Transcript tax update - Fasset
Budget & Tax Update 2008
The morning ahead
2008 Budget
2007 Tax update
Taxation Laws Amendment Act 8 of 2007
Taxation Laws Second Amendment Act 9 of 2007
Revenue Laws Amendment Act 35 of 2007
Revenue Laws Second Amendment Act 36 of 2007
2
PART 1 – BUDGET 2008
3
Main tax proposals
R10.5 bn in net tax relief R7.7 bn personal income tax relief Company tax rate down to 28% STC replaced by a final withholding tax on dividends in 2009 Simplified system for small businesses with annual turnover up to R1m Compulsory VAT registration threshold increases to R1m Incentives to encourage venture capital equity investments in SMMEs R5 billion over the next 3 years in targeted incentives to encourage investment in labour-intensive or strategic sectors Learnership allowances to be expanded Electricity levy of 2 cents per kilowatt hour to be introduced
4
Tax tables
5
Rebates
Under 65 Increase over previous year Over 65 Increase over previous year
2009
R8 280 7% R5 040 7.7%
2008
R7 740 7.5% R4 680 4.0% 6
Under 65 Over 65
Tax threshold
2009
R46 000 R74 000
2008
R43 000 R69 000 7
Tax savings - persons under 65
Taxable income R 46000 100000 200000 300000 500000 1000000 2008/9 R 0 9720 33430 64930 138730 338730 2007/8 R 540 10260 35385 67885 143385 343385 Saving R 540 540 1955 2955 4655 4655 % 5% 6% 4% 3% 1%
8
Interest and taxable dividend exemption
Under 65 Over 65 Foreign dividends & interest 2009 R19 000 R27 500 R3 200 2008 R18 000 R26 000 R3 000
9
Capital exemptions
Donations tax Estate duty CGT annual exclusion Primary residence exclusion 2009 2008 R100 000 R100 000 R3,5m R16 000 R3,5m R15 000 R1,5m R1,5m
10
Company tax rates
Years of assessment ending between 1/4/08 and 31/3/09 Non-mining companies Close corporations Employment companies Taxable income of a non-resident company Closely held passive investment companies 2009 2008 28% 28% 33% 33% 29% 29% 34% 34% 40% 29%
11
Small business corporations
Years of assessment ending between 1 April 2008 - 31 March 2009 Taxable income R 0 46 000 0% Rate of tax 46 001 300 000 300 000 10% of the amount over R46 000 R25 400 + 28% of the amount over R300 000
12
Presumptive turnover tax for very small businesses
Years of assessment ending between 1 April 2008 and 31 March 2009 Turnover R 0 100 000 100 001 300 000 Rate of tax 0% 2% of the amount over R100 000 300 001 500 001 750 001 500 000 R4 000 + 4% of the amount over R300 000 750 000 R12 000 + 5.5% of the amount over R500 000 1 000 000 R25 750 + 7.5% of the amount over R750 000
13
Presumptive tax illustration
Turnover R 100000 200000 300000 500000 750000 1000000 Tax R Nil 2000 4000 12000 25750 44500 Average 0% 1.0% 1.3% 2.4% 3.4% 4.5%
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STC
Rate of STC on dividends declared 14 March 1996 – 30 September 2007 On or after 01 October 2007 12.50% 10%
15
Other tax rates
Trusts (other than special trusts) Estate duty Donations tax PBOs & recreational clubs 2009 40% 20% 20% 28% 2008 40% 20% 20% 29%
16
Dividends & STC
STC rate remains at 10%
Dividend withholding tax in 2009
no dividend tax for tax-exempt entities
all STC credits will expire
10% withholding tax for resident shareholders
rate for non-resident shareholders may be limited by specific tax treaties
Tax withheld by the declaring company to be paid to SARS by the end of the month following the month in which the dividend is declared
17
Dividends (cont.)
