Corporate Law & Regulation

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Purpose of a loan and related interest expenditure

Interest is only deductible if incurred in the production of income and for purposes of carrying on a trade. This requires that the loan in respect of which the interest is paid and the trade/income should be closely connected. A recent case heard in the tax court illustrates that the original purpose of a loan for a specific purpose plays an important role in this regard, even in the case of a loan with flexible payment terms…

Bad debts: Effect on exchange gains or losses

The tax treatment of unrealised exchange gains or losses pose certain challenging questions when a foreign denominated debt becomes irrecoverable. SARS issued a draft interpretation note that provides their views on, amongst others, the tax effect of such gains or losses when a debt goes bad or is reduced. While the effect of unrealised exchange differences appear to be neutral from a lender perspective, this is not necessarily the case for a borrower whose debts are reduced…

Capital gains tax: Cancellation of disposals

Capital gains tax is imposed on any amount that a taxpayer becomes entitled to as a result of a disposal of an asset, whether this amount has been received in cash or not. It was confirmed in New Adventure Shelf 122 v C:SARS that a taxpayer does not have grounds to request that the assessment where such capital gains tax was levied if the proceeds become irrecoverable…

The Financial Sector Regulation Bill, 2015 and the regulation of financial conglomerates

The Financial Sector Regulation Bill seeks to supervise “eligible financial institutions” more closely that are part of “financial conglomerates”. Thus, the purposes of the Bill include establishing a system of financial regulation by creating the Prudential Authority (as defined in the Bill); and the supervision of financial conglomerates in relation to eligible financial institutions that are part of financial conglomerates…