S.Africa: Revenue Service issues interpretation note on headquarter companies
South Africa
Report from our correspondent Lutando Mvovo, South Africa
Revenue ServiceTax authorities are fundamental institutions within government frameworks, overseeing tax assessment, collection, and administration. Their operations ensure that tax laws are enforced and public funds are collected efficiently. This article delves into tax authorities' purpose, responsibilities, and structure, offering insights into their essential role in supporting government functions and economic stability. What is a Tax Authority? A tax authority is... issues interpretation note on headquarter companies
On 28 November 2018, the South African Revenue ServiceThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... (SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently...) published Interpretation Note 87 (Issue 2) (IN 87) on headquarter companies. The purpose of IN 87 is to provide guidance and clarity on the interpretation and application of section 9I of the Income TaxIncome Tax is a direct levy imposed by governments on the income generated by individuals, corporations, and other entities within a specific jurisdiction. It serves as a major source of revenue for governments and funds various public expenditures, such as infrastructure projects, healthcare, education, national security, and welfare programs. The tax is generally calculated as a percentage of the taxable... Act, 58 of 1962 (ITA), which deals with headquarter companies.
IN 87 also discusses other provisions of the ITA that provide special tax relief for headquarter companies, as well as the specific anti-avoidance rules that are designed to prevent misuse or abuse of those provisions.
IN 87 addresses the following, among other things:
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the definition of “headquarter company” and qualifying requirements for a headquarter company;
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relief from income taxIncome Tax is a direct levy imposed by governments on the income generated by individuals, corporations, and other entities within a specific jurisdiction. It serves as a major source of revenue for governments and funds various public expenditures, such as infrastructure projects, healthcare, education, national security, and welfare programs. The tax is generally calculated as a percentage of the taxable... and capital gains taxCapital Gains Tax (CGT) is a tax imposed on the profit an individual or entity earns from the sale or disposal of a capital asset. This tax is not levied on the total sale price of the asset but rather on the capital gain, which is the difference between the asset’s acquisition cost (or “base cost”) and its sale price....;
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dividends and foreign dividends received by or accrued to a headquarter company and related exemptions from income taxIncome Tax is a direct levy imposed by governments on the income generated by individuals, corporations, and other entities within a specific jurisdiction. It serves as a major source of revenue for governments and funds various public expenditures, such as infrastructure projects, healthcare, education, national security, and welfare programs. The tax is generally calculated as a percentage of the taxable...;
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transfer pricingTransfer pricing is a fundamental concept in international taxation that defines the pricing methods and rules applied to transactions between related entities within a multinational enterprise (MNE). In the context of tax regulations, it governs how prices for goods, services, or intangibles (such as intellectual property) are set when these items are exchanged between different branches, subsidiaries, or affiliates of... rules in relation to headquarter companies; and
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ring fencing of interest and royalties incurred by headquarter companies.
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The information contained in IN 87 is based on the income taxIncome Tax is a direct levy imposed by governments on the income generated by individuals, corporations, and other entities within a specific jurisdiction. It serves as a major source of revenue for governments and funds various public expenditures, such as infrastructure projects, healthcare, education, national security, and welfare programs. The tax is generally calculated as a percentage of the taxable... and tax administrationTax authorities are fundamental institutions within government frameworks, overseeing tax assessment, collection, and administration. Their operations ensure that tax laws are enforced and public funds are collected efficiently. This article delves into tax authorities' purpose, responsibilities, and structure, offering insights into their essential role in supporting government functions and economic stability. What is a Tax Authority? A tax authority is... legislation (as amended) as at the time of publishing and includes the following:
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the Taxation LawsTax laws form the backbone of any nation’s revenue system, setting the rules that govern how individuals and corporations contribute financially to support government functions. These laws define the types of taxes, the applicable rates, and the regulations regarding payment and compliance. They also outline the rights and obligations of taxpayers, ensuring a balanced and fair approach to funding public... Amendment Act, 17 of 2017, which was promulgated on 18 December 2017;
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the Tax AdministrationTax authorities are fundamental institutions within government frameworks, overseeing tax assessment, collection, and administration. Their operations ensure that tax laws are enforced and public funds are collected efficiently. This article delves into tax authorities' purpose, responsibilities, and structure, offering insights into their essential role in supporting government functions and economic stability. What is a Tax Authority? A tax authority is... Laws Amendment Act, 13 of 2017, which was promulgated on 18 December 2017; and
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the Rates and Monetary Amounts and Amendment of Revenue LawsTax laws form the backbone of any nation’s revenue system, setting the rules that govern how individuals and corporations contribute financially to support government functions. These laws define the types of taxes, the applicable rates, and the regulations regarding payment and compliance. They also outline the rights and obligations of taxpayers, ensuring a balanced and fair approach to funding public... Bill of 2018.
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