The Income Tax Act 58 of 1962 (“Act”) entitles taxpayers to deduct certain losses and expenses incurred by them from their taxable income if such losses and expenses comply with the requirements of section 11(a) of the Act. One of the requirements of section 11(a) is that, in order to be eligible for a deduction, the losses and expenses must have been “actually incurred” by the taxpayer. The area of tax deductions in our tax law represents the frontline in the continuous and inevitable war between the taxpayer (almost always desperately trying to maximise her deductions) and the revenue authorities (as often times desperately trying to minimise the deductions to which the taxpayer is entitled). The stage on which the various battles which make up this mighty war between citizen and state are fought is the court and the arsenal with which each party comes armed is the Act and, more specifically, the absolute belief of each party in the correctness of their interpretation of the Act, which, each party hopes, will be ably demonstrated by their able (and often extremely expensive) counsel. Such is the determination of the taxpayer and the tax authorities alike that the body of case law relating to this specific area of our law is, especially when one considers that it essentially involves on only one section of the Act, relatively voluminous. The author’s intention is to consider only one of the requirements with which the taxpayer must comply in order to be eligible for a deduction, namely, the requirement that the relevant loss or expenditure must have been “actually incurred” by the taxpayer. Despite the fact that the meaning of the phrase “actually incurred” has been considered extensively by our courts, significant uncertainty still exists as to its exact meaning. The author will deal with three specific contexts in which the meaning of this phrase remains a subject of uncertainty, namely, share-based payments, contingent liabilities and losses and expenses incurred in relation to illegal receipts. The author will begin first by dealing with the interpretation of tax statutes, the author will then, in general terms, consider the general deduction formula after which the author will delve into the meaning of the phrase “actually incurred” in the contexts of each of the transactions mentioned above. / Dissertation (LLM)--University of Pretoria, 2012. / gm2014 / Mercantile Law / unrestricted

The purpose of this dissertation is to examine an unexplored aspect of tax expenditures: the tax-price implications of tax exemptions, deductions and credits. Although this implication of tax expenditures has not been adequately examined, two separate lines of analysis have been suggested by the existing literature. Some authors have emphasized the welfare costs of tax expenditures. To the extent that tax expenditures narrow the tax base the introduction or extension of a tax expenditure undoubtedly makes the cost of raising revenue more than it would be otherwise. This kind of cost, denoted as a welfare cost, can be incorporated into a model of individual tax-price determination. On the other hand, other authors have emphasized another tax-price implication of tax expenditures: that the introduction or extension of a tax expenditure changes the cost-shares faced by each taxpayer, exclusive of any welfare cost. Since an individual's cost-share is nothing more than his personal tax base divided by the aggregate tax base, this result emerges because a tax expenditure usually changes the individual's tax base in a manner disproportionate to the change in the aggregate tax base. This dissertation will explore and combine each line of analysis, both theoretically and empirically. In the first portion of the dissertation a model of tax-price determination is developed that explicitly incorporates the welfare cost of taxation. Various tax expenditures are then introduced into the model and their effects on individual tax-price schedules discerned. In this way the influence a tax expenditure has on an individual's choice over public sector size can be surmised. The next portion develops within the confines of a simple median voter model some potential allocative implications of various tax expenditures. This portion traces out the expected change in the median voter's desired quantity of the collective good, given various tax expenditures, via an analysis of the cost-share impact of the various tax expenditures. Although in this section welfare costs are not explicitly considered or all possible political cases outlined, the analysis does look at a set of cases that are of general interest. The final portion of the dissertation considers the influence tax expenditures taken in toto have on both the cost-sharing arrangement among individual taxpayers and the welfare cost to individual taxpayers. The results are used to gauge both the distributive and allocative implications of tax expenditures. / Ph. D.

