctrine of substance over form and in tax legislation. Consequently, in the final analysis, the applicability of the antiavoidance measures to the tax planning strategies proposed in this study, is considered. / AFRIKAANSE OPSOMMING: BELASTINGOORWEGINGS OM IN GEDAGTE TE HOU BY SAMESMEL TINGS EN OORNAMES VAN SUID-AFRIKAANSE MAATSKAPPYE Korporatiewe samesmeltings en oornames is 'n dinamiese en immer groeiende area van die Suid-Afrikaanse besigheidsomgewing. Teen 'n korporatiewe belastingkoers van dertig persent is die belastinggevolge van 'n samesmelting of oorname 'n belangrike faktor in die finansiele sukses daarvan. Ter agtergrondinligting word daar in hierdie studie 'n kort uiteensetting van wat 'n samesmelting en oorname behels, die verskillende vorme wat dit kan aanneem en die redes waarom samesmeltings en oornames plaasvind, gegee. In wese kan 'n samesmelting of oorname geskied deur die verkryging van of die besigheid of die aandele van 'n teikenmaatskappy. 'n Vergelyking tussen die belastingimplikasies van genoemde twee opsies word uit die perspektief van beide die verkrygende maatskappy en die teikenmaatskappy, getref. Die samestelling van die koopprys wat ingevolge 'n oorname of 'n samesmelting betaalbaar is, kan verreikende belastingimplikasies inhou. Die mees algemene wyses van betaling, en die belastinggevolge wat daaruit voortvloei, word dus geanaliseer. Die studie behels hoofsaaklik 'n ontleding van spesifieke aspekte inherent aan samesmeltings en oornames wat, afhangend van die strukturering van die transaksie, verskillende belastinggevolge inhou. Die doel met die ontleding is tweeledig, naamlik om, eerstens, die belastinggevolge van samesmeltings en oornames vas te stel en om, tweedens, enersyds voorstelle te maak vir effektiewe belastingstrukturering, en andersins te waarsku teen struktureringsopsies wat negatiewe belastinggevolge mag inhou. Sommige struktureringstegnieke hou voordelige belastinggevolge vir een party tot 'n samesmelting of oorname in, maar lei tot korresponderende nadelige belastinggevolge vir die ander party. In sommige gevalle is dit egter moontlik om 'n middeweg tussen die voordeel en korresponderende nadeel te vind, sodat die partye in die voordeel kan deel. Daar word ook aangetoon dat sommige aspekte van samesmeltings en oornames, indien dit noukeurig beplan word, belastingvoordele sonder enige korresponderende nadele vir beide partye kan inhou. Belastingbeplanningstegnieke moet egter aan die algemene teenvermydingsmaatreels wat in die leerstuk van wese bo vorm, asook in belastingwetgewing, vervat word, gemeet word. Die studie word dus afgesluit met 'n bespreking van die toepaslikheid van die algemene teenvermydingsmaatreels op die voorstelle wat gemaak word ten opsigte van belastingstruktureringsopsies.

M.Comm. / In the case of share purchase schemes, the employer assists the employee to buy shares through a trust. If the interest on the loan is at a rate lower than the standard rate for tax purposes, the employee will be taxed on the difference between the standard and actual rate charged. An alternative for buying ordinary shares is to buy convertible preference shares in the Company. A scheme involving convertible debentures has the same basic principles as convertible preference shares, but the South African Revenue Services might use section 8A of the Act as it seems as if only a right to ordinary shares is offered to the employee. If the company does not have the means to administrate any of the schemes summarised above, they can make use of a phantom share scheme. With this scheme there is no actual buying or selling of shares, but "bonuses" are calculated with reference to the movement in the share price. These incentives are treated as normal bonuses for tax purposes in the hands of the employer and employee. To provide the employees with a tax effective scheme is just as important as providing a share incentive scheme. Companies, therefore, have to consider all the schemes available and the tax implications before implementing a share incentive scheme.

