tax consulting - sizwentsalubagobodo · directives issued by the commissioner of sars. in dealing...

Tax Consulting

CONTENTS

About Us 4

Reach 4

Overview 6

Our Approach 7

Specific Focus Area 8

Financial Services 8

International tax 10

Mining tax and Royalty tax 11

Our Tax Services 12

Tax risk management 12

Tax accounting 13

Asset consulting 13

Compliance 14

Mergers & acquisitions 15

Share incentive schemes 15

Other corporate tax services 17

Main Tax audit procedures 18

Human resource tax services 19

Value-Added-Tax (VAT) Services 20

Contact 21

While rooted firmly in Africa, with a stronghold

of over 24 countries, we have a global footprint

through our professional membership network

with Protiviti, a leading global consulting and

internal auditing firm specialising in advisory,

risk and transaction services. Locally, we have

11 offices around the country, with a presence in

all 9 provinces. Our extensive local and global

footprint ensures that critical skills and expertise

are available whenever and wherever clients may

need them.

REACH

SizweNtsalubaGobodo (SNG) is the fifth largest

accounting and advisory firm in Southern Africa

that provides a wide variety of specialist services

in Audit, Advisory and Forensic services to a

diversified client base.

As a firm, we deliver quality services that support

the growth of our clients, enable innovation and

improve organisational performance. We aspire

to be a leading trusted business adviser to all

our clients, regardless of the size and complexity

of their business. It is through our innate ability

to apply outstanding technical expertise and

specialist industry knowledge that we provide

best-in-class advice, professional execution and

excellent service.

ABOUT US

4 SizweNtsalubaGobodo 5Taxation


SizweNtsalubaGobodo Tax Advisory offer a comprehensive range of tax services,

through our team of dedicated tax specialists. Our team has a vast amount

of expertise that enables us to pro-actively bring practical, cost-effective tax

solutions to our clients and add value.

Our advice and opinion is based on the interpretation of the relevant provisions

of tax legislation and decided tax cases, if any, as well as Practice Notes and Tax

Directives issued by the Commissioner of SARS. In dealing with the taxation of

cross border transactions and foreign entities, we base our advice and opinion on

the interpretation of the local tax legislation, relevant foreign tax legislation and

Double Taxation Agreements (DTA). We rely on latest technology to obtain and

analyse client information in order to provide effective tax solutions.

We adopt a holistic approach to enable us to address our client’s most demanding business challenges.

By clearly assessing and understanding each client’s unique circumstances, we are able to design

bespoke solutions that meet their individual needs.

Because there is no one-size-fits-all solution, we strive to assemble the right mix of specialists in order

to leverage the optimal skill and expertise required for each individual project. This approach means our

clients benefit from best practice in execution together with sound technical support.

We rely on latest technology to obtain and analyse client information in order to provide effective tax solutions.

OVERVIEW OUR APPROACH


SPECIFIC FOCUS AREAS

FINANCIAL SERVICES

According to latest reports issued by Statistics South Africa and the World Bank,

the services sector (financial Services particularly) is the biggest contributor

to the South African Economy. It also follows that the sector is one of the key

contributors to the tax revenue of South African and a key area of interest for

the government. Taxation of the sector has evolved through the years with the

introduction of specific rules in relation to structured financing with special anti-

avoidance measures in place in relation to certain hybrid instruments, third party

backed shares amongst other changes.

The tax implications of interest, debt raising costs and fair value gains/losses

incurred on certain financial instruments require special attention due to the

unique laws that are applicable. Our experienced tax team can assist with

transaction advice on the tax implications of your finance structure, we can

review the tax efficiency of current financing instruments in place and propose an

efficient solution.

If you are looking to expand into the African region using South Africa as a

gateway/head office we can advise on a financing/capital structure that is tax

efficient for the whole group and is in-line with the in-country laws..

Our experience in this area includes:

OUR EXPERIENCE

Advising on appropriate controls when foreign

loans are used to finance assets currently

under construction

Tax implications using preference shares versus

other ordinary shares when financing asset acquisitions including group restructuring

VAT apportionment matters that are

generally associated with financial services

Review of inter-company loan agreements and

advise on the tax implications for

the group

Review of legal financing documents and advise on

the tax implications(compliance and financial

reporting implications)

10 SizweNtsalubaGobodo Taxation

MINING TAX AND ROYALTY TAX

Resources though no longer the biggest contributor to the economy of South Africa they still play a significant role,

mining tax plays a crucial role in South African fiscus. The determination of mining tax is however unique and requires

special skills. Changes in legislation and court decisions increase the tax risks that mining entities are facing in mining

environment. For instance, the tax treatment of successful and unsuccessful exploration expenditure poses challenges in

as far as interpretation of legislation and court decisions are concerned: Any mining capital expenditure recorded as part

of assets under construction are treated differently from other capital expenditure and therefore the tracking of these

expenses becomes not only necessary but also essential in the correct determination of the mining current and deferred

taxes.

