Dear Subscriber,

Tax Talk Magazine Issue 3 focuses on franchises, and more specifically on the stir created by the unreported royalties tax judgment 1145.

South Africa's franchise industry is a major driving force in the economy. With a massive turnover of close on R130 billion per annum and employment provision for almost 300 000 people, this industry sector shows an annual growth of more than 20% per year and has become an economic force to be reckoned with. The recent ruling by the Cape Tax Court however, could upset the applecart when it comes to tax deductions on royalties.

First up is our cover story "Paying tax on royalties" which explores the fees franchisees have to pay. This is followed by Michelle Swart's discussion on the inception of the Franchise Association of Southern Africa (FASA) 26 years ago and the association's representation of franchisors, franchisees and the professional organisations that service the franchise industry. Then we look at revising your franchise contract.

Next on we examine whether you are obliged to pay penalties and interest on an assessment raised by SARS, following an audit where SARS has raised additional tax. Steven Krause gives readers some key information on what to do, should they find themselves in such a situation.

Our writers give valuable input when they tackle pressing tax issues

such as tax relief for small businesses and the taxation of non-South African resident entertainers and sports persons.

Next in the series of articles "Get your ducks in a row and know your rights as a taxpayer" (PART 3) will continue in the following issue. If you watched Summit TV on Monday nights from March to July, you would have seen Tax Issues. We have compiled summaries of these shows and due to space constraints, we selected only those most useful to our readers.

At TaxTalk we endeavour to provide you with a tax information platform to assist you with all your tax related questions, interests and requests. Through the articles our experts in the tax industry will assist you in dealing with various tax matters.

I hope that you find Tax Talk Issue 3 informative and worthwhile. Please feel free to communicate with me on janine@taxtalk.co.za, I would like to publish your comments in our readers´ forum in the next issue.

Mondays at 20h40 and again at 22h40 on SUMMIT TV (DSTV CHANNEL 55).

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Until next time
Tax Talk Publisher

Ernst & Young

Multinational companies are facing an increasingly complex and adversarial transfer pricing environment, according to a recent survey of more than 30 countries’ revenue authorities conducted by leading professional services provider Ernst & Young.

Tax Authority Interviews: Perspectives, Interpretations and Regulatory Changes, which is the third installment of Ernst & Young’s 2005/2006 Transfer Pricing survey, indicates that while authorities are broadly agreeing on transfer pricing principles, they are adopting very different approaches to applying these principles.

Can you CONFIDENTLY answer the following questions? Call us NOW to Book your place on the Tax MasterClass and ensure your organizations future tax health.

• Where do you think your greatest Tax Risk lies?
• What is your documented tax policy/strategy?
• How good is your tax department's communication with the rest of your organization?
• Do they understand what your organizations REAL TAX RISK is?
• Do you know how Corporate Governance affects Tax Risk Management?
• How do you manage your relationship with your largest business partner, the South African Revenue Service?

Why are Transfer Pricing provisions constitutionally invalid and not enforceable? What amnesty is available in 2006 to corporate taxpayers for undisclosed income (not just for small businesses) and what is the effect of the Royalty Judgment on royalty payers?

Don’t miss “The Complete Tax Workshop” a 1-day workshop presented by Daniel Erasmus, to find out how you can prevent your business from falling foul of the law, in any of these areas.

Tax Talk

The tax law has changed with regard to foreign entertainers or sports people visiting South Africa. Alan Keep, director at Bauman Gilfillan discussed this matter on Tax Issues, broadcast on Summit TV on Monday evening.

From personal individual tax to significant company tax changes - the subject is a hotly debated issue throughout South Africa's corporate environment. Tax Issues - every Monday at 20h40pm and again at 22h40pm - demystifies some of the latest developments and issues being discussed in the corridors of power. Tax Issues will cover; The impact of pending new tax laws on individuals and companies, The capital gains tax debate, New SARS initiatives to collect tax Changes to tax benefits, The VAT vs personal tax debate.

Tax Talk

Franchises are major role players on the South African restaurant and fast food scene. In fact, with a massive turnover of close on R130 billion per annum and employment provision for almost 300 000 people, this industry sector shows an annual growth of more than 20% per year. A recent ruling by the Cape Tax Court could however place a serious tax burden on the shoulders of the franchisee and might even place small businesses in jeopardy.

Tax Talk

If a sole proprietor with a loss in one tax year converts to a CC in the following year, can the loss be used up by the individual in his own capacity or does the loss fall away?

Do you have something to say? Do you have an area of interest or expertise that you believe is something you can contribute for the interest of our readers? Do you want to share your views with like-minded people?

If so, send your submissions by email to (janine@taxtalk.co.za), fax (27 11 476 5004) or post (P.O. Box 1650, Gallo Manor 2052) and be heard!

We will publish the best stories and viewpoints on our website &/or in our weekly newsletter.

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Contact Janine at
janine@taxtalk.co.za
(011) 476 5095