cascading relief will apply to avoid double tax
10% rate on dividends paid to closely held (passive) companies dividend payments to nominees and representative parties Option 1: declaring company may reduce or eliminate 10% withholding tax if sufficient proof that the economic owner has preferred status (joint liability for error) Option 2: nominee withholds the tax (if SARS is satisfied that the nominee has sufficient substance) 18
Capital distributions
Part-disposal rule may be reviewed
A short discussion document may be issued
19
Learnership allowance
To be extended to cater for longer-term technical apprenticeships such as electricians, welders, plumbers, mechanics, etc
20
Tax incentives to support industrial policy
Carefully designed incentives to encourage investment in labour intensive or strategic sectors
Programme to be finalised in consultation with the Department of Trade and Industry and other interested parties
21
Urban development zones
Section 13quat incentive to be extended for five years
Municipalities may apply to extend designated zones
Number of participating municipalities may be expanded
22
Housing for low-income workers
Current tax allowances (ss 11(t) & 13ter) to be enhanced
R6 000 deductible limit per dwelling for employer-provided housing to be increased
Additional incentives to be explored
Fringe benefits tax relief for employer-provided low-cost housing
23
VAT relief for small businesses
Compulsory VAT registration threshold increased to R1 million p.a.
Threshold for farmers submitting VAT returns every 6 months and businesses that submit every 4 months increased from R1.2 m to R1.5 m
Presumptive tax for very small businesses
24
Venture capital incentive: non-mining
Investors in high-growth and high-tech small and start-up enterprises with
annual turnover up to R14 m or
gross assets up to R7 m
General venture capital investments: 30% up front deduction, with annual deductions capped at
R500 000 for individuals
R750 000 for companies
R7.5 m for venture capital funds
25
Venture capital incentive:
junior mining and exploration companies
Gross assets up to R30 – 50 million for junior mining and exploration companies
50% upfront deduction, with annual deductions capped at
R1 m for individuals; R10 million for companies and venture capital funds
26
Depreciation of small business non manufacturing equipment
50:30:20 write-off OR
Section 11(
e
) wear tear
27
Individuals
Medical scheme contributions
monthly monetary caps increased from R530 to R570 for each of the first two beneficiaries and from R320 to R345 for each additional beneficiary
Medical expenses
“handicapped person” and physical disability expenses to be reviewed
28
Employees’ tax
SITE
Refunds following broken periods
Repayable remuneration
Deductions to be introduced for repayments of bonuses,etc
29
Bursary exemption Remuneration limit Bursary limit 2008/9 R100 000 R10 000 2007/8 R60 000 R3 000
30
New travel allowance table
Value of the vehicle R 0 – 40 000 40 001 – 80 000 80 001 – 120 000 120 001 – 160 000 160 001 – 200 000 200 001 – 240 000 240 001 – 280 000 280 001 – 320 000 320 001 – 360 000 360 001 – 400 000 exceeding 400 000 Fixed cost R p.a.
14 672 29 106 39 928 50 749 63 424 76 041 86 211 96 260 106 367 116 012 116 012 Fuel cost (c/km) 58.6
58.6
62.5
68.6
68.8
81.5
81.5
85.7
94.6
110.3
110.3
Maint. (c/km) 21.7
21.7
24.2
28 41.1
46.4
46.4
49.4
56.2
75.2
75.2
31
New subsistence allowance rates
Travel in the Republic
meals and incidental costs: R240 per day
incidental costs only: R73.50 per day
Travel outside the Republic: US$215 per day
From 1 March 2008
32
Fringe benefits
Residential accommodation for expatriates
1 year exempt period to be extended to 2 years subject to a ceiling of the lower of 25% of remuneration or R25 000 per month
Relief for incidental private use of cellular phones and laptops
33
Reform of retirement funds
Review continues
Divorce settlements to be taxed in the non member spouse’s hands
34
Public benefit organisations
Requirement to conduct 85% or more of activities in South Africa to be dropped
Donations to multilateral humanitarian organisations offering developmental assistance in South Africa to qualify for section 18A deduction
PBOs providing student loans to be exempt
Tax exemption for PBOs providing housing
maximum monthly household income to be increased from R3500 to R7000 per month
35
Biodiversity conservation and management
Measures to encourage conservation
Tax incentives for private landowners preserving habitats and biodiversity on their land
Deduction of expenses limited to income derived from the land
Tax deduction for nature reserve or national park donated to a PBO or parastatal conservation agency
Possible estate duty, transfer duty and donations tax exemptions for properties bequeathed, sold or donated to a PBO for declaration as a protected area
36
Electricity levy
2 c/kWh tax on electricity
Complemented by incentives to encourage businesses to behave in a more environmentally responsible manner
Existing tax incentives on uptake and development of renewable energy may be further enhanced
37
Fuel taxes and Road Accident Fund levy
Fuel levy to increase on 2 April 2008 by 6 c/l to
127 c/l (petrol) and
111 c/l (diesel). This constitutes an increase of 5% for petrol and 5.7% for diesel respectively.
