May 2017


It is reported that the treasury’s procurement office has discovered 12000 dead people as shareholders in companies that do business with the state. In addition, some 14000 state employees are directors of companies that have been awarded state contracts in breach of regulations.

It seems a never-ending story of corruption that is set to undermine the credibility of good governance; one of the yardstick used when assessing the country’s credit status.


Annual Duty – one calendar month to the day after the incorporation date

Promotion of Access to Information Act manual – 31 December 2021 extended yet again!

Special Voluntary Disclosure Programme – 1 October 2016 to 31 August 2017

Tax returns

Tax clients should note that unless we receive all the relevant data and documentation at least fourteen days before the applicable submission deadline we cannot be held responsible for any punitive action taken against them by SARS. Clients should start accumulating their tax paperwork now in order to facilitate early submission once the latest returns are released.


Trust Tax Returns

Amongst the changes to trust tax returns is one that requires the Statement of Assets and Liabilities to differentiate between Interest Bearing and Interest Free loans. Whilst this may appear to be a minor change, the intent appears to be to give SARS ammunition to impose donations tax on free loans. At the current official interest rate of 8%, the donations tax payable may be calculated by the following formula:

((Loan value x 8%)-100 000)x20%. The R 100 000 is the amount of the annual exemption from donations tax.

Postal submission of trust tax returns is no longer acceptable.

Tax Ombud

The office of the Tax Ombud was established to provide an avenue whereby taxpayers, that are aggrieved by the actions of  SARS in relation to their affairs, to address their frustrations. It is not the avenue through which points of law can be attacked. Rather, the intent is for the ombud to investigate claims of administrative errors on the part of SARS that cannot be addressed through the dispute resolution process.

However, in keeping with his terms of reference, the Ombud’s office is currently investigating claims of alleged withholding of tax refunds by SARS.


Terminating Contracts

Generally, written contracts include clauses that regulate how a contract may be terminated other than upon the strict fulfillment by the parties of their obligations set out therein. These clauses determine an aggrieved party’s remedies where the other party breached the terms thereof.

The aggrieved party may either demand that the other party comply with the terms of the contract or cancel the contract. Additionally, where damages are incurred, an action may be brought to recover any loss.

Usually, a contract will contain provisions in terms of which notices are required to be given of the intent to terminate and to demand specific performance within a specified period. It is of vital importance that the aggrieved party comply with these provisions. Failure to do so may lead to the other party interpreting the aggrieved party’s conduct to be a repudiation of the contract,

For the aggrieved party to cancel the contract, the breach must be material, i.e., goes to the root of the contract and relates to a vital term,

Where a contract provides for a specific date of performance, failure to perform on that date does not give an automatic right to cancel. Therefore, it is imperative that the cancellation clauses enforce performance by that date. Bear in mind that a contract that contains a clause that provides that the terms thereof are suspended unless defined provisions are complied with within a specified period automatically terminates at the expiration of that period without such compliance.


In March 2017, the Chief Master issued a directive to all Masters with regard to the administration of trusts and in particular with regard the following topic:

·         The deregistration of trusts

There is no provision in the Trust Property Control Act for the de-registration of a trust. However, the Master may confirm that a trust has been closed upon the provision of the following:

§   Reasons for the termination and a resolution that states whether the trust is dormant or inactive and whether a bank account was opened and, if so, that it has been closed

§   The original Letter of Authority

§   Bank statements reflecting a nil balance or a letter from the bank confirming that the account has been closed

§   Proof that the beneficiaries have received their benefits; and

§   An affidavit from the trustees stating that the trust has been divested of all assets.

·         Appointment in independent trustees

In implementing the decision of the court in the case of Land and Agricultural Bank of South Africa v Parker and Others, the Master must consider appointing an independent trustee where a trust is registered for the first time and the trust deed indicates that the trust is a “family business trust”.

A family business trust is one where:

a)        The trustees have the power to contract with independent third parties thereby creating trust creditors; and

b)       The trustees are all beneficiaries: and

c)        The beneficiaries are all related to one another.

An independent trustee:

a)        Must be a person who understands the responsibilities of a trustee.

b)       May be a member of a professional body

c)        Has no family relation or connection to any of the existing or proposed trustees, founder or beneficiaries

d)       Is knowledgeable about the law of trusts

e)        Would not have any interest in the trust property as a beneficiary

f)        Has knowledge of the business field in which the trust operates

Upon good cause being shown by the Founder, the Master may dispense with the appointment an independent trustee. However, he may request security and audited annual financial statements


According to Fitch, there has been no further major deterioration in the economic outlook and fiscal landscape that would warrant a further ratings downgrade at this stage. However, such a move is dependant upon the government sticking to its fiscal consolidation plans and not embracing major policy changes in order to woe the voters.

The agency is also concerned with improvement in economic growth without negatively impacting on revenue collection. It is anticipated that the other credit agencies will follow suit.

However, the agency is also concerned about the quality of governance of state owned enterprises, particularly Escom and SAA as they pose a significant risk of the need for a government bailout. It is concerned that the continuing low economic growth rate is contributing to the budget deficit and public debt levels.

In the meantime, the debate surrounding the distribution of wealth in South Africa continues. In that regard, the Davis Commission is investigating the possible introduction of a wealth tax. To some extent that focus may be attributed to statements, by the current Minister of Finance, emphasizing the inequitable distribution of wealth. These statements use, as their source, a report by Oxfam which is based on one by Credit Suisse. However, facts, in those reports, that place South Africa in a more favourable light were overlooked by the minister. For example, South Africa has a more equitable wealth distribution than Denmark, Sweden and Norway.

The government could improve the country’s rating substantially by changing the land ownership policy whereby land in some areas, including Nkandla, are held under Permission to Occupy (PTO). This policy inhibits the ability of persons in tribal areas and African farmers from obtaining finance and thereby improving the value of the land. This would help reduce the negative wealth distribution statistics that are also a factor used in the determination of the country’s credit rating.

Another factor requiring urgent attention is the current unemployment rate. Of particular concern is the youth unemployment rate which, at 52%, exceeds the national average of 27%. In this regard, the effectiveness of the Youth Employment Incentive scheme should be examined and consideration given to making it more effective. This sector of the population is justifiably disenchanted with government’s efforts to remedy the situation. Unfortunately, this disenchantment could well result in unrest which, in itself, will influence the credit rating agencies in the short to medium term.


“There is nothing glamorous about death.” – Roger Moore