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What are the VAT implications of leasehold improvements under section 8(29) and section 18C of the Value-Added Tax Act, and how does the Taxation Laws Amendment Bill (TLAB) affect a lessor that is not a VAT vendor? That is the question this episode of Tax Break answers. Pieter starts with the commercial position: the lessee incurs the cost and the lessor benefits as owner of the property. He contrasts the familiar income tax questions, namely deductibility for the lessee and whether the lessor is taxed on the value of the improvements, with the VAT questions. For the lessee, he distinguishes improvements supplied to the lessor for a charge, where the normal output tax and input tax tests apply, from the more common case of no charge. There section 8(29) deems the lessee to make a supply in the course of an enterprise for no consideration. Pieter explains the effect on the lessee’s input tax claim, the time of the deemed supply and the exception to the rule. For the lessor, the policy is to restore the VAT position to what it would have been had the lessor made the improvements itself. He works through the lessor adjustment in section 18C, introduced in 2017: the link to section 17(2), the tax fraction of 15/115, the agreed amount or open market value and the non-taxable use percentage. The new part concerns a lessor that is not a VAT vendor, such as one too small to register or a school making only exempt supplies. Pieter covers what the amendment requires of a non-vendor lessor from 1 April 2027 within 30 days of completion of the improvements, whether this is really a reverse charge, the effect on the base cost of the property and the implications for lease agreements. 00:10 Introduction: VAT on leasehold improvements and the Taxation Laws Amendment Bill02:40 Commercial position and income tax questions for lessee and lessor03:50 Lessee: improvements for a charge, section 8(29) deemed supply and input tax05:30 Lessor: section 18C adjustment, section 17(2) and non-taxable use07:20 Amendment: lessor that is not a VAT vendor, 30 days from completion, 1 April 202709:00 Base cost of the property and take-home points You are welcome to join my weekly mailing list for articles about the same topic as the podcast at: https://tax.pvdz.co.za/#signup If you work with South African tax as an auditor, accountant, lawyer, wealth planner or corporate finance professional, this episode is for you. Contact me at [email protected] for feedback or tax advice. More resources at https://tax.pvdz.co.za. Keywords: VAT on leasehold improvements, leasehold improvements, section 8(29) VAT Act, section 18C, section 17(2), deemed supply, lessor adjustment, non-vendor lessor, input tax, Taxation Laws Amendment Bill, TLAB, South African tax

Does a proper IRP6 estimate protect you from the provisional tax underestimation penalty if you do not pay it? The Tax Administration Laws Amendment Bill (TALAB) published on 21 October changes this. That is the question this episode of Tax Break answers. Pieter starts with how the two-payment system works and why the first payment carries only a late payment penalty rather than an underestimation penalty, even though SARS can still ask for supporting calculations through a paragraph 19(3) request. He then turns to the second payment, where the underestimation penalty applies and where the threshold that determines the penalty basis moves from R1 million to R1.8 million from 1 March 2026. The main part of the episode deals with the new deeming rule. Under the previous rules, a taxpayer whose estimate fell within the acceptable range, for example more than 80% of actual taxable income above the threshold, faced only the 10% late payment penalty if the amount on the IRP6 was not paid. Pieter works through what happens under the amendment when the full amount is not paid within one month after the due date, how the last estimate is then determined, and how this interacts with the existing relief against a double penalty. He also considers the amended remission rule, which limits when the Commissioner may remit a penalty levied on this basis, and whether this one is likely to join the sticky percentage-based penalties discussed in an earlier episode. 00:15 Introduction: provisional tax change in the Tax Administration Laws Amendment Bill1:55 First provisional payment, late payment penalty and paragraph 19(3) requests03:00 Second payment, underestimation penalty and the R1.8 million threshold from 1 March 20264:35 New deeming rule: IRP6 estimate not paid within one month after the due date07:10 Relief against double penalties and the amended remission rule You are welcome to join my weekly mailing list for articles about the same topic as the podcast at: https://tax.pvdz.co.za/#signup If you work with South African tax as an auditor, accountant, lawyer, wealth planner or corporate finance professional, this episode is for you. Contact me at [email protected] for feedback or tax advice. More resources at https://tax.pvdz.co.za. Keywords: provisional tax, underestimation penalty, IRP6, Tax Administration Laws Amendment Bill, TALAB, late payment penalty, paragraph 19(3), R1.8 million threshold, penalty remission, second provisional tax payment, South African tax

