PORTFOLIO

Business Operations in South Africa (Portfolio 7350)

Tax Management Portfolio, Business Operations in South Africa, contains information enabling foreign businesses to determine the best method of conducting their operations in South Africa from both the tax and general legal points of view.

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DESCRIPTION

This Portfolio analyzes in detail the statutory and procedural framework of South Africa income taxation as applied to individuals and corporations. This analysis also includes many of the other legal details vital to the organization of a South African company. In addition to a detailed explanation of the South African system of income taxation, the Portfolio discusses the value added tax and the estate and gift tax. The Detailed Analysis analyzes the practical problems that confront foreign businesses operating in South Africa. A guide to the Detailed Analysis is provided by a Table of Contents.
Among the Worksheets in the Portfolio is the text of the South African income tax treaty with the United States. A complete list of the countries with which South Africa has concluded tax treaties is shown in the Table of Worksheets.


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AUTHORS

Business Operations in South Africa was authored by the following experts.
PROFESSOR JENNIFER ROELEVELD
Professor Jennifer Roeleveld, B.Compt (Hon)(SA), B.Com (Honours) (Taxation), LLM University of Cape Town; CA(SA), member of the South African Institute of Chartered Accountants (SAICA); member of the International Fiscal Association. Executive board member of the South African Fiscal Association; member of the National Tax Committee of SAICA and Integritax; head of taxation, Faculty of Commerce, University of Cape Town and registered tax practitioner.