RAF levy on petrol and diesel to increase by 5 c/l 46.5 c/l from 2 April 2008
38
Alcoholic beverages and tobacco products
39
Financing options for provincial and local government
Alternatives to RSC and JSB levies
share of revenue from the fuel levy based on fuel sales per municipality
provinces may receive a share of the fuel levy based on fuel sales per province
40
Group relief and the de-grouping charge
2007 amendments to group relief rules set to become effective from 1 January 2009
Definition of “group of companies” and transitional issues to be reviewed
Further anti-avoidance provisions
De-grouping charge to be revisited in respect of double gains and trapped losses
VAT legislation to be amended
41
Share incentive schemes
Broad-based share incentive schemes Limits to be reviewed Share incentive schemes Section 8C to be further refined 42
Intellectual property
2007 amendments to eliminate deduction of royalty payments to foreign residents if the royalty stemmed from intellectual property initially devised in South Africa
further discussion required before implementation
43
Body corporates
Levies are tax-free but other income is taxable
Non-levy investment income to be exempt up to R50 000
44
Provisional tax
System to be reviewed
Basic amount to exclude retirement fund lump sums and pre-retirement withdrawals
45
Tax administration
Penalty & interest system to be streamlined Requirement to submit supporting documents to be removed (supporting documentation need only be kept as part of the taxpayer’s records) IRP5 and EMP501 system to be improved 46
Trusts and estates
Trust distributions to beneficiaries
Double tax charge on vesting of trust assets to be removed
Estate redistributions
Tax-free redistribution rules to be adjusted for supplying outside funds or assets to equalise differences
47
Estate Duty
General anti-avoidance rule
Estate duty assessments
Life insurance/pension benefits and estate duty
exemption for life insurance up to a specified threshold (as long as that policy is not created shortly before death) 48
PART 2 – TAX UPDATE
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Developments over the last year
Interpretation notes
Regulations and government notices
Retirement notes
Tax judgments
Brochures and guides issued by SARS
Interest rate changes
UIF threshold See www.sars.gov.za
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Dividends & STC
Pre-1/10/01 capital profits and pre-1993 profits in a liquidation distribution no longer be excluded from “dividend” from 1/1/09 “Profits” means realised and unrealised profits whether or not unrealised profits have been recognised in the accounts of the company (from 1/10/07) Paras (c) and (d ) of the definition of “dividend” have been deleted (from 1/10/07)
Share capital or share premium apportioned to a particular class of shares may not exceed the contribution given in respect of the issue of that class of shares (from 1/10/2007)
51
Allocation of share premium
Example
A company has two classes of ordinary shares A and B shares A-shareholders previously contributed share capital and share premium of R30 000 Before the creation of the B shares, the company’s value was R1million B shares are then issued for R1million, bringing the total value of the company to R2 million The company then distributes R1 million to the A-shareholders.