A research report submitted to the Faculty of Commerce, Law and Management in partial fulfilment of the requirements for the degree of Master of Commerce (Taxation). Johannesburg, April 2017. / Technological advancements have introduced new methods of operating and transacting between business and targeted markets. Electronic interaction by business with respective target markets has enabled business to transact from any location around the world, instantaneously delivering goods and services to markets globally. Although benefits have been derived by business, the impact of e-commerce on established income tax principles has raised concern to governments around the world, as e-commerce grows as a method of transacting with targeted markets (Hubbard: 2016). Transacting in a digital environment has posed challenges to the taxation of residents and non-residents in South Africa which has resulted in the avoidance of income tax by taxpayers in countries of operation. Losses in tax revenue resulting from business conducted in e-commerce have been experienced (OECD, 2014a:5) by governments, as the application of income tax legislation is challenged by business operations in e-commerce (OECD, 2015:5). Transacting in a digital environment has provided business with the ability to operate in a market in the absence of physical premises established in that market, challenging income tax principles which rely on an association with a physical place or presence of an entity for taxation. This research report analyses the taxation of non-resident business operations in e-commerce in South Africa and the arising challenges due to ecommerce. An examination of the income tax legislation is performed to understand how tax is avoided by non-residents when operating in e-commerce. The possible solutions to address challenges posed to income tax by e-commerce will be examined as part of the research report. Keywords: BEPS; double tax agreements; e-commerce; income tax; non-residents; resident; source; permanent establishment. / GR2018

South Africa's right to tax the income of a non-resident is determined in terms of the South African "source rules" established by court decisions in relation to the imposition of tax in terms of the Income Tax Act. Unless a non-resident's income is captured by the South African "source rules" (on the basis that hi slits income is derived from a South African source), South Africa would have no right to tax such income, even if such non-resident creates a permanent establishment in South Africa by performing business activities within South Africa which could be considered essential (but not dominant) in nature. In such scenario the activities performed by the non-resident in South Africa may utilise the natural resources and the infrastructure of South Africa, but the South African fiscus would be deprived of the right to any tax revenues attributable to the income produced partly by such activities within South Africa. The South African "source rules" refer only to the main or dominant activities giving rise to the income for the purpose of determining the source of such income (and accordingly the right to tax such income). On the other hand, the "permanent establishment rules" as set out under the Organisation for Economic Cooperation and Development Model Tax Convention on Income and on Capital refer to all the taxpayer's essential business activities for the purpose of determining whether or not such activities create a pennanent establishment. The result of the narrow nature of the South African "source rules" is that, under certain circumstances, the South African fiscus would not necessarily be granted the right to tax all income produced partly within South Africa. The research demonstrated that incorporating the principles underlying the "pennanent establishment rules" into South African legislation would be a reasonable and logical solution to the problem of detennining the source of income. In so doing, the South African "source rules" would determine the source of income, and consequently South Africa's taxing rights, with reference to the essential business activities giving rise to such income. In such case South Africa would be afforded the right to tax the income of a non-resident in the event that it performs any of its essential business activities within South Africa, albeit not the dominant or main activities giving rise to the income.

This study compared the turnover tax and small business corporation tax systems in South Africa as applicable to micro and small businesses. Misinformed perceptions of the turnover tax system were the motivation for this study. A three phase approach was adopted to conduct this study, the phases being literature review, in-depth face-to-face interviews and quantitative analysis of financial statements which are referred to as case studies. The tax liability was calculated for each of the thirty cases and thereafter a comparative analysis was performed to establish the most beneficial tax system for each case study. The findings for year one revealed that the small business corporation tax system was the most beneficial tax system for fifteen of the thirty cases and turnover tax for the other fifteen cases. Over an average of five years, fourteen cases benefited from the small business corporation tax system and sixteen from turnover tax. There were a number of significant reasons why the above mentioned tax systems were appropriate for each of the thirty cases, one of which being, the type of business or industry where the case is located. The information obtained from this study could inform small and micro businesses about the most appropriate and beneficial tax system for their businesses. In addition the information emanating from this study could be used by tax practitioners to advise their clients on the most appropriate tax system for their businesses. Lastly, the results of this study could contribute to the debate around legislation for small and micro businesses. / Taxation / M. Com. (Accounting)