Thesis (MAcc)--Stellenbosch University, 2012. / ENGLISH ABSTRACT: The requirements of broad-based black economic empowerment (‘BEE’) are set out in the BEE scorecard. When an entity incurs expenditure relating to indirect empowerment measures (i.e. the preferential procurement, enterprise development, skills development and socio-economic development categories on the BEE scorecard), it is unclear whether the expenditure will be deductible for income tax purposes (BEE Partner, 2008). The objectives of the current study are to determine whether such expenditure is deductible and to formulate best practice guidelines for the deduction of the expenditure. The best practice guidelines consist of factors that should be considered when determining whether expenditure is deductible, as well as recommendations on how to justify that such expenditure should, in fact, be deductible. The methodology used was to first consider the requirements of the BEE scorecard, the types of expenditure and the reasons for incurring expenditure towards indirect empowerment measures. The deduction of such expenditure was then considered in a general sense and specifically for each broad category of expenditure. Lastly, the best practice guidelines were formulated based on the conclusions reached. Common expenditure towards indirect empowerment measures of BEE was grouped into broad categories. The different reasons why entities incur such expenditure were identified, as the reason for incurring expenditure can influence whether it is incurred in the production of income (Van Schalkwyk, 2010b:110). It is submitted that expenditure that is excessive or that is incurred for philanthropic purposes would not be incurred in the production of income. Four issues were identified that could preclude a deduction in terms of the general deduction formula (section 11(a)) – notably, that expenditure has to be in the production of income and non-capital in nature to be deductible. In addition to section 11(a), special income tax deductions (sections 12H, 12I or 18A) and capital allowances (sections 11(e), 13sex or 15(a)) could also possibly apply, but only for certain types of expenditure and only in qualifying circumstances. The conclusions drawn as to the deductibility of expenditure are summarised as a guideline for taxpayers. The above-mentioned conclusions, along with the literature examined, were used to formulate general best practice guidelines. One such guideline is that the onus is on taxpayers to show (through one of the ways suggested) that expenditure is in the production of income. Taxpayers should also note that excessive expenditure is not in the production of income and that certain expenditure required by sector charters is more likely to be capital in nature. Furthermore, specific best practice guidelines were submitted for each broad category of expenditure and relate to, for example, the applicability of the identified special deductions and the quantification of non-monetary expenditure. The specific best practice guidelines should be considered when incurring expenditure in a specific category. In summary, even though expenditure towards indirect empowerment measures has been found to be deductible in most cases, there are exceptions of which taxpayers should be aware. The proposed best practice guidelines include guidance that could be considered before incurring expenditure towards indirect BEE measures. / AFRIKAANSE OPSOMMING: Die vereistes van breë-basis swart ekonomiese bemagtiging (‘SEB’) word in die SEB-telkaart uiteengesit. Wanneer ’n entiteit onkostes met betrekking tot indirekte bemagtigingsmaatreëls (die telkaartkategorieë vir voorkeurverkryging, besigheidsontwikkeling, vaardigheidsopleiding en sosio-ekonomiese ontwikkeling) aangaan, is dit nie duidelik of sodanige onkoste vir inkomstebelasting-doeleindes aftrekbaar sal wees nie (BEE Partner, 2008). Die doelwitte van hierdie studie was om te bepaal of sulke onkostes belastingaftrekbaar is en om bestepraktyk-riglyne te formuleer vir die aftrekking van die onkostes. Die bestepraktyk-riglyne bestaan uit faktore wat oorweeg moet word in die bepaling of onkostes belastingaftrekbaar is, sowel as aanbevelings oor hoe aftrekbaarheid geregverdig kan word. Die studiemetodologie het eerstens ’n ondersoek behels na die vereistes van die SEB-telkaart, die soorte onkostes sowel as die redes vir die aangaan van onkostes wat met indirekte bemagtigingsmaatreëls verband hou. Daarna is die belastingaftrekbaarheid van sodanige onkostes in die algemeen sowel as spesifiek vir elke breë kategorie van onkoste oorweeg. Laastens is die bestepraktyk-riglyne opgestel op grond van die gevolgtrekkings wat bereik is. Algemene onkostes wat met indirekte SEB-maatreëls verband hou, is in breë kategorieë gegroepeer. Die verskillende redes waarom entiteite die uitgawes aangaan, is bepaal, aangesien dit kan beïnvloed of die uitgawe in die voortbrenging van inkomste is of nie (Van Schalkwyk, 2010b:110). Daar word aangevoer dat onkoste wat oormatige is of onkostes met betrekking tot filantropiese doeleindes nie as deel van die voortbrenging van inkomste beskou kan word nie. Vier kwessies is geïdentifiseer wat ’n aftrekking ingevolge die algemene aftrekkingsformule (artikel 11(a)) kan verhoed – die belangrikste is dat die onkostes in die voortbrenging van inkomste aangegaan moet word en nie kapitaal moet wees om afgetrek te kan word. Benewens artikel 11(a), kan spesiale belastingaftrekkings (artikel 12H, 12I of 18A) en kapitaaltoelaes (artikel 11(e), 13sex of 15(a)) ook moontlik geld, maar slegs vir sekere soorte onkostes en in omstandighede wat daarvoor in aanmerking kom. Die gevolgtrekkings oor die belastingaftrekbaarheid van onkostes word uiteindelik as ’n riglyn vir belastingbetalers opgesom. Bogenoemde gevolgtrekkings, tesame met die bestudeerde literatuur, is gebruik om algemene bestepraktyk-riglyne te formuleer. Een so ’n riglyn is dat die bewyslas op die belastingbetaler rus om (op een van die voorgestelde maniere) aan te toon dat onkostes in die voortbrenging van inkomste aangegaan word. Belastingbetalers moet ook daarop let dat oormatige onkostes nie as deel van die voortbrenging van inkomste beskou kan word nie en dat sekere onkostes ingevolge die vereistes van sektorhandveste meer waarskynlik kapitaal van aard sal wees. Spesifieke bestepraktyk-riglyne is voorts vir elke breë kategorie van onkostes voorgestel, byvoorbeeld met betrekking tot die toepaslikheid van die geïdentifiseerde spesiale aftrekkings en die kwantifisering van nie-monetêre onkostes. Hierdie spesifieke bestepraktyk-riglyne behoort in ag geneem te word wanneer onkostes in ’n spesifieke kategorie aangegaan word. Ter samevatting behoort belastingbetalers daarop bedag te wees dat hoewel onkostes met betrekking tot indirekte bemagtigingsmaatreëls in die meeste gevalle belastingaftrekbaar is, daar wel sekere uitsonderings is. Die voorgestelde bestepraktyk-riglyne bied derhalwe leiding oor die faktore wat oorweeg kan word voordat onkostes met betrekking tot indirekte bemagtigingsmaatreëls aangegaan word.