Does transfer pricing in South Africa still only apply to international transactions? The Taxation Laws Amendment Bill published on 21 October extends section 31 of the Income Tax Act to a domestic context for the first time, and this episode looks at where, how and why. The episode starts with the transfer pricing concept itself: why a high-taxed and a low-taxed entity in the same economic unit have an incentive to shift profits, and the two ways mispricing typically achieves that, through undercharging for supplies or overcharging for deductible items such as service fees, interest and management fees. It then turns to the specific domestic case: a qualifying company in a special economic zone (SEZ) taxed at 15%. The episode explains the current 20% connected person test that disqualifies an SEZ company from the concession, why that rule limits the incentive’s effectiveness, and what changes for years of assessment commencing on or after 1 January 2027 when section 31 applies to transactions between a qualifying company and a connected resident instead. From there the episode works through what applying section 31 means in practice: the arm’s length adjustment for the party deriving the tax benefit, the new corresponding adjustment in section 31(2A) to prevent double taxation, secondary adjustments and deemed dividends, and the documentation and burden of proof position for taxpayers outside the public notice. Finally, the episode asks whether domestic transfer pricing will spread beyond SEZs, and considers existing mechanisms that already address mispricing between connected persons: section 11(a), the PBO approval rules and the general anti-avoidance rule (GAAR). Timestamps00:15 Introduction: transfer pricing moves into a domestic context02:00 The transfer pricing concept and the two forms of mispricing04:50 SEZ qualifying companies, the 15% rate and the 20% connected person test05:30 Section 31 applied to SEZ transactions from 1 January 202707:00 The corresponding adjustment in section 31(2A) and secondary adjustments09:00 Transfer pricing documentation and burden of proof10:45 Is more domestic transfer pricing coming?13:00 Key takeaways You are welcome to join my weekly mailing list for articles about the same topic as the podcast at: https://tax.pvdz.co.za/#signup If you work with South African tax as an auditor, accountant, lawyer, wealth planner or corporate finance professional, this episode is for you. Contact me at [email protected] for feedback or tax advice. More resources at https://tax.pvdz.co.za. Keywords: domestic transfer pricing, section 31 Income Tax Act, special economic zone, SEZ qualifying company, Taxation Laws Amendment Bill, arm’s length, corresponding adjustment, section 31(2A), connected persons, section 11(a), GAAR, South African tax

Can one group company deduct the operating costs of another under section 11(a) of the Income Tax Act? This episode examines a tax court judgment on a South African subsidiary of a US-listed group that paid the care and maintenance costs of a related chrome mine, Clarice Mining, and claimed those costs as a deduction. The episode sets out the facts: the chrome offtake agreement, the plant the taxpayer built on the mine's premises, and the clause that made the taxpayer liable for the mine's operating costs if it went into care and maintenance, as happened in 2018 to 2020. Two categories of expense were in dispute: production costs paid before care and maintenance and set off against the chrome price, with the unrecovered portion claimed as a bad debt, and the care and maintenance costs, for which there was no right of recovery. Pieter works through the section 11(a) requirements. On "actually incurred", he asks whose liability was being deducted when the invoices were issued to the mine, and whether the court dealt with the taxpayer's own obligation under the offtake agreement or only with paying another company's expenses. On the production of income requirement, he considers from whose perspective the link to income must be tested, whether paying to secure a future chrome supply points to expenditure of a capital nature, and where section 23H fits. On the trade requirement, he examines the court's distinction between current and future trading activities. He closes with the court's view of care and maintenance expenditure as unredeemed capital expenditure under section 36, the finding of an impermissible avoidance arrangement, the SARS submission on dualism, and what a clear recharge agreement should do to manage this risk in a group. 00:15 Group expenses, recharges and who claims the section 11(a) deduction02:00 Facts: US-listed group, Clarice Mining, chrome offtake agreement and care and maintenance04:30 Two categories of expense: production costs, bad debts and care and maintenance costs06:45 Actually incurred: invoices in another company's name and the two obligations08:30 Production of income: payer's perspective, capital nature and section 23H10:45 Trade requirement: own trade, current versus future trading activities12:00 Care and maintenance, section 36 unredeemed capex, impermissible avoidance and dualism15:50 Recharge agreements and take-home points for group expenses You are welcome to join my weekly mailing list for articles about the same topic as the podcast at: https://tax.pvdz.co.za/#signup If you work with South African tax as an auditor, accountant, lawyer, wealth planner or corporate finance professional, this episode is for you. Contact me at [email protected] for feedback or tax advice. More resources at https://tax.pvdz.co.za. Keywords: section 11(a) deduction, Income Tax Act, group expenses, recharge agreement, actually incurred, production of income, capital nature, care and maintenance, section 23H, impermissible avoidance arrangement, tax court, South African tax

