Title page for ETD etd-03292006-153913

Document Type Master's Dissertation
Author Liebenberg, Pieter Francois
URN etd-03292006-153913
Document Title A critical analysis of section 20a : ring-fencing of assessed losses of certain trades
Degree MCom (Taxation)
Department Taxation
Advisor Name Title
Mr M Steyn
Prof M Stiglingh Supervisor
  • SARS
  • taxpayers
  • South Africa
Date 2004-11-19
Availability restricted
The purpose of the study was to perform a critical analysis of Section 20A, so as to identify possible problem areas that could lead to different interpretations between SARS and taxpayers. The section is very detailed and there are key terms and concepts that are not defined, but are open to interpretation. As the section is new, with no case law available yet to provide guidance, this could lead to inconsistent treatment. Section 20A was included in the Act to rectify a perceived abuse of tax laws, whereby individual taxpayers shielded their taxable income using losses generated from other trades. As the definition of a trade is very wide, most of these losses could have been utilised against other taxable income. In the analysis, several areas of uncertainty and unfairness, summarised below, were found which could result in future disputes. Only natural persons are included under Section 20A, not legal entities. This leaves the possibility of tax evasion, especially as it appears that SARS is encouraging taxpayers to trade through legal entities. The three-out-of-five-year rule is written with fixed intent, and does not allow for varying circumstances, which may be unfair to certain trades that can take longer than the set three years to generate a profit. Only certain trades are listed as suspect, leaving scope for unlisted trades to continue to claim losses before they fall within the three-out-of-five-year rule.

Copyright 2004, University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria

Please cite as follows:

Liebenberg, PF 2004, A critical analysis of section 20a : ring-fencing of assessed losses of certain trades, MCom (Taxation) dissertation, University of Pretoria, Pretoria, viewed yymmdd < http://upetd.up.ac.za/thesis/available/etd-03292006-153913/ >

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