Thesis (MAcc)--Stellenbosch University, 2014. / ENGLISH ABSTRACT: The requirements of section 11(a) and section 24J(2) were considered in this research assignment, from both a money-lender’s and an investment holding company’s perspective, to determine whether interest, losses on irrecoverable loans and raising fees were tax deductible. It was determined, that if the trade requirement is satisfied by the money-lender, then the above-mentioned expenses are fully tax deductible. However, if the trade requirement is satisfied by the investment holding company then only the interest is fully tax deductible. It is further submitted however in this research assignment that it cannot be said that the money-lender alternative is better than the investment holding company alternative – both alternatives are of equal value in the current tax system. What is important though is that taxpayers who will fit the mould of an investment holding company will now be able to use the principles set out in this research assignment to prove that it is in fact carrying on a trade for tax purposes, something that taxpayers are generally reluctant to pursue. If this is pursued, taxpayers may have the added tax benefit of tax deductible interest expenditure (in full) in cases where this was not previously the norm (and an investment holding company will not have to satisfy any of the guidelines of the “money-lender test” when it seeks to deduct its interest expense in full). However, if an investment holding company seeks to deduct losses on irrecoverable loans and raising fees for tax purposes, it will not have to satisfy all the guidelines of the “money-lender test”, but it will have to satisfy one guideline, that being the “system or plan” and “frequent turnover of capital” guideline. It will be very difficult for an investment holding company to prove this on the facts of the case – it will arguably take a special set of facts to accomplish this mean feat. / AFRIKAANSE OPSOMMING: Die vereistes van artikel 11(a) en artikel 24J (2) is in hierdie navorsingsopdrag vanuit ʼn geldskieter en 'n beleggingshouermaatskappy se perspektief oorweeg, om die belastingaftrekbaarheid van rente, verliese op oninvorderbare lenings en diensfooie te bepaal. Daar is vasgestel dat indien die bedryfsvereiste deur ʼn geldskieter nagekom word, bogenoemde uitgawes ten volle vir belastingdoeleindes aftrekbaar is. Indien die bedryfsvereiste egter nagekom word deur ʼn beleggingshouermaatskappy sal slegs die rente ten volle aftrekbaar wees vir belastingdoeleindes. Verder word dit in die navorsingsopdrag aan die hand gedoen dat daar nie gesê kan word dat die geldskieter-alternatief beter is as die beleggingshouermaatskappy-alternatief nie – beide alternatiewe is van gelyke waarde in die huidige belastingbestel. Die onderskeid is egter belangrik, aangesien die belastingbetalers wat aan die vereistes van ʼn beleggingshouermaatskappy voldoen, nou in staat sal wees om die beginsels wat in hierdie navorsingsopdrag uiteengesit word, te gebruik om te bewys dat die beleggingshouermaatskappy in werklikheid ʼn bedryf vir belastingdoeleindes beoefen. Belastingbetalers is oor die algemeen huiwerig om dit te poog. Indien wel, kan belastingbetalers ʼn belastingaftrekking ten opsigte van rente uitgawes kry, wat voorheen nie die norm was nie (ʼn beleggingshouermaatskappy sal nie enige van die “geldskietertoets” riglyne hoef na te kom wanneer dit poog om ʼn belastingafrekking vir die rente uitgawe te kry nie). Indien ʼn beleggingshouermaatskappy verliese op oninvorderbare lenings en diensfooie vir belastingdoeleindes wil aftrek, sal die belastingbetaler nie al die “geldskietertoets” riglyne hoef na te kom nie, maar sal egter moet voldoen aan die “stelsel of plan” en “gereelde omset van kapitaal” riglyne. Dit sal baie moeilik wees vir 'n beleggingshouermaatskappy om dit te bewys op grond van die feite van die saak – dit sal waarskynlik ʼn spesiale stel feite verg om dit te bereik.

