Income tax act offers some BBBEE compliance relief

| 0 Comments
Tax_headache.jpgBBBEE has also become a business imperative, and with the updating of the Codes of Good Practice currently underway, is likely to remain so for the foreseeable future.

While no tax incentives or legislation have been enacted to specifically provide relief for BBBEE compliance, various sections of the Income Tax Act can, actually, offer some relief, says Dirk Kotze, tax partner at global audit, tax and advisory firm Mazars, says in this month's SmartProcurement.

For example, the management control, employment equity and preferential procurement requirements of the Generic Scorecard do not necessarily have to be catered for in tax legislation as the salaries and costs involved in appointing and training management, adhering to labour requirements and selecting appropriate suppliers should be automatically tax deductible.

The enterprise development leg of the scorecard, however, appears to be the odd one out, says Kotze, especially considering what the Codes of Good Practice regard as enterprise development. Apart from the early payment of BBBEE creditors or larger settlement discounts for BBBEE customers, many of the initiatives involve providing BBBEE enterprises with the financial means to grow their operations, i.e. cash grants made, loans granted on preferential terms (no or low interest, advantageous repayment terms), granting the use of business assets for no consideration etc.

“The question is whether the cost incurred is tax deductible in the hands of the person making the enterprise development contribution, especially where assets have been given to the BBBEE enterprise or where cash grants have been provided. Are the contributions capital in nature, are they in the production of income and can they potentially be regarded as donations?”

In the hands of the recipient, the question would be whether the benefit received would be gross income subject to tax? Would the acceptance of a cash grant be for services rendered although there are no strings attached, would the loan granted on beneficial terms be regarded as a capital gain, would the waiver of repayment of interest be a recoupment?

“Questions can also be asked about the VAT treatment in respect of assets provided by companies to BBBEE enterprises or what the VAT treatment is of a cash grant received by a BBBEE enterprise from another entity,” Kotze says.

SARS has issued various Binding Private and Binding Class rulings dealing with costs and expenditure incurred on various BBBEE initiatives, but none of these seems to address the enterprise development leg of the scorecard, either for income tax or VAT.

“It may, however, be counter productive to consider the costs non-deductible in the hands of the persons making the contributions or making it taxable in the hands of the BBBEE beneficiaries.”

Kotze says that until some clarity on these matters is provided by way of legislation or a SARS practice or class ruling, businesses entering into these initiatives would be well advised to carefully consider the tax and VAT implications at the outset.

Leave a comment


SmartProcurement Newsletter
X

Please enter your details below to receive the SmartProcurement Newsletter for FREE on a regular basis.

As part of the SmartProcurement Newsletter you will be receiving World Class Procurement News, Tools, Tips, Tactics, Procurement Training updates, Upcoming Events, and the latest Procurement Career Openings.

* Email Address:
* Title:
* First Name:
* Surname:
* Company:
  Position:
* Country:
* Public / Private:

 

Career opportunites

Demand Planning Manager

  • <500 000 Gauteng Operations, Planning & Inventory Projects / Category Management
(Total Cost to Company R750k - R900K) excluding ...More

Global Category Manager: CONTRACTS

  • <500 000 Buyer Commodities Contract Gauteng
Total Cost to Company R1mil - R1.2mil excluding

Project Manager :12-18 MONTH CONTRACT

  • <500 000 Contract Procurement Officer / Specialist Projects / Category Management
Description:A well-known retail organization is looking for an ...More

Procurement Analyst

  • <500 000 Analyst Gauteng Permanent Procurement Management
Description:A leading infrastructure development group with strong presence ...More

Commodity Manager: Fuels and Lubes

  • <500 000 Commodities Gauteng Permanent Strategic Sourcing
Description:Ensuring continuity of supply in line with business ...More

Senior Facilities Manager

  • <500 000 Gauteng Operations, Planning & Inventory Permanent Projects / Category Management
(Total Cost to Company R800K - R900K) Description: ...More

Supply Chain Analyst

  • <500 000 Analyst Permanent Supply Chain Western Cape
(Total Cost to Company R350K - R550K) SOUTHERN ...More

Demand Planner

  • <500 000 Gauteng Operations, Planning & Inventory Permanent Supply Chain
(Total Cost to Company R450k - R550k, dependent ...More

Procurement Specialis

  • <500 000 Gauteng Permanent Procurement Management Procurement Officer / Specialist
(Total Cost to Company R700k - R800k including ...More

Solutions Architect

  • <500 000 Analyst Gauteng Operations, Planning & Inventory Permanent
(Total Cost to Company R1.3Mil - R1.1Mil including ...More

Engineering Manager

  • Gauteng Industrial Engineer Permanent Procurement Management
Total Cost to Company R850k - R950K including ...More

Country Head of Procurement

  • Permanent Procurement Management Procurement Officer / Specialist
https://careers.peopleclick.com/careerscp/client_gsk/external1931/gateway.dofunctionName=viewFromLink&jobPostId=359235&localeCode=en-us CBS Procurement,Hub Head of Procurement To lead, ...More

Demand Planner

  • <500 000 Gauteng Operations, Planning & Inventory Permanent Projects / Category Management
https://www.tech-pro.co.za/pages/jobdetail.aspx#!Gauteng/Planning/Demand%20Planner/TP2005490/MSe Category: PlanningPosition Title: Demand PlannerSalary: R600 000 ...More

Head of Procurement

  • <500 000 Gauteng Permanent Procurement Management Procurement Officer / Specialist
https://www.tech-pro.co.za/pages/jobdetail.aspx#!Gauteng/Procurement/Head%20of%20Procurement/TP2005488/ZBuCategory: ProcurementPosition Title: Head of ProcurementSalary: R1.3 million ...More

Warehouse and Distribution Manager

  • <500 000 Gauteng Logistics & Warehousing Permanent Supply Chain
https://www.tech-pro.co.za/pages/jobdetail.aspx#!Gauteng/Logistics/Warehouse%20Distribution%20Manager/TP2005455/TMa Category: Supply ChainPosition Title: Warehouse and Distribution ...More

Supply Chain Manager

  • <500 000 Mpumalanga Permanent Procurement Officer / Specialist Supply Chain
https://www.tech-pro.co.za/pages/jobdetail.aspx#!Mpumalanga/Supply%20Chain/Supply%20Chain%20Manager/TP2005448/LMa Category: Supply ChainPosition Title: Supply Chain Manager ...More

Industrial Engineer

  • <500 000 Gauteng Industrial Engineer Operations, Planning & Inventory Permanent
https://www.tech-pro.co.za/pages/jobdetail.aspx#!Gauteng/Consulting/Continuous%20Improvement%20Manager/TP2005489/SNh Category: ConsultingPosition Title: Industrial EngineerSalary: R900 000 ...More

Operations Manager

  • >500 000 Gauteng Operations, Planning & Inventory Permanent Supply Chain
Our client within the FMCG industry with a ...More

Warehouse and Distribution Manager

  • >500 000 Gauteng Logistics & Warehousing Operations, Planning & Inventory Permanent
An exciting opportunity awaits for a Warehouse and ...More

Demand Planner

  • <500 000 Permanent
Get an opportunity to be part of one ...More