Department of Mercantile Law

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https://scholar.sun.ac.za/handle/10019.1/128

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Browsing Department of Mercantile Law by browse.metadata.advisor "Du Plessis, Izelle"

Now showing 1 - 3 of 3
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    Abuse of legal personality to avoid tax : piercing the corporate veil as remedy in case of the abuse of legal personality for tax purposes
    (Stellenbosch : Stellenbosch University, 2019-04) Marais, Albertus Johannes; Van Wyk, Andreas; Du Plessis, Izelle; Stellenbosch University. Faculty of Law. Dept. of Mercantile Law.
    ENGLISH ABSTRACT : Companies are legal persons and as much part of commercial traffic as the natural persons owning and controlling them. Compared to one another, companies and natural persons nevertheless have very different legal abilities and characteristics. It is therefore not unexpected that they are treated differently for purposes of the law of taxation. As a result it may often be more beneficial to have the profits generated by a business enterprise taxed in a company rather than in the hands of a natural person, especially in instances where a shareholder would be commercially indifferent to whether those profits are generated in a company or not. By using the separate legal personality of a company shareholders may often perpetrate an abuse of that separate legal personality. Such abuse of legal personality can also take place when legal personality is employed primarily for tax reasons. While a limited form of abuse of the corporate veil is tolerated, whether the use of separate legal personality for tax reasons amounts to an abuse thereof beyond what is permitted in South Africa can be determined in terms of three tests. These tests are the traditional “piercing of the corporate veil” judgments forming part of the common law, section 20(9) of the Companies Act 71 of 2008 and the General Anti-Avoidance Rules (“GAARs”) (and other specific provisions) in the Income Tax Act 58 of 1962. This dissertation considers when any of these various tests will dictate that the separate personality of a company be ignored (or “pierced”) for purposes of taxes levied in terms of the Income Tax Act. Through critical analysis of both the South African rules on piercing as applied for tax purposes as well as the circumstances under which selected other jurisdictions provide for piercing for tax reasons the dissertation formulates what best practice and desired policy for piercing for tax reasons are.
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    A comparative evaluation of the South African income tax regime for investments using trusts
    (Stellenbosch : Stellenbosch University, 2023-12) Herbst, Hendri; Du Plessis, Izelle; Stellenbosch University. Faculty of Law. Dept. of Mercantile Law.
    ENGLISH ABSTRACT : This study evaluates the South African income tax regime for investments using trusts. It considers whether reforms are required, and if so, how can this be done to create a tax framework that will encourage investment, limit tax avoidance and curb capital outflows, while considering South Africa’s unique context and challenges.
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    A critical analysis of the interpretation of the term "associated enterprise" in provisions in South African double taxation agreement based on Article 9 of the Organisation for Economic Cooperation and Development's Model Tax Convention on Income and on Capital
    (Stellenbosch : Stellenbosch University, 2020-12) Greeff, Andre; Du Plessis, Izelle; Stellenbosch University. Faculty of Law. Dept. of Mercantile Law.
    ENGLISH ABSTRACT: To the extent that a contracting state has no applicable double taxation agreement (“DTA”) in place, that contracting state will rely solely on its domestic law to regulate transfer pricing related matters. Many states, however, enter into DTAs that are intended to inter alia reduce the risk of economic double taxation. Most of these DTAs are based on the Organization for Economic Cooperation and Development’s Model Tax Convention (the “OECD’s MTC”). Article 9 of the OECD’s MTC aims to prevent transfer pricing manipulation by associated enterprises, as well as to provide associated enterprises with relief from economic double taxation. However, Article 9 is only applicable if “an enterprise of a contracting state participates … in the management, control or capital of an enterprise of the other contracting state, or the same persons participate … in the management, control or capital of an enterprise of a contracting state and an enterprise of the other contracting state.”1 DTAs, however, generally do not define the terms contained in the phrase “participates in the management, control or capital.” This may result in uncertainty regarding the applicability of a DTA provision identical to Article 9 of the OECD MTC. This dissertation illustrates the possibility of economic double taxation arising as a result of a corresponding contracting state disallowing a requesting for a corresponding transfer pricing adjustment in terms of a DTA provision identical to Article 9(2) of the OECD MTC due to such state disagreeing with the initial primary adjustment. Such disagreement may arise due to differing interpretation of the term “associated enterprise.” It appears that there are at least two possible solutions to eliminating economic double taxation from arising as a result of a primary transfer pricing adjustment. The first being for contracting states to agree to an autonomous or universal definition of an associated enterprise (which would arguably require consensus amongst all contracting states that the context of Article 9 requires otherwise than to interpret the terms therein in accordance with the domestic law of a particular contracting state). The alternative would be for contracting states to apply the modified “new approach” (that is, the DTA is to be interpreted in accordance with the contracting state applying the DTA), which would arguably require contracting states to ignore the existing paragraph 6 of the Commentary on Article 9 of the OECD MTC.2 Considering the historical context of Article 9, together with the purpose thereof, it is concluded that “participation in management or capital” ought to be interpreted as meaning that a person requires a dominant level of participation in management or capital in order to be associated. Regarding “control,” it is concluded that the context of Article 9 (in the form of the Commentary to Article 93 and the OECD Transfer Pricing Guidelines (“”TPG”)4)requires “control” to be interpreted as de facto control in the narrow sense.