TABLE OF CONTENTS

Detailed Analysis

I. South Africa - The Country, Its People and Economy

Introductory Material

A. HIV/AIDS

B. The Economy

C. Investment

D. Geography

E. Population

F. Law

G. International Links

II. Operating a Business in South Africa

A. Foreign Investment Regulation

1. Opportunities

2. Incentives

3. Restrictions

B. Currency and Exchange Controls

C. Trade and Commerce Regulation

1. Imports and Exports

a. Licenses and Exports

b. Customs Duties and Other Taxes

c. Documentation

2. General Regulation of Business

a. Monopolies

b. Mergers

c. Restrictive Trade Practices

(1) Horizontal Restrictive Trade Practices

(2) Vertical Restrictive Trade Practices

d. Price Controls

e. Securities Regulation

3. Licensing and Franchising in South Africa

a. Patents

b. Trademarks and Trade Names

c. Registered Designs

d. Copyright

e. Know-How

f. Licensing

g. Franchising

D. Immigration Regulations

E. Labor Relations

1. Labour Relations Act

2. Basic Conditions of Employment Act

3. Employment Equity Act

4. Skills Development Levies Act

F. Financing the Business

G. Black Economic Empowerment

H. Corporate Governance

III. Forms of Doing Business in South Africa

A. Principal Business Entities

1. Sole Proprietorship

2. Joint Stock Corporation

3. Partnership

4. Branch of a Foreign Corporation

5. Other Entities

B. Companies

1. Formation

a. Purpose Clause

b. Corporate Name

c. Incorporators/Shareholders

d. Articles of Incorporation

e. Capital Stock/Shares

f. Incorporation Procedure

g. Costs of Incorporation

2. Operation

a. License

b. Amendment of Articles

c. Increases and Reduction of Capital Stock/Shares

d. Acquisition of Own Shares

e. Corporate Officers

f. Shareholders' Meetings

g. Directors' Meetings

h. Books and Records

i. Financial Statements

j. Dividends and Other Distributions

k. Reserves

3. Statutory Merger

4. Dissolution

5. Liquidation

6. Reorganization

C. Other Group Entities

1. Close Corporations

2. Section 21 Company

3. Section 53 Company

D. Partnership

1. Formation

2. Administration

3. Dissolution

E. Branch of a Foreign Corporation

1. Registration

2. Liability

3. Books and Records

F. Other Business Entities

IV. Principal Taxes

A. Income Tax

B. Estate and Gift Tax

C. Value Added Tax

D. Taxation of Capital Gains

1. In General

2. Nonresidents

3. Withholding Tax on Nonresidents

E. Payroll Tax

1. Pay-As-You-Earn

2. Social Security

F. Local Taxes

G. Other Taxes

V. Taxation of Domestic Corporations

A. Domestic Corporation

B. Corporate Income Tax

1. Residence Basis

2. Financial Reporting

a. Reported Profit and Taxable Income

b. Accounting Periods

c. Financial Reporting Methods

d. Inventories

e. Reserves

f. Deferrals

3. Calculation of Taxable Income

a. General

b. Capital Gains

c. Dividend Income

d. Income from Foreign Sources

e. Other Inclusions in Gross Income

f. Exclusions from Income

4. Business Expenses

a. General

b. Group Expenditure

c. Employment Expenditure

d. Interest and Royalties

e. Taxes

f. Depreciation and Amortization

g. Obsolete Equipment

h. Charitable Contributions

i. Capital Losses

j. Casualty Losses

k. Reserve Accounts

l. Bad and Doubtful Debts

m. Inventory Write-downs

n. Rents

o. Salaries and Wages

5. Capital Expenditure

6. Loss Carryovers and Carrybacks

7. Tax Credits

a. Foreign Tax Credits

b. Investment Tax Credits

c. Other Credits

8. Tax Rates and Calculation of Taxable Income

9. Assessment and Filing

10. Consolidated Returns

11. Reorganizations

a. Change of Legal Form

b. Mergers and Spin-offs

c. Cross-border Transactions

d. Liquidation

12. Advance Rulings

C. Other Taxes

1. Dividend Tax

2. Capital Investment Tax

3. Value Added Tax

4. Trade Tax

5. Real Estate Tax

6. Local Taxes

7. Miscellaneous Other Taxes

VI. Taxation of Foreign Corporations

A. What Is a Foreign Corporation?

B. Determination of Taxable Income

C. Method of Taxation

VII. Taxation of a Branch

A. Determination of Taxable Income

B. Method of Taxation

C. Subsidiary vs. Branch

VIII. Taxation of Partnerships

IX. Taxation of Other Business Entities

X. Taxation of Individuals - Residents

A. Scope of Taxation

B. Residence

C. Determination of Gross Income

D. Allowances, Deductions and Credits

E. Rates and Calculation of Taxable Income

F. Assessment and Filing

G. Tax Amnesty

XI. Taxation of Nonresident Aliens

A. General

B. Business Income

C. Investment Income

D. Capital Gains

E. Methods of Taxation

XII. Estate/Inheritance/Transfer and Gift Tax

A. Estate Duty and Transfers at Death

1. Liable Persons

2. Territorial Scope of the Estate Duty

3. Taxable Base for Estate Duty

a. Taxable Property

b. Exemptions

c. Deductible Liabilities

d. Personal Allowances

4. Tax Rates

B. Gift Tax

1. Liable Persons

2. Territorial Scope of the Gift Tax

3. Taxable Base

a. Taxable Property

b. Exempt Transfers

c. Deductible Liabilities

d. Personal Allowances

4. Tax Rates

XIII. Intercompany Pricing

A. Scope of the Intercompany Pricing Provision

B. Determination of Arm's-Length Price

C. Competent Authority

XIV. Special Provisions Relating to Multinational Corporations

A. Foreign Family Foundations

B. Tax Haven Operations

C. Subpart F-type Provisions

D. International Headquarter Companies

XV. Avoidance of Double Taxation

A. Foreign Tax Credits

B. Tax Treaties

1. Taxation of Business Income

a. Permanent Establishment

b. Industrial or Commercial Profits

c. Planning to Minimize Taxation of Business Income under the Treaty

2. Taxation of Investment Income

a. What Is Investment Income?

b. Withholding Rates

C. Tax Treaties with the United States

1. Income Tax Treaty

2. Estate and Gift Tax Treaty

3. Other


WORKING PAPERS

Working Papers

Table of Worksheets

Worksheet 1 Model Articles of Incorporation for a South African Company (for Public and Private Companies)

Worksheet 2 Corporate Income Tax Return for Resident - Form IT 14

Worksheet 3 Principles for the Allocation of Income Related to Transfer Pricing (SARS Practice Note 2 of May 14, 1996, together with Practice Note 7 of August 5, 1999)

Worksheet 4 Notification of Performance of Foreign Entertainer or Sportsperson - Form NR 01

Worksheet 5 Declaration by Purchaser for the Sale of Immovable Property in South Africa by a Nonresident - Form NR 02

Worksheet 6 Application for a Tax Directive by Nonresident Seller of Immovable Property in South Africa - Form NR 03

Worksheet 7 Request for Binding Effect in Respect of Written Statements Issued by the Commissioner Prior to Oct. 1, 2006 - Section 76I of the ITA, 1962 - Form ATR 1

Worksheet 8 Value Added Tax Return - Form VAT 201

Worksheet 9 List of Comprehensive Double Taxation Agreements and Related Protocols Signed by South Africa as of June 1, 2008

Worksheet 10 1997 South Africa-United States Income Tax Treaty

Worksheet 11 1947 South Africa-United States Estate Tax Treaty

Worksheet 12 Application for Relief of Income Tax in Terms of the Double Taxation Convention with the United Kingdom - Form IT 24

Worksheet 13 South African/Swiss Income Tax Convention - Application for a Refund Form IT 25

Worksheet 14 Application for Refund of or Relief from South African Tax in Terms of the Double Taxation Convention with the Netherlands - Form IT 26

Worksheet 15 Application for Refund of or Relief from South African Tax in Terms of the Double Taxation Convention with the Federal Republic of Germany - Form IT 27

Bibliography

OFFICIAL

Cases

UNOFFICIAL

English Language Treatises and Periodicals

Additional References