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The South African Revenue Service (SARS) has been in the media spotlight recently for all the wrong reasons. It appears that they are now turning things around and this is positive news for South African businesses and the country’s economy.

On 21 March 2018, SARS and the B-BBEE Commission signed a Memorandum of Understanding (MoU), which was published on 6 July 2018 by the Department of Trade and Industry in the Government Gazette 41754.

The MoU is a collaborative agreement that outlines how the two departments will support each other. This includes sharing resources, information and expertise in rooting out corruption, fronting practices and tax abuse.

This MoU follows hot on the heels of Finance Minister Nhlanhla Nene’s extension of the preferential tax rates for qualifying companies operating in the designated Special Economic Zones (SEZ) of Coega (Port Elizabeth), Dube (KZN), East London, Maluti-a-Phofong (Harrismith) and Richards Bay. Companies in these zones are subject to a company tax rate of 15%.

Minister Nene also announced that the age restriction (29 years of age) in the Employment Tax Incentive Act will not be applicable in these SEZs. This means that the employment tax incentive can be claimed for all qualifying employees in the SEZs, irrespective of age. This will give a much-needed tax break to these businesses and encourage the employment of new job seekers in these zones.

It is clear from these two recent developments that SARS is stepping up as a critical department to “facilitate trade and as well as protect our economy and society.”

Murray Chabant, Managing Director of Signa Group, says, “The cooperation between SARS and the B-BBEE Commissioner makes a lot of sense, especially where abuses are taking place, as these undermine meaningful economic activity. I am particularly encouraged by the growth and job creation focus of Minister Nene’s extension of the SEZs.

“The bottom line is that unless B-BBEE is operating in an environment of economic growth, it is doomed for failure. Growth is necessary for B-BBEE deals to work and generate a positive return on investment for shareholders. Many B-BBEE deals end up under water when there is an economic downturn, and B-BBEE shareholders are left worse off than before the deal.

“It will be interesting to see whether further collaborations between the B-BBEE Commissioner and, for instance, the Competition Commissioner or the Special Investigating Unit, will take their lead from this cooperation agreement with SARS.”

Download the Memorandum of Understanding between the B-BBEE Commission and the South African Revenue Service.