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A critical analysis of the scope of the foreign services reportable arrangement provision of the Tax Administration Act of South Africa
Thesis (MCom)--Stellenbosch University, 2019.
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| Format: | Thesis |
| Language: | en_ZA |
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Stellenbosch : Stellenbosch University
2019
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| _version_ | 1867614110393303040 |
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| access_status_str | Open Access |
| author | Oosthuizen, Marlene |
| author2 | Thiart, Cara |
| author_browse | Oosthuizen, Marlene Thiart, Cara |
| author_facet | Thiart, Cara Oosthuizen, Marlene |
| author_sort | Oosthuizen, Marlene |
| collection | Thesis |
| dc_rights_str_mv | Stellenbosch University |
| description | Thesis (MCom)--Stellenbosch University, 2019. |
| format | Thesis |
| id | oai:scholar.sun.ac.za:10019.1/106995 |
| institution | Stellenbosch University (South Africa) |
| language | en_ZA |
| last_indexed | 2026-06-10T12:46:49.940Z |
| license_str | Other — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from SUNScholar — Stellenbosch University Repository |
| publishDate | 2019 |
| publishDateRange | 2019 |
| publishDateSort | 2019 |
| publisher | Stellenbosch : Stellenbosch University |
| publisherStr | Stellenbosch : Stellenbosch University |
| record_format | dspace |
| source_str | SUNScholar — Stellenbosch University Repository |
| spelling | oai:scholar.sun.ac.za:10019.1/106995 A critical analysis of the scope of the foreign services reportable arrangement provision of the Tax Administration Act of South Africa Oosthuizen, Marlene Thiart, Cara Stellenbosch University. Faculty of Economic and Management Sciences. School of Accountancy. Taxation -- Law and legislation -- South Africa Tax administration and procedure -- South Africa Taxation -- South Africa UCTD Thesis (MCom)--Stellenbosch University, 2019. ENGLISH SUMMARY: The Organisation for Economic Cooperation and Development identified mandatory disclosure rules (i.e. reportable arrangement rules) as one of the fifteen areas to address Base Erosion and Profit Shifting. The South African Tax Administration Act no.28 of 2011 (the Tax Administration Act) contains legislation addressing reportable arrangements. Section 35 of the Tax Administration Act specifies arrangements that are reportable. While section 35(1) lists specific arrangements, section 35(2) prescribes that any arrangement is considered reportable if that arrangement is listed by the Commissioner in a public notice. The Commissioner listed an additional reportable arrangement by way of a public notice in section 2.6 of the Government Gazette no. 39650 of 3 February 2016 relating to foreign service fee payments. Section 2.6 (hereafter referred to as the foreign services reportable arrangement provision or this provision) was added due to significant amounts of money flowing out of South Africa as payment for management, legal, accounting and related fees. These service fees result in expenditure which can be considered for a tax deduction, thereby giving rise to potential base erosion. Several terms and phrases contained in the foreign services reportable arrangement provision are unclear, as they are neither defined in South African tax legislation nor has the SARS issued updated guidance or an Interpretation Note on the application of this provision. As a result, ambiguities regarding the scope of this provision exist. The main objective of this study was consequently to critically analyse the scope of this provision. The aim of the research was threefold. Firstly, the research study was aimed at critically analysing the meaning of the term ‘arrangement’ as used in the foreign services reportable arrangement provision. Secondly, it sought clarity on how the term ‘anticipated’ should be interpreted and applied in the context of the provision. The third aim of the research study related to how the R10 million monetary threshold, which indicates a reporting obligation of the foreign services arrangement, ought to be applied. To apply the R10 million monetary threshold, the research inquired into how an arrangement, denominated in a foreign currency should be translated to South African Rand. Moreover, it sought to determine whether a mixed supply contract, with a single composite price should be divided. Hence, consideration was also given to ascertain how the contract price of a mixed supply contract ought to be divided. Based on an analysis of available literature, a survey was created for dissemination among tax professionals. The