OWN CORRESPONDENT, Johannesburg | Thursday
YOU’RE not even safe from the taxman’s prying fingers in cyberspace. For the first time, tax returns will require full disclosure of sales and purchases made over the Internet.
The SA Revenue Service has moved to close a loophole that may have seen billions of rands slip out of country, with the receiver’s 1999 tax returns containing reporting requirements for revenue generated from e-commerce transactions, including disclosure of all sales and purchases made via the internet and their source, Johannesburg’s Business Day newspaper reported.
Independent research group BMI-TechKnowledge estimates that e-commerce will generate sales of about R5,8bn this year.
Business Day quoted Ernst and Young’s e-commerce tax consultant Eugene Terblanche as saying that the SARS could now monitor transfer pricing, which is the manipulation of prices where profits are transferred from a high-tax country to a low tax country.
In SA, e-commerce is one of the reasons for the coming shift from a source-based principle of taxation to a residence-based tax in the draft Revenue Laws Amendment Bill, expected to come into effect early next year, says Franz Tomasek, manager tax research at SARS.
It is difficult to decide where income is sourced in e-commerce, he says. Instead, SARS can ask where the company is resident by looking at incorporation and management and control details.
Companies that are resident in SA must report their earnings worldwide and claim credit for taxation paid in other countries, and must report the web addresses of their major customers.
Exemptions to the rule exist in the form of double taxation agreements in which trading partners agree on where tax will be levied. But this is based on the concept of a “permanent establishment” in one of the countries.
SARS is not ultimately concerned with companies which claim to generate their profits in an “acceptably taxed region”, in other words, a region with a statutory rate of company tax of at least 27%. Instead, its interest is focused on companies which generate profit in a low-tax region which has entered into a double-tax agreement with SA.