Our procedures addressing risks related to mining tax are designed to ensure that:

• Proper provision is made of mining tax to be paid to revenue authorities

• The current and deferred tax are fairly presented or disclosed in accordance with accounting standards read with

relevant tax legislation

Furthermore, compliance with legislation that regulates the imposition and calculation of royalties is very important.

To ensure that the correct amount of royalties is paid or provided for, we perform procedures that include among others:

• Review of controls relating to compliance with legislation that regulates the imposition and calculation of royalties

• Review calculation of royalties provided by management

• Re-perform the calculation of royalties’ payaAble based on facts and relevant legislation

11

INTERNATIONAL TAX

The taxation of cross border transactions and foreign entities is not only complex but also requires specialised

tax knowledge and skills that includes the working knowledge of foreign taxes and DTA between South Africa and

contracting countries in which our clients operate. We work closely with our offices in the African Region where

applicable to provide relevant cross border transaction advice.

Our services include but are not limited to the following:

• Advise on tax implications of financing agreements entered into by related entities and non-related entities in

different countries

• Advise on tax implications of cross border transactions

• Drafting or review of existing transfer pricing policy and its implementation

• The taxation of foreign exchange gains or losses (including the timing of inclusion or deduction thereof)

• Review of efficiency of existing group structures


OUR TAX SERVICES TAX ACCOUNTING

The presentation of the tax expenditure and other tax balances is very important to the users of financial statements.

Our tax accounting team assists your tax and finance departments with the recalculation of the tax expenditure and

other tax balances, supporting schedules and the effective tax rate to ensure accuracy, completeness and existence of

tax balances disclosed in the financial statements prior to the submission of the financial statements to the auditors.

ASSET CONSULTING

Generally in the South African environment costs incurred to acquire capital assets are not deductible when incurred in

terms of the general deductions formula. The costs are deductible under a number of sections that allow taxpayers to

deduct the costs over the asset usage period. The legislation has special allowances for the following assets:

• Small business corporations

• Assets used in the process of general manufacturing

• Assets used in the process of manufacturing, distribution of electricity including renewable energy and allowances in

respect of energy efficiency savings

• Tax allowances applicable to buildings ( and other permanent structures)

• Tax allowances applicable to special zoning areas

• Deduction in respect of airport and port assets

• Allowances in relation to certain industrial policy projects

• Special allowances in relation to research and development amongst other special allowances

Incorrect application of the special allowance sections has financial and reputational risk for an entity. Our team can

assist with determining the most efficient applicable section before the assets are brought into use. The team can also

review the efficiency of the allowance sections that have been applied to specific assets and advice on accuracy and

efficiency thereof.

TAX RISK MANAGEMENT

There is a growing awareness and activism in relation to business expected to

pay the fair amount of tax in the regions they operate in. The recent examples of

Google, Starbucks in the United Kingdom, Acacia Mining Plc are an indication of

the growing focus on fair taxation of multinational organisations by governments.

The growing interest places focus for organisations to properly identify and

document and manage tax risks.

Our tax risk management team can assist your organisation with establishing an

appropriate tax risk management strategy aligned to the group risk management

policy and corporate governance strategy. The risk assessment team can also

advice on the design and implementation of appropriate internal controls to

facilitate the management of all corporate tax compliance functions.

Visit our website to download our tax risk tool kit: http://www.sng.za.com/

advisory/tax-advisory


COMPLIANCE

Failing to comply with the laws and regulations in relation to taxation have financial and reputation implications. The Tax

Administration Act No.28 of 2011 (TAA) imposes penalties for failure to comply with the administration requirements of

the Acts and regulations administered by the Commissioner. Non-compliance with the Laws of the country any entity

operates in, will have a negative impact on the reputation of the entity and might be seen by stakeholders (customers,

government & shareholders) as unethical and a complete disregard for the general public.

Our compliance department can assist with:

• The submission/review of the tax returns in relation to normal tax, indirect taxes, withholding taxes and other third

party related returns

• The completion and submission of annual tax returns (including IT14 SD where applicable) to SARS including

submission of provisional tax

• Submission of third party returns, FACTA, Country by Country reporting

Our compliance services include drafting of transfer pricing policies that are compliant with local legislation and the

regulations of the Organisation for Economic Co-operation and Development (OECD) where applicable.

MERGERS & ACQUISITIONS

Tax can be a significant cost during a merger or acquisition process if not managed properly. South African legislation

allows for specific provisions for group restructuring that can result in deferral of certain taxes thereby decreasing

the tax costs of the restructuring transaction. Our mergers and acquisition team can assess the tax implications of the

reorganisation for possible capital gains, VAT implications and implications of the reorganisation to the end shareholder.

Our services include:

• Review of the restructuring agreements

• Tax implications of financial instruments that will be used to effect the transaction for the entities involved and the

end shareholders

• We also assess the accuracy of the taxation balances included in the business valuation, including the assessment of

the risk related to underpayment of taxes and other related non-compliance issues from prior periods

SHARE INCENTIVE SCHEMES

Share incentive schemes are one of the most important performance based remuneration systems for senior/executive

managers and fund managers. In the South African environment share based payments are also used to redress the

imbalances of the past. Different share schemes have different tax implications for the entity involved, the share trust

where a trust is used as a vehicle to issue the instruments to employees, and have tax implications for the employees

receiving the instruments.