results of the survey research are incorporated to develop a workable model that may assist taxpayers in the identification and application of a foreign services reportable arrangement. The literature suggested that the term ‘arrangement’ is defined in broad terms to include all forms of foreign service transactions entered into by the taxpayer. This finding was found to be congruent with the provision’s goal, which is to protect the South African tax base from extortion. It was found that the term ‘anticipated’ can be determined as “regarded as probable, expect or predict”. Hence, the study found that when determining whether it is ‘anticipated’ that the non-resident will be physically present in South Africa, one can consider certain indicators, such as the nature of the services, negotiations between parties, the service level agreement (SLA), and/or the history of similar services rendered in the past. To determine whether it is anticipated that the expenditure incurred or to be incurred, will exceed R10 million in aggregate, the study found that negotiations between the parties involved, the type and length of the services to be rendered by the non-resident service provider and/or the cost of similar services rendered in the past may assist. In addition, the study found that the foreign services arrangement denominated in a foreign currency should be translated to South African Rand (where the expenditure of the arrangement has not been actually incurred) at the spot rate on the date that it meets all of the criteria as set out in the foreign services reportable arrangement provision. It was also confirmed that the contract price of a mixed contract (specifically a supply and service contract) should be divided between the different components, where the most appropriate method would depend on the facts and circumstances of each case. The participant to the arrangement must, however, be able to demonstrate, on request, to the satisfaction of the SARS that the results of the apportionment calculation is fair and reasonable. The study was able to more clearly define the scope of the provision, which shall assist in affording taxpayers with greater clarity on the application of the foreign services reportable arrangement provision. AFRIKAANSE OPSOMMING: Die Organisasie vir Ekonomiese Samewerking en Ontwikkeling het verpligte openbaarmakingsreels (rapporteerbare onreelmatighede reels) geidentifiseer as een van vyftien areas om ‘BEPS’ te voorkom. Die Belasting Administrasie Wet no.28 van 2011 van Suid-Afrika bevat wetgewing rakende rapporteerbare onreelmatighede. Artikel 35 van die Belasting Administrasie Wet bepaal watter reelings rapporteerbaar is. Terwyl artikel 35 (1) spesifieke reelings bevat, bepaal artikel 35(2) dat enige reeling as ʼn rapporteerbare onreelmatigheid kwalifiseer indien die reeling deur die Kommissaris in 'n publieke kennisgewing gelys word. Die Kommissaris het ʼn addisionele rapporteerbare onreelmatigheid by wyse van ʼn publieke kennisgewing in artikel 2.6 van die Staatskoerant no. 39650 van 3 Februarie 2016 gelys. Hierdie rapporteerbare onreelmatigheid het betrekking tot betalings wat deur Suid-Afrikaanse inwoners (of nie-inwoners met ʼn permanente saak in Suid-Afrika) aan buitelandse diensverskaffers gemaak word. Die Kommissaris het artikel 2.6 van die Staatskoerant (hierna verwys as die buitelandse diensfooi rapporteerbare onreelmatigheid bepaling) bygevoeg as gevolg van beduidende bedrae geld wat uit Suid-Afrika vir betaling van bestuurs-, regs-, rekeningkundige- en ander verwante dienste vloei. Hierdie diensfooie lei tot uitgawes wat oorweeg kan word vir ʼn belasting aftrekking en wat dus aanleiding tot moontlike basis erosie kan gee. Verskeie terme en frases, soos vervat in die buitelandse diensfooi rapporteerbare onreelmatigheid bepaling, is nie in Suid-Afrikaanse belastingwetgewing omskryf nie. Die Suid-Afrikaanse Inkomste Diens (SAID) het ook geen opgedateerde Interpretasie Nota of gids aangaande die toepassing van hierdie bepaling uitgereik nie. Dit kan daarvolgens tot onsekerhede rakende die omvang van die bepaling lei. Gevolglik is die primere doel van die studie om die omvang van die buitelandse diensfooi rapporteerbare onreelmatigheid bepaling krities te analiseer. Die doel van die navorsing was drievoudig. Eerstens was die studie daarop gemik om die betekenis van die term ‘reeling’, soos vervat in die buitelandse diensfooi rapporteerbare onreelmatigheid bepaling, krities te analiseer. Tweedens was oorweging geskenk om te bepaal hoe die term ‘verwag’ geinterpreteer en toegepas moet word in die konteks van die buitelandse diensfooi rapporteerbare onreelmatigheid bepaling. Die derde doelwit van die