Page 646 - SAIT Compendium 2016 Volume2

IN 75 (2) Income Tax acT: InTeRPReTaTIon noTes IN 76
• A company whose receipts or accruals of whatever nature would be exempt from normal tax under section 10 [paragraph (i)(cc)].
• A company that is a public bene t organisation or recreational club that has been approved by the Commissioner under section 30 or 30A [paragraph (i)(dd)].
As a result, Article 24(5) will not apply when paragraph (i) of the proviso excludes a non-resident controlling company from a group of companies because residentcompanies who are similarly exempt from SouthAfrican income tax are also excluded from relief under the corporate rules.
With effect from 1 January 2013 a company incorporated, established or formed in South Africa but which has its place of effective management outside South Africa is also excluded from a group of companies under paragraph (i)(ff)* of the proviso. Certain tax treaties† provide that when a person other than an individual is a resident of both contracting states, that person shall be deemed to be a resident solely of the state in which its place of effective management is situated.
5. Conclusion
It is not permissible to interpret the proviso as an independent enacting clause and its provisions must be read as if they formed part of the opening words of the de nition in section 41(1). The exclusion by the proviso of, for example, a controlling company from a group of companies will accordingly impact on whether its controlled companies remain part of a group of companies under the corporate rules. The exclusion of non-resident companies by the proviso does not constitute discrimination under South Africa’s tax treaties.
INTERPRETATION NOTE: NO. 76
DATE: ACT: SECTION:
SUBJECT:
CONTENTS
Preamble
1. Purpose
2. Background
2.1 The form of tips
2.2 The manner of payment or distribution
3. The law
4. Application of the law
4.1 The recipient
4.1.1 Gross income
(a) Any amount received by or accrued to (b) In respect of services rendered
4.1.2 Provisional tax
4.2 The owner
4.2.1 Introduction
4.2.2 Obligation to withhold employees’ tax
(a) Remuneration
(b) Employee
(c) ‘Employer’ as de ned
(d) Owner’s, in a tripartite tipping relationship, obligation to withhold employees’ tax
4.2.3 SDL
4.2.4 UIF
4.3 The patron
4.3.1 Introduction
4.3.2 Obligation to withhold employees’ tax 4.3.3 SDL
4.3.4 UIF
5. The bipartite position
6. Conclusion Annexure A – The law Annexure B – Exemptions
Preamble
In this Note unless the context indicates otherwise –
* Paragraph (i)(ff) of the proviso was inserted by section 90(1)(e) of the Taxation Laws Amendment Act No. 31 of 2013 and applies to transactions entered into on or after 1 January 2013.
† The term ‘tax treaty’ means an agreement for the avoidance of double taxation entered into between two countries.
26 February 2014
INCOME TAX ACT 58 OF 1962
SECTION 1(1), DEFINITION OF THE TERM ‘GROSS INCOME’, FOURTH SCHEDULE TO THE ACT, PARAGRAPH 1 DEFINITIONS: ‘REMUNERATION’, ‘EMPLOYER’, ‘EMPLOYEE’, ‘PROVISIONAL TAXPAYER’, PARAGRAPH 2(1)
THE TAX TREATMENT OF TIPS FOR RECIPIENTS, EMPLOYERS AND PATRONS
638 saIT comPendIum oF Tax LegIsLaTIon VoLume 2