Can a 10% late payment penalty be remitted, and on what grounds? This episode of Tax Break works through the percentage-based penalties imposed under section 213 of the Tax Administration Act (TAA) and the permutations for requesting remittance. Pieter starts with what these penalties are and where they sit in Chapter 15 of the TAA, alongside fixed amount penalties. He traces the provisions in other tax Acts that give rise to them: section 39 of the VAT Act for late VAT payments, paragraph 6 of the Fourth Schedule to the Income Tax Act for late employees' tax and provisional tax, the deeming of underestimation penalties as percentage-based penalties, and section 6A of the Securities Transfer Tax Administration Act for late STT. The episode then moves to remittance under section 215 and the three permutations in the legislation. The first requires reasonable grounds, remedied non-compliance and a first incidence. Pieter explains why the definition of first incidence trips taxpayers up: the 36-month look-back, whether a prior Chapter 15 penalty of a different kind counts, what happens if the earlier penalty was remitted under section 218, and whether having used the first incidence relief before matters. The second permutation applies to amounts under R2 000. The third is exceptional circumstances under section 218, where Pieter sets out the list in section 218(2) and the threshold that the circumstance must have rendered the taxpayer incapable of complying. He also raises a possible fourth ground found in other Acts, using the underestimation penalty as the example. Pieter draws on his own experience of why clients describe these penalties as sticky and closes with three take-home points for anyone requesting remittance. 00:15 Introduction02:50 Section 213 TAA and Chapter 15 administrative penalties04:00 Where the penalties arise: VAT Act section 39, Fourth Schedule paragraph 6, STT Administration Act section 6A04:55 Remittance under section 215 TAA05:40 Permutation one: reasonable grounds and the first incidence definition07:50 Permutation two: penalties under R2 00008:30 Permutation three: exceptional circumstances under section 21810:30 A possible fourth ground: the underestimation penalty11:00 Take-home points If you work with South African tax as an auditor, accountant, lawyer, wealth planner or corporate finance professional, this episode is for you. Contact me at [email protected] for feedback or tax advice. More resources at https://tax.pvdz.co.za. Keywords: percentage-based penalties, section 213 Tax Administration Act, remittance of penalties, section 215 TAA, section 218 exceptional circumstances, first incidence, Chapter 15 administrative penalties, late payment penalty, section 39 VAT Act, underestimation penalty provisional tax, Securities Transfer Tax Administration Act, South African tax