One perceived deficiency in the tax system is its unfairness (inequity). One area in which unfairness has been alleged is the favoritism shown toward homeowners. The focus of this study was on the effects of homeowner preferences on the Federal tax system. The overall impact of homeowner preferences can be said to produce three major results—loss of revenue, reduction in horizontal equity, and reduction in vertical equity.

<p><font size="3" face="Arial"><font size="3" face="Arial"> <p align="left">In this study, I will look at the common law principle of offset to see whether it can be applied to employers making deductions against employees for loss or damage. Notice is a quantifiable amount and is a legal debt / therefore. it should be able to be applied as an offset. Two subsections deal with deductions / after looking carefully at the wording of theses subsections I will try to determine whether the one is alternate to the other, or whether the narrow interpretation that the Department of Labour gives to the statute is accurate. A narrow interpretation of the law states that the employee must sign an acknowledgement of debt. However, employees often refuse to sign an acknowledgement of debt, thereby frustrating the law. Could this possibly have been the intentions of the drafters? Surely not, yet the Department of Labour, by having a narrow interpretation of the law, see it as such and as a result the employer is left out of pocket. In this mini-thesis, I will look at the way the law should be interpreted and the way it should be applied in practice.</p> <p>&nbsp / </p> </font></font></p>

On July 1 2010 new rules regarding cross-border group deductions came into force in Sweden. The rules are based on a series of judgements which were delivered by the Court of Justice of the European Union and subsequent rulings deriving from the Swedish Supreme Administrative Court. The new set of rules is supposed to make the Swedish group consolidation system in line with EU law in the area of cross-border group consolidations. The new rules allow a resident parent to deduct the losses stemming from its non-resident subsidiary but only if the subsidiary has exhausted all the possibilities to take those losses into account in its own state of origin and the losses cannot be utilized in the future by the subsidiary or a third party. Furthermore, the non-resident subsidiary needs to be liquidated for the parent to be able to show that the possibilities have been exhausted. However, before even considering whether the subsidiary has exhausted the losses there is one criterion that need to be fulfilled; the criterion of a wholly owned subsidiary. The criterion of a wholly owned subsidiary requires a resident parent to directly own its non-resident subsidiary without any intermediate companies and that shareholding must correspond to more than 90 percent. It is the requirement of a direct shareholding which post a concern to whether that criterion can be seen as in compliance with the case-law stemming from The Court of Justice of the European Union and the Swedish Supreme Administrative Court. After revising and analysing the case-law stemming from the Court of Justice and the Swedish Supreme Administrative Court it is the author’s belief that the criterion of a wholly owned subsidiary, due to the requirement of a direct shareholding, is not in conformity with EU law and cannot be justified by the justification grounds put forward by the Swedish government.

