Demystifying the value-added tax effects of foreign branches in South Africa: The Wenco case

by | Mar 10, 2024 | SAMLJ, SAMLJ V35 I2

Demystifying the value-added tax effects of foreign branches in South Africa: The Wenco case

Author: Faeeza Soni

ISSN: 1996-2185
Affiliations: CA (SA), Senior Lecturer, School of Accountancy, University of the Witwatersrand
Source: South African Mercantile Law Journal, Volume 35 Issue 2, 2023, p. 123 – 137
https://doi.org/10.47348/SAMLJ/v35/i2a1

Abstract

The application of South African value-added tax (VAT) principles to transactions involving foreign branches is challenging. A recent judgment made in Wenco International Mining Systems Ltd & another v CSARS (59922/2019) [2021] ZAGPPHC 70 brought the uncertain applications of the VAT Act to the forefront. An awareness of the uncertainties could guide policymakers to improve the legislation and assist tax professionals who advise their clients. This research adopts a qualitative approach and traditional legal doctrinal methodology. It proposes amendments to the legislation. I question the application of s 8(9) of the VAT Act because proviso (ii) of the definition of ‘enterprise’ separates the activities of foreign branch or foreign main business from those of the vendor. It is unclear if a foreign branch or foreign main business is treated as a separate ‘person’ in the VAT Act, with all the accompanying powers of another ‘person’. The proviso is also unclear about whether it applies only if the foreign branch or foreign main business makes supplies ‘for consideration’. It is unclear whether s 11(1)(i) and 11(2)(o) should apply, as opposed to s 11(1)(a) and 11(2)(l).

A comparative assessment of the treatment of unincorporated business entities in financial distress in South Africa

by | Mar 10, 2024 | SAMLJ, SAMLJ V35 I2

A comparative assessment of the treatment of unincorporated business entities in financial distress in South Africa

Authors: Kudzai Mpofu & Hermanus Johannes Moolman

ISSN: 1996-2185
Affiliations: Senior Lecturer, School of Law, Walter Sisulu University; Senior Lecturer, Department of Mercantile Law, University of the Free State
Source: South African Mercantile Law Journal, Volume 35 Issue 2, 2023, p. 138 – 161
https://doi.org/10.47348/SAMLJ/v35/i2a2

Abstract

The main objective of this paper is to examine how business rescue schemes in South Africa facilitate the rescue of sole proprietorships and partnerships (unincorporated business entities) in financial distress. It is premised on the view that when a business is in financial distress, the lawmaker should provide some form of business rescue scheme accessible to all debtors regardless of their legal status, size, or commercial activities. The business rescue process has arguably received the most scholarly attention in recent times, yet, little or no attention is paid to the fate of financially distressed unincorporated entities in South Africa. The article sheds light on the role and significance of small and medium enterprises in promoting economic growth and the need to promulgate a debtor-friendly rescue regime. Through a comparative assessment, different business rescue schemes available to unincorporated business entities in South Africa, the United States of America and the United Kingdom are explored. It is observed that sole proprietorships and partnerships, which account for most unincorporated business entities in South Africa, are not eligible for business rescue or debt relief under the existing legislation. The rationale behind excluding unincorporated business entities from business rescue legislation seems to be that they lack legal personality. However, in other jurisdictions, the legislature has promulgated special business rescue procedures customised to match the unique personality of unincorporated business entities. Therefore, the South African legislature should consider promulgating a business rescue model for unincorporated business entities separate from the current Chapter 6 business rescue. Chapter 13 of the USA Bankruptcy Code provides an ideal rescue scheme for sole proprietors, while the UK insolvent partnership administration provides lessons on how to modify a business rescue scheme applicable to companies to accommodate partnerships in financial distress. The article contributes to the development of business rescue legislation that is targeted at relieving small businesses in financial distress.

