The South African Revenue Service ("SARS") has published a public notice ("the Notice") setting out reportable arrangements and excluded arrangements for purposes of sections 35(2) and 36(4) of the Tax Administration Act 28 of 2011 ("TAA"). The Notice was released and became effective on 3 February 2016, replacing all notices previously issued under sections 35(2) and 36(4) of the TAA.
The Notice is substantially similar to the public notice previously issued under sections 35(2) and 36(4) of the TAA on 16 March 2015; however, we note the following differences:
- an exclusion has been added to an arrangement listed as reportable if it would qualify as a "hybrid equity instrument" for purposes of section 8E of the Income Tax Act 58 of 1962 ("the Act"), where instruments are listed on an exchange regulated in terms of the Financial Markets Act 19 of 2012;
- an arrangement that would have constituted a "hybrid debt instrument" for purposes of section 8F of the Act, if the prescribed period had been 10 years, is no longer considered to be reportable;
- an additional reportable arrangement has been included in respect of the rendering of consultancy, construction, engineering, installation, logistical, managerial, supervisory, technical or training services to a resident or a non-resident with a permanent establishment in South Africa, in terms of which a non-resident who is not an employee, agent or representative of that person was, is or will be in South Africa in connection with, or for purposes of, rendering those services, and the expenditure incurred, or to be incurred, after 3 February 2016 exceeds, or is anticipated to exceed, R10-million in aggregate and does not qualify as remuneration for purposes of the Fourth Schedule to the Act; and
- an arrangement referred to in section 35(1)(c) of the TAA will constitute an excluded arrangement in terms of section 36(4) of the TAA if the tax benefit that is, or will be, derived, or is assumed to be derived, from that arrangement is not the main, or one of the main, benefits of that arrangement.
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