Den 1 januari 2009 trädde en ny lagstiftning i kraft gällande ränteavdragsbegränsningar i syfte att förhindra skatteupplägg med ränteavdrag inom en intressegemenskap. Förändringarna innebar att en huvudregel infördes vilken stipulerar att bolag inom en intressegemenskap inte får dra av ränteutgifter avseende en intern skuld som hänför sig till förvärv av delägarrätter inom koncernen. Till huvudregeln infördes två undantag som stadgar att avdrag ändock får göras om särskilda krav är uppfyllda. Undantagen kom att benämnas tioprocentsregeln och ventilen. När det gäller tillämpningen av tioprocentsregeln ligger svårigheten i att utföra det så kallade hypotetiska testet där man ska beräkna till vilken skattesats det räntemottagande bolaget ska beskattas till om det endast hade haft ränteinkomsten som sin enda inkomst. Tillämpningsproblemet gällande ventilen är att det är en lagregel vilken vilar på domstolens subjektiva värderingar av affärsmässigheten i de uppkomna skuldförhållandena. Trots införandet av de nya reglerna uppmärksammade Skatteverket att skatteplaneringsförfaranden fortfarande föreligger varför ett nytt lagförslag nu har publicerats av Finansdepartementet. Förslaget innebär i kort tre stora förändringar av de nuvarande reglerna. Samtliga interna lån ska numera omfattas, en omvänd ventil införs vilken ger Skatteverket rätt att neka avdrag oavsett till vilken skattesats ränteinkomsten beskattas till samt att avdrag enligt ventilen endast ska kunna medges gällande ränteutgifter som betalas till bolag belägna i ett land inom EES eller till ett land vilket Sverige har ett skatteavtal med. Huruvida lagförslaget kommer att antas eller inte är i nuläget oklart. Flera remissinstanser har varit kritiska till förslaget, framförallt gällande den omvända ventilen då man anser att den leder till stor rättsosäkerhet. / On January 1st 2009, a new legislation was set in force with regards to deduction limitations on interests in order to prevent tax schemes with the use of interest deductions within a corporate group. The changes that were made imposed a general rule which stipulates that companies within a corporate group are not allowed to deduct interests regarding internal debts if that debt relates to an acquisition of shares in a company within the corporate group. To the general rule two exceptions were introduced which stipulates that deductions can be made if certain requirements are fulfilled. The exceptions were called the ten percent-rule and “ventilen”. Regarding the application of the ten percent-rule the difficulty lies in the performing of the so called hypothetical test in which you have to calculate to what tax rate the interest-receiving company will be taxed at if it only had the interest as it´s only income. The application problem regarding “ventilen” is based on the fact that it is a rule which rests on the Court’s subjective evaluation of the commercial reasonableness of the transaction. Despite the introduction of the new rules the Swedish Tax Authorities noticed that tax schemes still exists why a new proposal now has been published by the Ministry of Finance. The proposal contains in short of three major changes to the current rules. All internal loans are now covered, a reverse ”ventil” is introduced which gives the Tax Authorities a right to deny deductions regardless of what tax rate the income is taxed to and finally that deductions according to “ventilen” only will be allowed regarding interest payments to a country within the EEA or to a country which Sweden has a tax agreement with. Whether the proposal will be adopted or not is currently unclear and several respondents have been critical to the proposal.

<p><font size="3" face="Arial"><font size="3" face="Arial"> <p align="left">In this study, I will look at the common law principle of offset to see whether it can be applied to employers making deductions against employees for loss or damage. Notice is a quantifiable amount and is a legal debt / therefore. it should be able to be applied as an offset. Two subsections deal with deductions / after looking carefully at the wording of theses subsections I will try to determine whether the one is alternate to the other, or whether the narrow interpretation that the Department of Labour gives to the statute is accurate. A narrow interpretation of the law states that the employee must sign an acknowledgement of debt. However, employees often refuse to sign an acknowledgement of debt, thereby frustrating the law. Could this possibly have been the intentions of the drafters? Surely not, yet the Department of Labour, by having a narrow interpretation of the law, see it as such and as a result the employer is left out of pocket. In this mini-thesis, I will look at the way the law should be interpreted and the way it should be applied in practice.</p> <p>&nbsp / </p> </font></font></p>

The problem with which this study is concerned is that of determining the optimal transfer of property from a decedent to his surviving spouse. A secondary problem addressed is whether equity between common law states and community property states in the application of the estate tax provisions has been achieved through the allowance of the marital deduction. From this analysis decision criteria were developed to aid taxpayers and their advisors in determining optimal property transfers to a surviving spouse. Conclusions of the study were the following: (1) The primary concern when formulating an estate plan should be to determine whether any property should be transferred to the surviving spouse. The literature has stressed qualifying transfers for the marital deduction while giving minimal consideration to the wisdom of doing so. This study indicates that in a majority of estates optimal results are obtained by making no transfers to the surviving spouse. (2) Relative after-tax rates of return of the surviving spouse and other beneficiaries are the most important factors in determining optimal transfers to the spouse. This again conflicts with the literature which has emphasized relative estate sizes as the dominant factor. (3) Rates of inflation have minimal influence in determining the size of the optimal transfer. (4) Citizens of common law states are generally favored as opposed to citizens of community property states in the application of the estate tax laws. Citizens of these states have more flexibility in. planning transfers to beneficiaries and may generally do so at a lower tax cost through use of the marital deduction.