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Found this. Can someone please translate it into English please.

Prescription of a tax assessment is an important and powerful tool for a taxpayer when it comes to obtaining certainty in respect of one’s tax affairs and can serve as an important defence when disputing an assessment.  Prescription is governed by section 99 of the Tax Administration Act No. 28 of 2011 (“TAA”).



A three year prescription period applies where the South African Revenue Service (“SARS”) has had a previous opportunity to assess a taxpayer (such as in the case of income tax) and a five year prescription period applies in the case of a self-assessment tax (such as value-added tax (VAT) and employees’ tax (PAYE)).

Generally, the prescription period that prohibits SARS from issuing an assessment does not apply if the reason why the full amount of tax was not charged was due to fraud, misrepresentation or non-disclosure of material facts.  When the tax is a self-assessment tax, the basis on which the period of limitation does not apply differs in that it refers to fraud, as well as intentional and negligent misrepresentation or non-disclosure.

The prescription period that prohibits SARS from issuing an assessment will also not apply where SARS and the taxpayer so agree prior to the expiry of the limitations of time.  Practically, such agreements are often entered into when SARS is conducting an investigation into a complex matter which involves the auditing of substantial information and facts.

Clause 34 of the 2013 Draft Tax Administration Laws Amendment Bill (“the Bill”) provides for an additional circumstance where the period of prescription can be extended.  It proposes to amend section 99 of the TAA by inserting a new subsection (3) which will provide for the extension of the prescription periods where “a taxpayer without just cause fails to submit relevant material requested by SARS for purposes of verification, inspection or audit ... commencing on the day that the relevant material was required to be submitted and ending on the day that the taxpayer submits the relevant material.”

The proposed amendment accordingly appears to have the effect of allowing SARS to extend the prescription periods provided for in section 99 of the TAA where a taxpayer exhibits a certain behaviour vis a vis the provision of information to SARS, assuming SARS was entitled to request the information in the first place.  What is unclear from the provision is what  would constitute “without just cause” where there is a delay in a taxpayer providing information and practically, what interaction is required, if any, where the period for prescription is extended in terms of this provision.  In challenging any assessment, a taxpayer can raise prescription as a ground of objection.  Accordingly, where SARS has relied on this proposed new provision in issuing an adverse assessment on the basis that the period of prescription has been extended due to the taxpayer’s behaviour, this should be able to be dealt with by a taxpayer in the objection and appeal process.

This new proposed provision certainly places an additional burden on taxpayers as regards the timeous provision of information to SARS and may have the effect of weakening the important defence for a taxpayer which prescription presents.  It is certainly a departure from the tool which is currently available to SARS to extend a prescription period which involves participation by the relevant taxpayer, namely where SARS and a taxpayer may enter into an agreement in respect thereof and it could be used by SARS to its strategic advantage when it comes to late requests for information when the prescription date for an assessment is looming.

Due to the important role which prescription can play in tax disputes, it is crucial for taxpayers to be aware of the prescription status of assessments and what rights are available in respect thereof.  Should the new proposed amendment to section 99 of the TAA be adopted by Parliament in the form discussed in this article, taxpayers should be vigilant in respect of information requests from SARS and deal with same fully and timeously.

The tax consequences of not doing so could prove extremely costly

It is common knowledge that investing takes time and patience,and that the chances of a good return are increased the longer the investment horison.From an income tax perspective, there's also an incentive to hold shares for at least three years before selling them.

This is because of the ‘safe haven’ tax rules in Section 9C of the Income Tax Act, which provide that the proceeds from the sale of shares (with certain exceptions) are automatically deemed to be capital if held by the taxpayer for at least three years.

This essentially means that the more favourable capital gains tax rate (a maximum rate of 13.3%, as opposed to the income tax rate of a maximum of 40%) will apply to profits made on shares that are held for three years or more.

Where shares are held for less than three years, the normal rules governing capital gains versus income gains must be applied to determine whether the gain is capital or income in nature. If the gain is capital in nature, the capital gains tax rate will apply; and if it is income in nature, the income tax rate will apply.