Does the July 2026 tax court judgment on dividend stripping and the general anti-avoidance rule (GAAR) mean these transactions can no longer be done? This episode answers a listener's question about that case and reads it against section 22B of the Income Tax Act, paragraph 43A of the Eighth Schedule and the current understatement penalty (USP) regime. The episode starts with the facts: seven appeals combined into one, seven shareholders of a property company funded by shareholder loans rather than share capital, holding companies introduced under section 42, a dividend declared equal to the full value of the business, a subscription by a new shareholder that diluted the existing shareholders to 0.1%, and a sale of the remaining shares. SARS applied the GAAR to tax the dividends as sales proceeds, and the court found for SARS. Rather than repeating the GAAR analysis covered in earlier episodes, the discussion looks at three broader questions. What tax law does and does not do when you ask whether a transaction may be done. Why the February 2017 implementation date matters, given that the specific dividend stripping rules in section 22B and paragraph 43A came into effect on 19 July 2017 and were refined in 2019 for dilutive structures. And what the judgment says about understatement penalties: the court's description of the taxpayer's position as an error of legal judgment, the bona fide inadvertent error defence and the Thistle and Coronation judgments, and how the penalty table currently treats impermissible avoidance arrangements and substantial understatements. The episode closes with what to take home when reading a case like this against the law as it was then and as it stands now. Timestamps:00:15 Introduction and the listener question on dividend stripping and the GAAR03:15 Facts of the tax court case: dividend, subscription, dilution and sale06:40 What tax law does and does not do07:30 Section 22B and paragraph 43A: the 19 July 2017 effective date and the 2019 amendments10:30 Understatement penalties: error of legal judgment and bona fide inadvertent error12:30 The penalty table now: impermissible avoidance arrangements and substantial understatements14:00 Take-home points If you work with South African tax as an auditor, accountant, lawyer, wealth planner or corporate finance professional, this episode is for you. Contact me at [email protected] for feedback or tax advice. More resources at https://tax.pvdz.co.za. You can subscribe for my weekly mailer at  Keywords: dividend stripping, GAAR, general anti-avoidance rule, section 22B, paragraph 43A, Income Tax Act, understatement penalty, USP, bona fide inadvertent error, impermissible avoidance arrangement, Tax Administration Act, South African tax

When does section 23M of the Income Tax Act limit the interest a company can deduct on debt owed to a creditor in a controlling relationship, and why is it not just a cross-border rule? This episode of Tax Break highlights three pointers for identifying whether s 23M applies. Pieter starts with the origin of the provision in the 2013 Amendment Act alongside the OECD BEPS Action 4 work on interest deductibility, and the early commentary linking it to thin capitalisation, transfer pricing and the withholding tax on interest. The first pointer is the controlling relationship requirement: the 50% equity share or voting rights test, and the wider list in s 23M(2) that reaches indirect controlling relationships and funding from other entities in the same group. He explains why the group structure and the route the funding takes both matter. The second pointer is the requirement that the interest not be subject to tax in the lender's hands, the deeming ratio where withholding tax on interest is reduced below 15% under a tax treaty, and two domestic examples.  The third pointer concerns the impact of s 23M: specifically, what is considered interest for this provision goes beyond contractual interest to items such as foreign exchange losses and IFRS 16 lease interest embedded in section 11(a) lease payments. This is the last episode before a short break. Tax Break returns in October. 00:10 Introduction04:06 Origins of s 23M 05:47 Pointer one: controlling relationships 07:20 Pointer two: interest not subject to tax09:00 Pointer three: the expanded definition of interestIf you work with South African tax as an auditor, accountant, lawyer, wealth planner or corporate finance professional, this episode is for you. Contact me at [email protected] for feedback or tax advice. More resources at https://tax.pvdz.co.za. Keywords: section 23M, interest deduction limitation, controlling relationship, subject to tax, withholding tax on interest, section 9D controlled foreign company, tax EBITDA, IFRS 16 lease interest, foreign exchange losses, OECD BEPS Action 4, Income Tax Act, South African tax

Understatement penalties (USP) and bona fide inadvertent errors after the amendment to section 222 of the Tax Administration Act (TAA): if you correct an error on a return that has already been assessed, has the amendment created a new risk? The request for correction function on SARS eFiling, and the objection route where an assessment has already been audited or verified, have been the standard ways to fix a return. Pieter van der Zwan revisits how section 222 protected a taxpayer who came forward with a bona fide inadvertent error, and how the Thistle and Coronation judgments widened the concept of bona fide inadvertent errors to positions taken on tax advice. Section 222 was amended at the end of last year and the bona fide inadvertent error ground now sits in section 223(3)(a), tied to the definition of a substantial understatement (the greater of 5% of tax properly chargeable or R1 million). Pieter shares his concern regarding the effect that the amendment may have on correcting true errors. The episode considers why the correcting an error may carry more exposure, where the voluntary disclosure programme (VDP) enters the picture, and the question that Pieter thinks the amendment leaves open. Timestamps00:10 Introduction 02:50 Request for correction and objection under the previous section 22205:10 Thistle and Coronation: tax advice as a bona fide inadvertent error06:30 Amended section 222 and section 223(3A)09:47 Substantial understatement threshold: 5% or R1 million example15:10 Reasonable care and USP exposure below the threshold15:40 Key takeaways If you work with South African tax as an auditor, accountant, lawyer, wealth planner or corporate finance professional, this episode is for you. Contact me at [email protected] for feedback or tax advice. More resources at https://tax.pvdz.co.za. Keywords: understatement penalty, USP, bona fide inadvertent error, section 222 Tax Administration Act, section 223(3)(a), substantial understatement, request for correction, reasonable care, objection, voluntary disclosure programme, Thistle case, South African tax