Result
The share capital and premium allocated to the A shares cannot exceed R30 000 (initial contribution for those shares)
52
Inter-group STC exemption (s 64B(5)( f ))
New definition of “group of companies” in s 41
If the shareholder is a company
it must form part of the same group of companies as the company declaring the dividend and
the dividend must be taken into account in the determination of the profits of that shareholder
Dividend from pre-acquisition profits
Exemption applies if the dividend is recognised as income Excluded from the definition of “dividend” to the extent that it reduces the cost of investment in accordance with IAS 18 (AC 111)
Effective 1 October 2007
53
Company reorganisations (Part III)
Definition of “group of companies” (s 41) narrowed
Limited to taxable companies 70% ownership criteria tightened
Excludes shares held as trading stock
Ignore shares subject to derivatives with rights/obligations of sale
Effective date: the definition of ‘‘dividend’’ - 1 October 2007
Part III of the Act - 1 January 2009 STC provisions - 1 October 2007 Para 12 of the Eighth Schedule - 1 October 2007
54
Company reorganisations (Part III)
Sections 42 and 43 combined : Asset-for-share transactions Section 44(9A): amalgamated company’s profits are effectively rolled over to the resultant company so that STC remains payable when the resultant company makes subsequent distribution
effective from 21 February 2007
Section 44(13): steps to liquidate, etc must be taken within 18 months (or a longer period as the Commissioner may allow)
Intra-group transactions (s 45): degrouping charge if severed within 6 years
effective from 1 January 2009
55
Deemed capital on share sales
Previously: s 9B
Listed shares
5-year rule
Election
disposed of by the taxpayer before 1/10/07
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New s 9C
Sales of shares held for up to 3 years are deemed to be capital
Mandatory (no election )
Applies to gains and losses
Applies to sales of “qualifying shares” on/after 1/10/07
Recoupment of previous deductions but no s 22(8) recoupment
Special rules for fixed property companies
57
Example
Taxpayer
acquires shares for R150 in 2008
holds the shares as trading stock
sells the shares for R290 in 2013
Tax treatment:
Purchase/opening stock deduction and closing stock add back in 2008 - 2012
2013:
opening stock deduction (s 22) of R150
deduction recouped R150
capital gain of R140 (R290 - R150)
58
“Qualifying share”
Equity share as defined in s 44 - includes
shares listed on the JSE (domestic and foreign)
private company shares
interests in close corporations
collective investment schemes in securities
Excludes
s 8E hybrid instruments
shares in share block companies
shares in unlisted foreign companies
59
Fixed property companies
The person selling the share is a connected person to the company
“Connected person” - s 1 definition BUT
includes a shareholder (another company) with at least 20% holding even if another shareholder holds a majority interest And a) more than 50% of the MV of the company consists of immovable property acquired within 3 years before disposal of the shares
or b) within the last 3 years the company acquired assets that are encumbered by a lease or license and payments for use of the asset are made to someone other than the company Normal facts and circumstances test will then apply
60
Example
Mr X wishes to use one of his shelf companies to trade property
He has held one shelf company for 5 years
He provides a guarantee to enable the shelf company to obtain a bank loan to buy a property
Sells the shares in the shelf company 6 months later
S 9C will not apply as he is a connected person to the shelf company & the MV of the company comprises fixed property
61
Other s 9C provisions
Para 12 deemed disposals are disposals for s 9C purposes
FIFO basis applies
Roll-over rules generally apply except for s 42 (asset for-share transactions) and s 46 (unbundlings)
Special provisions for securities lending arrangements
Section 8B and 8C continue to apply
62
Retirement fund lump sum benefits Para 1 of the Second Schedule
Formula A deleted
Lump sums on retirement or death accruing on/after 1/10/07
tax-free portion calculated using Formula B: (Z=C+E-D)
C = R300 000
D = previous exemptions
E = disallowed contributions & pre-1/3/98 benefits from public sector pension funds
63
Example