Thesis (MAcc)--Stellenbosch University, 2012. / ENGLISH ABSTRACT: Globally, climate change is probably the biggest environmental challenge facing the world this century. To accommodate change, the South African government introduced a vehicle emission tax on 1 September 2010. However, the design of the vehicle emission tax focuses on consumers and it might not be most effective in reducing CO2 emissions to the desired level. Therefore, alternative initiatives need to be identified and implemented to address increasing CO2 emissions. A “feebate” policy is considered as a possible alternative to reduce CO2 emissions. A literature review was performed on the topic of “feebate” policies and current tax legislation that could encourage vehicle manufacturers to invest in energy-efficient technology aimed at reducing CO2 emissions. Based on the literature review, a qualitative empirical study was conducted by means of a questionnaire, which was distributed to nine vehicle manufacturers in South Africa. The study specifically focused on vehicle manufacturers as they have the opportunity to design, develop and introduce energy-efficient technology, which could reduce CO2 emissions. Results suggest that a “feebate” policy that leads to costs savings should be considered by government to encourage vehicle manufacturers to invest in energy-efficient technology in order to lower CO2 emissions. It was also noted that, in general, the provisions of the current Income Tax Act No. 58 of 1962 provides little incentive to encourage vehicle manufacturers to invest in energy-efficient technologies to reduce CO₂ emissions. / AFRIKAANSE OPSOMMING: Wêreldwyd is klimaatverandering waarskynlik die grootste uitdaging wat die wêreld in die gesig staar die eeu. Die Suid-Afrikaanse regering het op 1 September 2010 ʼn voertuig uitlatingsbelasting ingestel om verandering te akkommodeer. Aangesien die ontwerp van voertuig uitlatingsbelasting egter fokus op die verbruiker, is dit moontlik nie die effektiefste manier om CO2-uitlatings te verminder en tot ʼn aanvaarbare vlak nie. Dus moet alternatiewe inisiatiewe geïdentifiseer en geïmplementeer word om toenemende CO2-uitlatings aan te spreek. ʼn “Feebate” beleid word oorweeg as ʼn moontlike alternatief om CO2-uitlatings te verminder. ʼn Literatuurstudie is uitgevoer rakende die onderwerp van “feebate” beleide en huidige belastingwetgewing wat voertuigvervaardigers kan motiveer om te investeer in energie effektiewe tegnologie wat gemik is daarop om CO2-uitlatings te beperk. Gebaseer op die literatuurstudie is ʼn kwalitatiewe empiriese studie uitgevoer deur middel van ʼn vraelys, wat aan al nege voertuigvervaardigers in Suid-Afrika gestuur is. Die studie het spesifiek op voertuigvervaardigers gefokus, omrede hulle die geleentheid het om energie effektiewe tegnologie te ontwerp, te ontwikkel en voor te stel wat CO2-uitlatings kan verminder. Resultate dui daarop dat die regering ʼn “feebate” beleid, wat sal lei tot kostebesparing, behoort te oorweeg om sodoende voertuigvervaardigers te motiveer om in energie effektiewe tegnologie te investeer om CO2-uitlatings te verlaag. Daar is ook bevind dat die huidige Inkomstebelastingwet No. 58 van 1962 oor die algemeen min insentief verskaf om voertuigvervaardigers te motiveer om in energie effektiewe tegnologie te investeer om CO2-uitlatings te verlaag.