navorsingstudie het betrekking op hoe die R10 miljoen monetere drempel, soos vervat in die buitelandse diensfooi rapporteerbare onreelmatigheid bepaling, toegepas moet word. Hierdie doel was drievoudig. Eerstens is navorsing gedoen om te bepaal wanneer en hoe ʼn reeling wat in buitelandse valuta gedenomineer is, na Suid-Afrikaanse Rand omgeskakel moet word. Tweedens is daar ondersoek ingestel om te bepaal of ʼn gemengde kontrak, spesifiek ʼn aanbod en dienskontrak, met ʼn enkele saamgestelde prys, verdeel moet word. Laastens was daar vasgestel hoe die saamgestelde prys van ʼn gemengde kontrak verdeel moet word. Op grond van 'n analise van beskikbare literatuur is 'n opname vir die verspreiding onder belastingkundiges geskep. Die resultate van die opname was geinkorporeer om ʼn werkbare model te ontwikkel wat belasting betalers kan help met die identifisering en toepassing van ʼn buitelandse diensfooi reeling. Daar was vasgestel dat die term ‘reeling’ in bree trekke gedefinieer moet word om alle vorme van buitelandse diensfooi transaksies in te sluit. Hierdie bevinding stem ooreen met die bepaling se doelwit, naamlik om die Suid-Afrikaanse belastingbasis teen moontlike basis erosie te beskerm. Daar was vasgestel dat die term ‘verwag’ gedefinieer kan word as “waarskynlik of voorspel”. Daar was beslis dat daar na sekere faktore gekyk kan word om vas te stel of daar ‘verwag’ gaan word dat die nie-inwoner fisies in Suid-Afrika teenwoordig gaan wees. Hierdie faktore sluit die aard van die dienste, onderhandelinge tussen partye, die diensvlakooreenkoms en/of die geskiedenis van soortgelyk dienste wat in die verlede gelewer is, in. Die studie het verder vasgestel dat die onderhandelinge tussen die betrokke partye, die tipe en lengte van die dienste wat deur die nie-inwoner gelewer gaan word; en/of die koste van soortgelyke dienste wat in die verlede gelewer was, kan help om te bepaal of daar ‘verwag’ gaan word dat die uitgawes van die reelings die R10 miljoen drempel gaan oorskry. Daar was verder bepaal dat ʼn buitelandse diensfooi reeling wat in ʼn buitelandse geldeenheid gedenomineer is, na Suid-Afrikaanse Rand teen die sigkoers omgeskakel moet word op die datum wat daar aan al die vereistes, soos uiteengesit in die buitelandse diensfooi rapporteerbare onreelmatigheid bepaling, voldoen. Dit is van toepassing waar die uitgawe van die reeling nog nie werklik aangegaan is nie. Daar was vasgestel dat die saamgestelde prys van ʼn gemengde kontrak (spesifiek ʼn aanbod en dienskontrak) verdeel moet word tussen die verskillende komponente en dat die geskikste metode van die feite en omstandighede van elke spesifieke geval sal afhang. Die deelnemer aan die reeling moet egter, op versoek en tot bevrediging van die SAID kan demonstreer dat die uitslag van die verdelingsberekeninge redelik is. Hierdie navorsingstudie het die omvang van die buitelandse diensfooi rapporteerbare onreelmatigheid bepaling duideliker omskryf wat daarteenoor die belastingbetalers sal help om die bepaling toe te pas. Masters 2019-08-19T07:27:21Z 2019-12-11T06:42:17Z 2023-01-04T03:00:14Z 2019-12 Thesis http://hdl.handle.net/10019.1/106995 en_ZA Stellenbosch University 72 pages ; illustrations application/pdf Stellenbosch : Stellenbosch University |
| spellingShingle | Taxation -- Law and legislation -- South Africa Tax administration and procedure -- South Africa Taxation -- South Africa UCTD Oosthuizen, Marlene A critical analysis of the scope of the foreign services reportable arrangement provision of the Tax Administration Act of South Africa |
| title | A critical analysis of the scope of the foreign services reportable arrangement provision of the Tax Administration Act of South Africa |
| title_full | A critical analysis of the scope of the foreign services reportable arrangement provision of the Tax Administration Act of South Africa |
| title_fullStr | A critical analysis of the scope of the foreign services reportable arrangement provision of the Tax Administration Act of South Africa |
| title_full_unstemmed | A critical analysis of the scope of the foreign services reportable arrangement provision of the Tax Administration Act of South Africa |
| title_short | A critical analysis of the scope of the foreign services reportable arrangement provision of the Tax Administration Act of South Africa |
| title_sort | critical analysis of the scope of the foreign services reportable arrangement provision of the tax administration act of south africa |
| topic | Taxation -- Law and legislation -- South Africa Tax administration and procedure -- South Africa Taxation -- South Africa UCTD |
| url | http://hdl.handle.net/10019.1/106995 |
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