Browsing by Author "Foster, Martie"

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    A critical analysis of the taxation of cross-border service fees in South Africa: Motivation for the reinstatement of the withholding tax on service fees
    (2018) Xulu, Mbali; Foster, Martie
    South Africa has seen a growth in cross-border services in the last decade. This comes as no surprise since, as early as 2010, the global service sector accounted for approximately 70% of the world’s Gross Domestic Product. Given the magnitude of the service sector, it is imperative that South Africa implements laws that seek to tax service fees in an efficient, effective and equitable manner. South Africa’s Minister of Finance and the Davis Tax Committee are amongst the key government stakeholders who have expressed concern regarding the threat that South Africa faces to the erosion of its tax base as a result of outward cross-border service fees. The tax base erosion typically occurs when a non-resident derives a service fee from South Africa which is not taxed in South Africa, whilst the resident payor is allowed to claim a deduction. As a means of addressing the above threat, South Africa introduced the withholding tax on service fees regime. This withholding tax was intended to apply on service fees derived by a non-resident from a source in South Africa. However, as the application of this withholding tax was subject to the application of the relevant double tax treaties, South Africa’s right to impose this withholding tax was in most cases limited. The withholding tax on service fees regime was therefore repealed. With the withdrawal of the withholding tax on service fees, South Africa can only tax service fees to the extent that they are derived by a non-resident from a source in South Africa and attributable to the non-resident’s permanent establishment situated in South Africa. In terms of the Organisation for Economic Co-operation and Development Model Tax Convention ('OECD MTC’), a permanent establishment is defined as essentially comprising of a fixed place of business whilst, under the United Nations Model Tax Convention9 ('UN MTC’), this definition is extended to include the provision of services by a non-resident who is at least present in South Africa for more than 183 days in any 12-month period rendering services in connection with the same or connected project. Globalisation and electronic commerce has made the remote provision of services possible. It has therefore become relatively easy for a non-resident business to render services in South Africa without the presence of a fixed place of business or without being present in South Africa for substantial periods and thereby avoid being subjected to income tax in South Africa on the service income derived. In light of the above, this dissertation argues that the permanent establishment threshold is no longer appropriate for the taxation of services. Specifically, it is contended that the permanent establishment threshold is excessively high and as a result contributes towards the erosion of the source state’s tax base. Various options for addressing this concern are then explored and a recommendation is made that South Africa should negotiate for the inclusion of the technical fee article in its double tax treaties and re-instate the withholding tax on service fees regime.
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    An evaluation of the recourse available to taxpayers where SARS does not adhere to the correct tax administrative procedures
    (2018) Herbert, Lauren Stacey; Foster, Martie
    There is a common perception among South African taxpayers and tax professionals that the South African Revenue Service (“SARS”) is “draconian” in its administrative actions and interactions with taxpayers and tax professionals, which infringes on taxpayers’ constitutional right to just administrative action. This dissertation aims to make taxpayers and tax professionals more aware of their right to just administrative action which entitles taxpayers to administrative action and interactions with SARS that are lawful, reasonable and procedurally fair. Furthermore, this dissertation investigates how taxpayers and tax professionals may go about defending such administrative rights, should SARS infringe upon it without just cause. A comparison is made between the recourse available to South African taxpayers and tax professionals who experience tax administrative disputes against SARS, against the recourse provided in a selection of foreign jurisdictions. This comparison is performed with a view to determine possible areas of improvement to the recourse provided in South Africa, as it pertains to administrative disputes against SARS. Recommendations to introduce a Taxpayers Bill of Rights or revise and improve on the current SARS Service Charter, is considered in Chapter 5 of this dissertation. This dissertation shows that while the introduction of the Tax Ombud in South Africa certainly enriched taxpayers’ constitutional right to just administrative action, the Tax Ombud’s limited authority, mandate and the non-binding effect of its recommendations on SARS, limits the effectiveness of the role of the Tax Ombud in South Africa. Recommendations to further the Tax Ombud’s authority and mandate are considered in Chapter 5 of this dissertation.
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    Withholding tax on services : a square peg in a round hole? : an analysis of intra-group cross border services in the context of source, related transfer pricing principles and witholding taxes
    (2014) Foster, Martie; Roeleveld, Jennifer
    Various countries have extended the levying of withholding taxes beyond the traditional withholding taxes on royalties, dividends and interest. Withholding taxes are now often levied on services such as management services, professional services, technical services, financial services, insurance services, fees, commission, advisory services and digital services, amongst others. The purpose of this paper is to consider the impact of these withholding taxes on certain services, in particularly intra-group cross border services in the context of source and related transfer pricing principles.