DOUBLE TAX TREATY BETWEEN SA AND MAURITIUS IS A CLOUDY ISSUE
January 2016 is set to see the new double tax treaty between Mauritius and South Africa, which has now been ratified, come into place. Tax experts have predicted that changes to the treaty, including withholding taxes for interest (10%) and royalties (5%), may be to the detriment of cross-border investment. The new treaty allows for the South African and Mauritian tax authorities to come to a mutual agreement when there is a dispute about the tax residence of a company, and about who has the first right to tax.
Such factors include:
where the headquarters are situated, where the accounting records are stored, where meetings of the entity’s board of directors or equivalent body are usually held, where the CEO and other senior executives usually carry out their activities. A mutual agreement procedure is unheard of in South Africa in order to determine residence status. In a case of a dispute, the accepted test of the place of effective management will determine the outcome and right to tax. A company that is effectively managed in South Africa is likely to continue to be regarded as South African tax resident under the new Mauritius treaty. However, until such time as the authorities have agreed, the company will not be able to rely on the treaty, and will be doubly taxed – in each of the countries.
Another concern is whether or not both authorities are able to resolve the issue timeously, and if not, the company contending may need to take the matter to court for resolution. Mauritius is a potential postern to Africa, due to their lack of stringent exchange controls and low tax rates. An investor may well consider Mauritius more favourably for investment than South Africa for these reasons. The mutual agreement procedure could lead to uncertainty to those corporations who have Mauritian companies in their groups, and may be a negative factor for investment in the future.
Resolution of such disputes may not be readily resolved, a further factor for consideration. Furthermore, if the tax authorities cannot agree, there seems to be no resolution for the situation. A cloudy issue indeed.
TAX SEASON 2015 FOR INDIVIDUALS
1 July 2015 is the start of the 2015 Tax Season for Individuals. During Tax Season, you need to submit an ITR12 (which is your Income Tax Return) so that SARS can calculate your tax on your income and the taxdeductible expenses for the assessment year (1 March 2014 – 28 February 2015), which may, in some cases, result in a refund.
The Tax Season runs from July to November every year. For provisional taxpayers who submit via eFiling, it runs until January of the next year.
The important dates are:
• 30 September 2015 – Manual/postal submissions
• 27 November 2015 – At a SARS branch (non-provisional)
• 27 November 2015 – eFiling (non-provisional)
• 29 January 2016 – Provisional taxpayers via eFiling
For further information see http://www.sars.gov.za/TaxTypes/PIT/Tax- Season/Pages/default.aspx. It is always advisable to consult a professional tax practitioner when dealing with you tax
affairs. Do not hesitate to contact our offices for advice in this regard.
CORPORATE GOVERNANCE AND THE SMALL BUSINESS
As SME owner, you may trade as a sole proprietor, in a partnership or as a director or member of a private company or a close corporation. Corporate governance has not been common in the small business realm. Yet, in today’s business and economic climate, the ideas surrounding corporate governance are becoming more widely applicable and useful, for both small business and the larger organisations. Whenever there is a form of structure, with mixed obligations to owners, staff, customers and other stakeholders, corporate governance begins to become relevant.
A well–developed corporate governance process within a business, no matter how small, can be described as:
- Adhering to accepted ethical standards
- Adhering to best practices, codes and guidelines, formal laws (such as labour law), and in particular, the regulations that specifically govern the entity’s industry
- Effective communication with stakeholders, for example using appropriate email addresses with multiple logins, and the allocation of responsibility for communication and confidentiality
- Leading from the front in terms of core values and role modelling
- Responsibility and accountability to stakeholders, reporting in a transparent manner
- Directing or “steering” the entity to achieve its strategic goals within the corporate governance framework
- Ensuring there are internal controls and processes for optimal functioning. Processes should be in a written manual/ training guide, which serves as an “insurance policy” if a key staff member leaves
- Strategic target setting informs the process by which staff are appointed and held accountable. Job descriptions should be aligned to this
- Financial management and controls, for example ensuring your work functions around debtors and creditors are separated
- Delegation and supervision within the accountability hierarchy, greatly reducing the need to micro manage
- Independent consultation regarding strategic decision making and accountability. Using independent consultants to assist with the heavy responsibility of crucial decisions that the small business owner has to make, especially in areas where the business owner lacks in expertise
- Risk management and control, ensuring that there are processes in place to identify, evaluate, educate, monitor and control all the risks associated with the effective functioning of the business, the ultimate aim being the achievement of its corporate goals, but within the context of sustainable outcomes
Small businesses are always growing, and where there is already a set of formalised policies and procedures in place, future growth implications can be eliminated, and the business owner will be primed legally and culturally to take the business to the next level.
Contact our offices, should you require assistance with implementing a corporate governance structure within your business.
A FEW INTERESTING FACTS ABOUT CC’S
It seems that load shedding is here to stay for a while – some say for at least another three to five years, resulting in decreased productivity and financial losses for business, especially small businesses. In the services industry, employees often sit around in the office, for three to four hours at a time, completely unproductive. Within the retail industry, the larger outlets do have back-up generators in place, allowing them to continue trading as usual, however the smaller traders often have to close-up shop, as generators are not cheap.
To compound the issue, although Eskom seems to have a planned schedule of load shedding notifications, but changes to the stages of load shedding are sent just a few hours before the event, or even during the event, leaving the employer at a loss in terms of planning ahead.
There are some steps that can be taken to alleviate the impact that load shedding has on your business:
- Where you are aware of a scheduled load shedding period, ensure that you have planned ahead, and can allocate work for the three to four hours where you can – work that does not require an electrical supply, such as filing, team building exercises, customer contact, and meetings.
- Install an Uninterruptible Power Supply (UPS) system, which works as both a backup battery for the computers, and regulates the amount of power it receives. Install power surge plugs, and where viable, a generator.
- Protect your data. If the business is computer based, ensure that back-ups are done regularly, and ensure that your data is kept safe.
- Take out insurance on your server and data, so that if your server crashes or your data is lost due to the power interruption, you will be covered.
- Ensure that you do not contravene the labour law when it comes to load shedding. In terms of South African labour and common law, an employer has a duty to pay remuneration to an employee if the employee is available to work despite his inability to work due to load shedding. Should an employer wish to treat the load shedding period as a lunch break, he has to remember that he has to pay employees for any lunch break in excess of 75 minutes (in terms of the Basic Conditions of Employment Act 75 of 1997 (“BCEA”)), unless the employee lives on the premises. Some industries have specific agreements in place (for example, the metal and engineering industries) relating to load shedding. Should the employer request that the employee returns to work after hours to make up for the time lost, the normal provisions relating to overtime provided for in the BCEA will apply. Employers and employees may, however, agree to changes in working hours or shift structures in order to alleviate the impact of load shedding, but this arrangement will need to be agreed upon between both parties, and written up in an employment contract.
These are just some areas that the business owner can look at to alleviate the impact of load shedding on their business. Should you require further assistance or information, please contact our offices.