Our tax specialist can assist with advising on the tax implications of share incentive schemes for all parties during the

drafting of the share scheme agreements to ensure efficiency of the tax charge. We provide advice on the restructuring

of B-BBEE related share schemes and non-B-BBEE schemes, assist with application for rulings from SARS where

applicable.

OTHER CORPORATE TAX SERVICES

• Corporate tax management and tax planning, including income tax, dividends tax (previously STC), etc

• Risk assessments, audits and advice on the design and implementation of appropriate internal controls to facilitate

the management of all corporate tax compliance functions

• Pre-issuance and pre-filing reviews, including assistance with the preparation of tax computations, tax returns and

required schedules

• Providing assistance when liaising with SARS, including:

• Requesting for waiver of interest and penalties

• Applying for extensions for the submission of returns and other administrative and compliance issues

• Assisting with disputes and drafting of objections and appeals against assessments

• Requesting advance tax rulings or private binding rulings

• Opinions on various tax issues, including the tax implications of structured finance schemes, reorganisations, mergers

and acquisitions

• Due diligence reviews


MAIN TAX AUDIT PROCEDURES

• Verify the roll forward of the opening balances in the tax computations, including deferred tax

• Compare the previous year tax computation to the filing position

• Detailed review of the taxation calculations, income tax rate reconciliations and deferred tax using the trial balance

and supporting schedules where detailed schedules are furnished for the Group and subsidiaries where statutory

sign- off is required

• Audit the tax reporting packs that are used for the consolidated tax computation for significant business entities in a

group environment

• Assess the integrity of adjustments made and ensure that the correct tax principles are applied in the determination

of the taxable income or loss at the end of the period

• Consider whether the principles adopted are in accordance with the relevant tax laws, practice notes and case law

• Review of the material amounts that will affect the assessed loss in the Company and Group and consider the impact

on the amounts that will be disclosed in the annual financial statements as the unrecognised deferred tax asset

• Analyse the deferred tax on the comprehensive method as required in terms of the International Financial Reporting

Standards and IAS12

• Review the income tax and deferred tax disclosure and notes in the annual financial statements

• Review of the royalty tax calculation for reasonableness and consistency with the relevant legislation of the country

imposing tax

• Re-perform the computation of royalty tax paid or payable and compare to amount recorded

• Discuss any issues / findings noted on the tax computation with management and SizweNtsalubaGobodo audit team

• Review of the Group consolidation of current and deferred tax

18 SizweNtsalubaGobodo

HUMAN RESOURCE TAX SERVICES

• PAYE, UIF and SDL registrations

• PAYE, UIF and SDL health checks, risk assessments and compliance reviews


• equesting for waiver of interest and penalties




• Evaluation of HR policies, documentation and procedures to ensure correct tax treatment and disclosure of

benefits and remuneration paid to staff

• Review of design, implementation and disclosure of cost-to-company structures

• Advice on the design and implementation of tax-based reward schemes such as share incentive schemes

• Review of and advice on the tax treatment of international assignments

19Taxation

VALUE-ADDED-TAX (VAT) SERVICES

• VAT registrations and de-registrations

• VAT health checks, risk assessments and compliance reviews


• Requesting for waiver of interest and penalties




• Advice on the indirect tax implications of existing business structures as well as reorganisations, mergers

and acquisitions

• Assistance with the compilation of procedures manuals, the design and implementation of appropriate

internal controls to facilitate the proper management of all indirect tax compliance issues and the training of

staff in this regard

• Assistance with the drafting of input and output tax schedules, turnover reconciliations, completion of

VAT201 forms and submission thereof to SARS

• Drafting of opinions on the VAT treatment / implications of certain transactions

21Taxation

CONTACTS

Veli Ntombela

Director: Tax Advisory Services

E: [email protected]

C: +27 (083) 299 3694

T: +27 (011) 231 0600

Azwinndini Magadani



C: +27 (083) 279 1402

T: +27 (011) 231 0600

Khanyisa Cingo



C: +27 (076) 695 5615

T: +27 (011) 231 0600

20 SizweNtsalubaGobodo

We advise clients on a comprehensive range of tax related matters including tax risk policy formulation or review to ensure alignment to overall risk management strategy of your organisation.

Other Local Offices

Pretoria - T. +27 86 117 6782

Nelspruit - T. +27 13 752 5413

Polokwane - T. +27 15 291 1339

Cape Town - T. +27 21 552 5311

East London - T. +27 43 721 1180

Rustenburg - T. +27 14 592 8427

Mafikeng - T. +27 18 381 0414

Kimberly - T. +27 53 831 2776

Bloemfontein - T. +27 51 430 5120

Durban - T. +27 31 539 4800

Head Office

20 Morris Street East, Woodmead, 2191

P.O. Box 2939, Saxonwold, 2132

Tel: +27 (0) 11 231 0600

Fax: +27 (0) 11 234 0933

www.sng.za.com

tax consulting - sizwentsalubagobodo · directives issued by the commissioner of sars. in dealing...

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