Hiding behind the veil: On whom does liability for discriminatory practices by recruitment agencies fall

by | Mar 10, 2024 | SAMLJ, SAMLJ V35 I2

Hiding behind the veil: On whom does liability for discriminatory practices by recruitment agencies fall

Authors: Davy Rammila & Ernest Manamela

ISSN: 1996-2185
Affiliations: Senior Lecturer, University of South Africa; Professor, University of South Africa
Source: South African Mercantile Law Journal, Volume 35 Issue 2, 2023, p. 162 – 189
https://doi.org/10.47348/SAMLJ/v35/i2a3

Abstract

The Employment Equity Act 55 of 1998 (EEA) provides that applicants for employment are employees for purposes of its unfair discrimination provisions. The EEA is, however, silent in respect of applicants who seek employment through recruitment agencies. In this article, we argue that this silence has the potential to handicap these applicants and deprive them of the statutory procedure they would have enjoyed had they otherwise applied directly to employers. We further contend that the relationship between recruitment agencies and applicants for employment is not capable of being construed to fall within the provisions of s 4 of the EEA. We also posit that it would be unreasonable to expect these applicants to follow an onerous process under the Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000; this, despite there being a clear employment nexus informing the foundation and execution of the juristic act between the respective parties. Instead, we propose that recruitment agencies are agents in the ordinary sense, that their engagements with applicants enjoy prior authorisation from the potential employer, and that any consequences of such engagements are attributable to the potential employer.

Translation of transfer pricing adjustments in South Africa: A seemingly insignificant detail

by | Mar 10, 2024 | SAMLJ, SAMLJ V35 I2

Translation of transfer pricing adjustments in South Africa: A seemingly insignificant detail

Author: Michelle van Heerden

ISSN: 1996-2185
Affiliations: Senior Lecturer, Department of Accountancy, University of Johannesburg
Source: South African Mercantile Law Journal, Volume 35 Issue 2, 2023, p. 190 – 212
https://doi.org/10.47348/SAMLJ/v35/i2a4

Abstract

The South African rand is one of the most volatile currencies in the world — at times the most volatile. To this is added a further area of uncertainty, namely the tax implications relating to transfer pricing. Section 31 of the South African Income Tax Act does not have any specific foreign currency translation rules. The general rule in s 25D of the Income Tax Act is therefore applicable, which provides for the translation of foreign currency to rand using the spot rate. However, given the nature of transfer pricing transactions, it raises the question whether the spot rate is indeed appropriate. The purpose of the study was to investigate South Africa’s translation rules and to seek guidance from an international perspective. The research design was non-empirical, adopting an interpretative paradigm, together with a doctrinal research methodology. The conclusion of this study is that the translation rules concerning transfer pricing adjustments have seemingly been overlooked. The study recommends a legislative amendment of s 31 and proposes that transfer pricing adjustments are converted using the average rate of exchange for the year of assessment to which the adjustments relate, as such an amendment will lead to certainty, equity and convenience.

South African governance legal framework for corporate disclosures and reporting: Part 2—Mandatory financial disclosure and reporting

by | Mar 10, 2024 | SAMLJ, SAMLJ V35 I2

South African governance legal framework for corporate disclosures and reporting: Part 2—Mandatory financial disclosure and reporting

Author: Werner Schoeman

ISSN: 1996-2185
Affiliations: Lecturer, Mercantile and Labour Law Department, University of Limpopo
Source: South African Mercantile Law Journal, Volume 35 Issue 2, 2023, p. 213 – 231
https://doi.org/10.47348/SAMLJ/v35/i2a5

Abstract

In this second part of this article, I focus on the efficacy of the framework for mandatory financial disclosure and reporting. In particular, I investigate the governance of auditors within the corporate jurisprudence. Independence of auditors remains contentious in the light of the funding model of the regulator, functioning of audit committees and the connection between directors and companies.

Case Notes: Is the foreign business establishment lagging behind new business models? Commissioner for the South African Revenue Service v Coronation Investment Management SA (Pty) Ltd [2023] ZASCA 10

by | Mar 10, 2024 | SAMLJ, SAMLJ V35 I2, Uncategorized

Case Notes: Is the foreign business establishment lagging behind new business models? Commissioner for the South African Revenue Service v Coronation Investment Management SA (Pty) Ltd [2023] ZASCA 10

Author: Khodani Sengwane

ISSN: 1996-2185
Affiliations: Lecturer, University of Pretoria
Source: South African Mercantile Law Journal, Volume 35 Issue 2, 2023, p. 232 – 240
https://doi.org/10.47348/SAMLJ/v35/i2a6

Abstract

None