Government Support: South African Revenue Service (SARS)
SARS - The South African Revenue ServiceTax incentives are governed by SARS, the South African Revenue Service.
The Income Tax Act of 1962 has been updated much over the last ten years (and is reviewed annually) to encourage individuals and businesses to become legal and upfront about their tax matters. Tax law has become more fair and consistent; for example, in the past, people and companies could be taxed twice for the same income if the income was declared in two different countries.
It is important to stay up-to-date so that your business can benefit from these incentives if they apply to you.
Here are a few examples of tax incentives welcomed by businesses in the last few years.
1. There is legislated agreement to stop double taxation on the same income for businesses, individuals and their assets (including property) if the business is operating in two countries. This will encourage people who feared double taxation to come forward and declare their investments and provide accurate returns, and only be taxed once. This is recognised under the laws of the South Africa and some foreign countries including the United Kingdom.
2. If costs were spent on matters relating to the acquisition and development of patents, copyright, trademarks, designs and other intellectual property before October 29 1999, it can be written off under the SARS-specified conditions.
3. Businesses are allowed special tax allowances on hotel buildings and equipment because these depreciate over time.
4. A depreciation allowance is allowed annually on cost of buildings (and improvements) where the building is used in a manufacturing or similar process and the building or improvement is commenced after 1 January 1989.
5. Capital investment approved by CSIR (Council for Scientific and Industrial Research) for buildings and equipment used exclusively for scientific research may be written off under specific conditions.
Recent Incentive Developments (October 2004)
A recent development in this arena, still in proposal stage, is the tax incentive for companies embarking on BEE deals. Some of these benefits would be:
- Proposed tax incentives to encourage companies to give shares to employees to spread ownership of companies.
- Proposed that employees would get a tax deduction on their shares if they held them for at least five years.
- Proposed that if employees sold the shares after five years they would be liable only for capital gains tax.
The proposal forms part of the draft of the Revenue Amendments Bill, tabled on October 26 2004 by Finance Minister Trevor Manuel.
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