Reportable arrangements (RAs) under section 35 of the Tax Administration Act are often overlooked by advisors, and frequently only surface when an accountant reaches the "reportable arrangement" question on the tax return. This episode of Tax Break sets out what reportable arrangements are, where they are found in the legislation, and what to do when a transaction is reportable. Reporting an arrangement to SARS on form RA01 does not change the tax treatment of the transaction. It flags arrangements with features SARS wants to see, which also tells advisors that a risk exists and should be addressed in the advice given. Section 35(1) is conceptual and fact-specific. Examples include arrangements with a tax deduction but no accounting expense (or accounting revenue but no gross income), and arrangements with tax avoidance characteristics such as round tripping or offsetting elements. Section 35(2) allows SARS to list arrangements by public notice, which it did in 2016. The thresholds in that notice are not high, so reportable arrangements are not limited to large transactions. The episode highlights four items from the 2016 public notice that come up regularly: hybrid equity instruments under section 8E if the prescribed period were 10 years; share buybacks exceeding R10 million where shares are issued within 12 months (dividend stripping risk); acquiring a controlling interest in a company with an assessed loss exceeding R50 million (section 103(2) risk); and payments exceeding R10 million to non-residents rendering services in South Africa (permanent establishment risk). Exclusions are covered, including the tax benefit threshold and the exclusion where the tax benefit is not the main or one of the main benefits. A participant must report within 45 business days, and written confirmation that another participant has reported may relieve the obligation. Non-reporting penalties are fixed monthly amounts that can range from roughly R600 000 to R3.6 million over 12 months. Timestamps 00:10 Introduction: why reportable arrangements are missed01:03 About Tax Break and the tax question tool on the website02:54 What reportable arrangements are and what reporting means04:31 Section 35(1) arrangements: tax vs accounting differences, avoidance features06:48 Section 35(2) and the 2016 public notice07:57 Section 8E hybrid equity instruments09:16 Share buybacks over R10 million10:00 Controlling interest in companies with assessed losses over R50 million10:55 Payments to non-residents over R10 million12:00 Exclusions12:45 Who reports, 45 business day deadline, RA0113:36 Penalties for non-reporting14:00 SummaryIf you work with South African tax as an auditor, accountant, lawyer, wealth planner or corporate finance professional, this episode is for you. Contact me at [email protected] for feedback or tax advice. More resources at https://tax.pvdz.co.za. Keywords: reportable arrangements, RA01, section 35 Tax Administration Act, SARS public notice 2016, section 8E hybrid equity instruments, share buyback dividend stripping, assessed loss section 103(2), permanent establishment non-residents, reportable arrangement penalties, South African tax

Are self-insurance premiums deductible? In this episode of Tax Break, I discuss the deductibility aspect of the Western Cape High Court judgment in CSARS v Meiring Citrus (Pty) Ltd.  I cover: The two grounds that SARS abandonedThe court’s conclusion as to whether the taxpayer actually incurred expenditureWhy I disagree with the court's position on expenditureThe court’s position on the capital nature of the premiums paid.If you work with South African tax as an auditor, accountant, lawyer, wealth planner or corporate finance professional, this episode is for you. Contact me at [email protected] for feedback or tax advice. More resources at https://tax.pvdz.co.za. Keywords: self-insurance premiums, section 11(a) deduction, Meiring Citrus, capital in nature, expenditure actually incurred, Labat Africa, section 23L, experience account, South African tax, Income Tax Act, Western Cape High Court, SARS