Thesis (MAcc)--Stellenbosch University, 2012. / ENGLISH ABSTRACT: Share incentive schemes have become an important part of the remuneration package of employees in South Africa. Employers offer share incentive schemes to employees in order to attract and retain high quality workers while aligning the interests of the employees with those of the shareholders. Employees are motivated to participate in share incentive schemes due to the opportunity to invest in their financial future, as well as the opportunity to share in the economic success and growth of the employer company. Due to the increase in the utilisation of share incentive schemes to remunerate employees, the South African Revenue Service (the SARS) increased its focus on the taxation of such schemes. Section 8C of the Income Tax Act No. 58 of 1962 (the Act) was introduced by the SARS on 24 January 2005 to govern the taxation of share incentive schemes in South Africa. Prior to the introduction of section 8C, section 8A sought to tax the gains realised by employees participating in share incentive schemes, being the difference between the market value on the exercise date and the grant price. The tax liability incurred by employees in terms of section 8A did not tax the full gain eventually realised by employees upon vesting of the shares and the SARS sought to close this loophole through the introduction of section 8C to the Act. The employer company is required by the Fourth Schedule to withhold employees’ tax amounting to the gain realised by the employee in terms of section 8C of the Act. This assignment analysed the workings of the four share incentive schemes most commonly found in the South African marketplace, namely: share option scheme, share purchase scheme, deferred delivery share scheme and phantom share scheme. The current normal income tax legislation governing share incentive schemes in relation to employees was examined by considering literature contained in the Act, amendment bills and acts, case law and other material. Based on current income tax legislation, the tax implications of each of the four selected share incentive schemes was determined and compared in order to determine which of the selected share incentive schemes are most tax efficient in relation to the employee. It was concluded that the share option scheme and the deferred delivery share scheme are the most tax efficient schemes in relation to the employee. Based on case studies conducted, along with an analysis of the current income tax legislation contained in the Act, the share option scheme and the deferred delivery share scheme resulted in the lowest overall tax liability for employees. It was further concluded that employers will be required to revisit the structuring of their current share incentive schemes in order to ensure that any dividends paid to employees in terms of the schemes will remain exempt in terms of the amended section 10(1)(k)(i)(dd). The assignment includes recommendations relating to how share incentive schemes can be structured to be more tax efficient. / AFRIKAANSE OPSOMMING: Aandele-aansporingskemas het ’n belangrike deel van die vergoedingspakkette van werknemers in Suid-Afrika geword. Werkgewers bied aandele-aansporingskemas aan werknemers om sodoende hoë-kwaliteit werkers te lok en te behou terwyl die belange van die werknemers met dié van die aandeelhouers belyn word. Werknemers word gemotiveer om aan aandele-aansporingskemas deel te neem vanweë die geleentheid om in hul finansiële toekoms te belê, sowel as die geleentheid om in die ekonomiese sukses en groei van die werkgewer-maatskappy te deel. Weens die toename in die aanwending van aandele-aansporingskemas om werknemers te vergoed, het die Suid-Afrikaanse Inkomstebelastingdiens (die SAID) sy fokus op die belasting van welke skemas verskerp. Artikel 8C van die Inkomstebelastingwet Nr. 58 van 1962 (die Wet) is deur die SAID op 24 Januarie 2005 ingestel om die belasting van aandele-aansporingskemas in Suid-Afrika te beheer. Voor die instelling van artikel 8C het artikel 8A gepoog om die winste gerealiseer deur werknemers wat aan aandele-aansporingskemas deelneem, te belas, synde die verskil tussen die markwaarde op die uitoefeningsdatum en die toekenningsprys. Die belastingaanspreeklikheid aangegaan deur werknemers ingevolge artikel 8A het nie die volle wins uiteindelik gerealiseer deur werknemers ten tye van vestiging van die aandele belas nie, en die SAID het gepoog om hierdie skuiwergat te sluit deur die instelling van artikel 8C in die Wet. Daar word van die werkgewer-maatskappy verwag om werknemersbelasting ingevolge die Vierde Bylaag te weerhou ten bedrae van die wins deur die werknemer ingevolge artikel 8C van die Wet gerealiseer. Hierdie studie het die werking van die vier mees algemene aandele-aansporingskemas in die Suid-Afrikaanse mark geanaliseer, naamlik: die aandele-opsieskema, aandeleaankoopskema, uitgestelde-leweringskema, en die skyn-aandeleskema. Die huidige normale inkomstebelastingwetgewing wat aandele-aansporingskemas ten opsigte van werknemers beheer, is ondersoek deur die literatuur in die Wet, wysigingswetsontwerpe en wette, beslissings en ander materiaal in oënskou te neem. Gebaseer op huidige inkomstebelastingwetgewing is die belastingimplikasies van elk van die vier geselekteerde aandele-aansporingskemas bepaal en vergelyk om sodoende te bepaal watter van die geselekteerde aandele-aansporingskemas die mees belastingdoeltreffend ten opsigte van die werknemer is. Daar is gevind dat die aandele-opsieskema en die uitgestelde-leweringskema die mees belastingdoeltreffende skemas ten opsigte van die werknemer is. Gebaseer op gevallestudies wat uitgevoer is, tesame met ’n analise van die huidige inkomstebelastingwetgewing vervat in die Wet, het die aandele-opsieskema en die uitgestelde-leweringskema gelei tot die laagste algehele belastingaanspreeklikheid vir werknemers. Daar is verder tot die gevolgtrekking gekom dat daar van werkgewers verwag gaan word om die strukturering van hul huidige aandele-aansporingskemas te hersien om sodoende te verseker dat enige dividende wat aan werknemers in terme van die skemas betaal word, vrygestel sal bly ingevolge die aangepaste artikel 10(1)(k)(i)(dd). Die studie sluit aanbevelings in oor hoe aandele-aansporingskemas gestruktureer kan word om meer belastingdoeltreffend te wees.

