Unit 7

Question 1

Which legislative sections are crucial to tax avoidance?

Answer 1

Sections 80A - L

Question 2

Which is illegal: tax evasion or tax avoidance?

Answer 2

Tax evastion

Question 3

When is something tax ‘avoidance’?

Answer 3

When any reduction in tax liability can be justified in terms of the Act

Question 4

What are the two types of anti-avoidance provisions?

Answer 4

General & specific

Question 5

What are the legisl. provisions of the SPECIFIC anti-avoidance rules? (6)

Answer 5

Sec. 1 
Sec. 7(2) to (10) 
Sec. 8E & F 
Sec. 9D 
Sec. 22(8) 
Sec. 54 to 64

Question 6

Which anti-avoidance rules may SARS apply?

Answer 6

Both specific and general

Question 7

Name 3 points about Section 80A

Answer 7

Impermissible avoidance agreements
4 requirements
Differentiates between business & private

Question 8

What is meant by ‘arrangement’? (6)

Answer 8

Transactions 
Operations 
Schemes 
Agreements 
Understandings 
Any of the above involving alienation of property

Question 9

What is meant by a ‘tax benefit’?

Answer 9

Any avoidance, postponement, reduction of any liability to pay tax

Question 10

What are the 4 requirements for tax avoidance arrangements?

Answer 10

1. Arrangement
2. Arrangement results in tax benefit
3. Sole purpose of Tax Administration Act = tax benefit
4. Business context

Question 11

What are the requirements for tax avoidance arrangements in a private context?

Answer 11

1. Arrangement
2. Arrangement results in tax benefit
3. Business context

Question 12

Section 80B?

Answer 12

Powers of SARS:
Any part of agreement can be ignored or combined
May deem different parties as 1 and same person
May re-allocate/re-classify any amounts
May ignore whole agreement

Question 13

Section 80C?

Answer 13

Lack of commercial substance [not allowed]

(TP obtains tax advantage without: effect on risk/cash) flow

Question 14

Section 80D?

Answer 14

Round-trip financing [not allowed]

Transfer of funds between parties - especially Pty with subsidiaries

Question 15

Section 80E?

Answer 15

Tax indifferent party [not allowed]
(No effect on indifferent party liability
Would affect liability of other party)

Question 16

Section 80F?

Answer 16

Connected parties [not allowed] 
(Connected parties deemed as 1 party 
Ignore indifferent party 
SARS gives notice 
Party reacts w/in 60 days 
SARS 180 days further enquiries / application)

Question 17

Which sections apply to Reportable Arrangements?

Answer 17

Sections 34 - 39 of the Tax Administration Act

Question 18

To what does section 103(2) apply?

Answer 18

Assessed losses

Question 19

Section 103(2)?

Answer 19

Prohibits purchasing a company with an assessed loss.
Requirements:
1. Agreement/change in shareholding, trustees, trust beneficiaries
2. Received / accrued
3. Intention: avoid tax

Question 20

Name 3 cases related to Assessed Losses

Answer 20

SA Bazaars and New Urban Properties
Glen Anil Development Corporation
ITC 1123

Question 21

What are the requirements for Cession ito sec103(5)?

Answer 21

1. Transaction, operation, scheme; AND
2. Cede right to income for dividends; AND
3. Reduced liability to pay
   (SARS may ignore transaction)