When does prescription protect taxpayers from SARS issuing additional assessments? Section 99 of the Tax Administration Act generally bars SARS from issuing an additional assessment more than three years after the original assessment issued by SARS. Section 99(2) lifts that bar where the tax was not assessed due to fraud, misrepresentation or non-disclosure of material facts. In this episode of Tax Break, I discuss the prescription aspect of the Western Cape High Court judgment in CSARS v Meiring Citrus (Pty) Ltd. SARS issued additional assessments roughly three and a half years after the original 2017 assessment, relying on the non-disclosure of notional interest of R1 197.52 on an experience account under a structured self-insurance policy, and a misrepresentation of the nature of the agreement. I cover: The timeline of assessments, verifications and the audit, and why the dates matter under section 99The two questions in section 99(2): is a listed conduct present, and did it cause the tax not to be assessedThe difference between the Tax Court and High Court analysisAssessment of the materiality of a non-disclosureOpen questions: the role of information provided during a verification, and where taxpayer disclosure ends and SARS's duty to ask for more information beginsPractical lessons on completing the ITR14 accurately, including income statement and balance sheet line items, and why responses to verification requests should not be underestimatedIf you work with South African tax as an auditor, accountant, lawyer, wealth planner or corporate finance professional, this episode is for you. Contact me at [email protected] for feedback or tax advice. More resources at https://tax.pvdz.co.za.  Keywords: prescription, section 99, Tax Administration Act, additional assessment, SARS audit, Meiring Citrus, non-disclosure, misrepresentation, ITR14, South African tax

The National Treasury published the 2026 draft Tax Administration Laws Amendment Bill (draft TALAB) for public comment on 30 July 2026. In this episode, I discuss three proposed amendments with clear practical impact for South African taxpayers and their advisors, two of which are favourable to taxpayers. The topics covered: ·       Employees' tax (PAYE): a proposal to narrow the withholding obligations of foreign employers with permanent establishments (PEs) in South Africa ·       Provisional tax: aligning underestimation penalties under paragraph 20 of the Fourth Schedule with actual payments made ·       Voluntary disclosure programme (VDP): broadening the relief available under the Tax Administration Act Contact me at [email protected] for feedback or tax advice. More resources at https://tax.pvdz.co.za.

South Africa’s National Treasury published the 2026 draft tax law amendments for public comment on 30 July 2026. Although proposals are technical, tax practitioners and CFOs need to assess whether their businesses or clients are affected. In this episode I analyse four key proposals: the interaction between the controlled foreign company (CFC) rules and the domestic treasury management company (DTMC) regime for translating CFC income, the clarification of the dividend stripping anti-avoidance rules, the withdrawal of the alignment between the interest deduction limitations in sections 23M and 23N of the Income Tax Act, and the proposed VAT changes for leasehold improvements. Contact me at [email protected] for feedback or tax advice. More South African tax resources: https://tax.pvdz.co.za .

Does the label on a contract determine its South African tax consequences? If you call an agreement a loan, are the payments deductible interest? If you call it a lease, are the outflows deductible rent? In CSARS v Meiring Citrus the Western Cape High Court considered whether premiums on a contract labelled an insurance policy were deductible. In this episode I examine the key aspects of the judgment on the nature of the underlying transaction — substance over form, simulation and how courts characterise agreements for tax purposes — and conclude with what tax practitioners and advisers should take from the case. Contact me at [email protected] for feedback or tax advice. More South African tax resources: https://tax.pvdz.co.za

Zero-ratings are complex and often underestimated by taxpayers and their advisors. The exposure may be significant if you get it wrong, especially on recurring transactions. Interpretation Note 31 is an essential part of applying a zero-rating. SARS issued a revised version of this interpretation note (Issue 5), nearly 10 years since the previous version. In this episode, I discuss zero-rating, the documentary requirements and some of the changes to Interpretation Note 31.  You can contact me at ⁠[email protected]⁠ if you have any feedback on the episode or require tax advice. My website contains more resources and articles that may interest you  – ⁠https://tax.pvdz.co.za⁠. You are welcome to take a look!