There is a large volume of legal precedent governing the distinction between capital and income gains,and the approach of the courts has been to place a high emphasis on the intention with which the taxpayer acquired the shares—was the dominant purpose for investment (capital) or was it for speculation (income)?

 Speculation concerns the subsequent sale of the shares at an increased price, whilst investment is the holding of the shares more or less ‘for keeps’ in order to earn dividend income.However, a potential problem that a taxpayer faces with regard to the argument that he acquired shares in order to earn dividend income is that the dividend yields of shares on the JSE are generally extremely low,and it is therefore often difficult to argue that this is a rational investment strategy.

Our strongest case law on this issue, much of which was decided in a time when dividends were relatively higher, would certainly not prove helpful to a taxpayer who, in addition to earning dividend income, sought to bolster the performance of the portfolio by selling at a profit to any meaningful degree.

Two cases in point: In the case of Tod, which was decided in the Natal Provincial Division of the High Court in 1983, the taxpayer was retired and lived almost entirely on the dividends from his shares. Tod had embarked on a plan in order to increase his annual dividends, whereby he would purchase a share on which a dividend was imminent, and as soon as the dividend had been declared, he would sell the share,usually at a profit.

The court held that in order for profits on the sale of shares not to be subject to income tax, the taxpayer must have a dominant purpose of maximising dividend income, and that any selling of shares must be ‘purely incidental’ to this objective.Tod's share transactions were held not to be purely incidental to the objective of maximising dividend income, and the proceeds were subject to income tax.

In Nussbaum's case, which was decided in the Appellate Division of the High Court in 1996, Nussbaum was a retired schoolteacher who had inherited a substantial share portfolio.He testified that he always acquired shares for the earning of dividend income, and that he had never bought a share for profitable resale;however, his modus operandi was to sell a share if the dividend yield had fallen to unacceptable levels.

Since a fall in the dividend yield was generally caused by an increase in the price of a share, Nussbaum generally made profits,and the court found that even though he had the primary purpose of earning dividend income, there was a ‘secondary purpose’ of dealing in shares, which rendered profits subject to income tax.

Market conditions aside, it is therefore wisest from a tax perspective to wait a minimum of three years before selling shares.

Source: By David Warneke (Tax breaks)

 

obviously CGT, as every sale you make, is of shares that you've owned longer than 3 years

What about if you buy shares/etf's monthly over a period of 3years? There's going to be 12 transactions a year 36 transactions in total. Does it mean if you sell all in month 37 you'll only pay cgt?

if you sell all in mnth 37, you'll pay CGT on one month and PAYE on 35 months - gotta own the shit for 3 years

that would work - main thing is, when you sell, you gotta tell SARS the date that you bought the shares that you are now declaring and it has to be 3 years prior, or you will have to motivate that there was some problem that changed your long term intent, in order to not pay PAYE

interesting Orca - I was not aware of that - In what document on which page can that be found?

That could come in handy if you want to move your gain into a new tax year....

I think Orca found it under Chapter 9 of the Comprehensive guide to CGT which you can get from SARS site.

In a nutshell, form the guide:-

Mark buys 500 shares of Effe Ltd listed on a recognised exchange for R10 000 and sells them on 20 February 2002 for R3 000. On 1 April 2002, he buys 500 shares of Effe Ltd for R3 200

Result:
Since the shares were repurchased within 45 days of loss-sale date, para 42 applies. Mark cannot claim his R7 000 loss. Instead, he must adjust his base cost for the ‘repurchased’ shares. The base cost under para 42(1)(a) and (b) for his ‘new’ shares will be R3 200 (the actual cost) plus R7 000 (the held-over loss), therefore R10 200.
Mark would also be affected by this paragraph if he had purchased his ‘new’ shares on 24 January 2002 and then made the loss sale on 20 February 2002. On the other hand, if Mark had waited and repurchased the 500 shares 46 days after the sale, para 42 would not apply and the R7 000 capital loss would be allowable. The base cost of the 500 shares repurchased would equal the cost actually incurred.



Edit: Must be the same share, not share X and then purchase share Y