This study compared the turnover tax and small business corporation tax systems in South Africa as applicable to micro and small businesses. Misinformed perceptions of the turnover tax system were the motivation for this study. A three phase approach was adopted to conduct this study, the phases being literature review, in-depth face-to-face interviews and quantitative analysis of financial statements which are referred to as case studies. The tax liability was calculated for each of the thirty cases and thereafter a comparative analysis was performed to establish the most beneficial tax system for each case study. The findings for year one revealed that the small business corporation tax system was the most beneficial tax system for fifteen of the thirty cases and turnover tax for the other fifteen cases. Over an average of five years, fourteen cases benefited from the small business corporation tax system and sixteen from turnover tax. There were a number of significant reasons why the above mentioned tax systems were appropriate for each of the thirty cases, one of which being, the type of business or industry where the case is located. The information obtained from this study could inform small and micro businesses about the most appropriate and beneficial tax system for their businesses. In addition the information emanating from this study could be used by tax practitioners to advise their clients on the most appropriate tax system for their businesses. Lastly, the results of this study could contribute to the debate around legislation for small and micro businesses. / Taxation / M. Com. (Accounting)

The sale of an entity as a going concern has a number of tax consequences for both the purchaser and the seller. The tax deductibility of a contingent liability upon its transfer from the seller to the purchaser, where the selling price has been reduced by the value of the contingent liabilities transferred, remains uncertain following the decision in Ackermans Ltd v Commissioner for the South African Revenue Service. An expense is either deductible under a specific section of the Income Tax Act, 58 of 1962, or under the general expense provisions in terms of sections 11(a) and 23(g). The Act does not contain a specific section relating to contingent liabilities and therefore a contingent liability will need to be considered for deduction under these sections. The Act further disallows an expense as a deduction under section 23(e), where a reserve is created (for example a leave pay provision). This study analyses the tax deductibility of a contingent liability, where the contingent liability has been transferred from the seller to the purchaser in a sale of an entity as a going concern and the purchase price has been reduced to compensate for the transfer of the contingent liability. The deductibility of the contingent liability was first assessed in terms of the provisions of the Act (sections 11(a), 23(g) and 23(e)) and associated case law. The decision in the Ackermans case and its preceding Income Tax Case 1839 was then analysed in order to establish the principles arising from the decisions. Finally the proposals in the Draft Taxation Laws Amendment Bill, 2011, and the subsequent Discussion Document issued by the South African Revenue Service were discussed. The analysis revealed the continuing confusion surrounding the status quo, thus demonstrating the importance of legislative intervention to provide guidelines for taxpayers.

Over the last 10 years the South African fiscus has introduced numerous changes to the Income Tax Act (ITA) which affect the income tax implications of persons ceasing to be a resident of South Africa. The two main changes were: - The introduction of a world-wide basis of taxation for residents - The introduction of capital gains tax (CGT) as part of the ITA The aim of this treatise was to identify the income tax implications of persons ceasing to be a resident of South Africa. Resulting from this research, several issues in the ITA have been identified, and the two major ones are summarised below. Firstly, upon the emigration of the taxpayer, there is a deemed disposal of a taxpayer’s assets in terms of paragraph 12 of the Eighth Schedule. It is submitted that the resulting exit tax may be unconstitutional for individuals. It is recommended that South Africa should adopt the deferral method within its domestic legislation for individuals who are emigrating. The deferral method postpones the liability until the disposal of the asset. Secondly, on the subsequent disposal of assets by former residents where there was no exit charge in terms of the exemption under paragraph 12(2)(a)(i) of the Eighth Schedule. Depending on the specific double tax agreement (DTA) that has been entered into with the foreign country, taxpayers have been given vii the opportunity to minimise or eliminate the tax liability with regard to certain assets. This should be of concern from the point of view of the South African government. Further issues noted in this treatise were the following: - It is submitted that the term ‘place of effective management’ has been incorrectly interpreted by SARS in Interpretation Note 6. - It is further submitted that the interpretation by SARS of paragraph 2(2) of the Eighth Schedule is technically incorrect. The above issues that have been identified present opportunities to emigrants to take advantage of the current tax legislation. It is further recommended that taxpayers who are emigrating need to consider the South African domestic tax law implications, respective DTA’s, as well as the domestic tax laws of the other jurisdiction, not only on the date of emigration but also on the subsequent disposal of the respective assets.