T retires from Big (Pty) Ltd on 1 December 2007
Member of the pension fund for 30 years
Retirement lump sum = R900 000
All contributions allowed as deductions and no previously retirement lump sum
The tax-free portion:
Z = C + E – D = 300 000 + 0 + 0 = R300 000
Taxable portion = R600 000
64
Tax rates for retirement and death lump sums accruing on/after 1/10/07 Tax rate on any taxable retirement fund lump sum benefit in respect of any year of assessment ending on 29 February 2008:
65
Lump sum benefits: other amendments (from 1/10/07)
“Retirement funding employment” (RFE) excludes retirement fund lump sum benefits
Rebates (s 6) may not be set off against tax on retirement fund lump sum benefits
RAF contributions (s 11(n)(A)): 15% of TI before s18, 18A excluding RFE income and retirement lump sum benefits
Medical deduction (s 18): 7,5% on TI excluding retirement lump sum benefits
Section 18A limit: 10% of TI excluding any retirement fund lump sum benefit
Assessed loss may not be set off against a retirement fund lump sum benefit (s 20 proviso (c))
No deduction of any expenses incurred in production of a retirement fund lump sum benefit (s 23(i))
66
Surplus apportionments
Lump sum distributions to former members after their retirement, death, withdrawal or resignation from a pension, provident or RA fund or the winding up of the fund
To rectify past unfair practices (as previously referred to in para 6(2))
NOT included in para (e ) of the definition of ‘Gross income’
Para 2C of the Second Schedule (w.e.f. 1/1/06)
(Para 6(2)(deleted)
67
Membership of a public sector fund transferred to a private sector fund
Pre-1/3/98 benefits transferred to private sector fund are preserved as tax-free E in formula B amended to include these amounts same treatment on resignation/withdrawal 68
Withdrawal/ resignation lump sum benefits
Same treatment as previously
Extension of pre-1/3/98 tax free benefits from public sector funds
Taxable amount taxed according to s 5(10) rating formula
69
Changes to definition of ‘pension fund’ and ‘retirement annuity’ fund (s 1) Rules of the fund: Not more than 1/3 of total benefit may be commuted to a lump sum (2/3 must be taken as an annuity) except where 2/3 of the total value does not exceed R50000 (i.e. total benefit not more than R75000) (previously referred to annual annuities up to R1800) Effective from commencement of years of assessment ending on/after 1/1/08
70
PAYE on Lump sum benefits
Para 9 of the Fourth Schedule
PAYE must be withheld from lump-sum payments included in para (d) or (e) of the gross income definition or to which s7A(4A) applies
BUT: No employees tax to be withheld from any para (e) lump sum if the individual’s taxable income excluding the lump sum for the previous year was below the tax threshold (for lump sums accrued on/after 1/10/07)
71
Divorce settlements
Taxable in the hands of the fund member as a withdrawal benefit on the date the amount becomes payable
Fund must pay PAYE in terms of a tax directive
The Pension Funds Act has been amended to allow the fund to release the tax from the fund member’s benefit
In the case of a divorce order, the fund member will have a right of recovery of the tax he/she has paid
72
Occupational death benefits
Up to R300 000 compensation on death arising out of and in the course of employment
if in addition to compensation paid in terms of the Workmen's Compensation Act, 1941 (Act 30 of 1941) or the Compensation for Occupational Injuries and Diseases Act, 1993 (Act 130 of 1993)
73
183-day exemption (cont.)
Employee must be absent for 183 full days during any 12 month period commencing or ending during any year of assessment
Remuneration received or accrued during a year of assessment in respect of services rendered in more than one year of assessment is deemed to have accrued evenly over the period that those services were rendered
Effective from the commencement of years of assessment ending on or after 1 January 2008
74
183-day exemption (s 10(1)( o )(ii))
Remuneration received by/ accruing to an employee
By way of -
salary, leave pay, wage, overtime pay, bonus, gratuity, commission, fee, emolument
para (i) fringe benefits
sections 8B and 8C
Doesn’t include
pension, superannuation allowance, retiring allowance or stipend
para (cA), (d), (e), (eA) or (f) amounts if not for services rendered
75
Deduction for annuities (s 11( m ))
Deduction of annuity payments to a dependent of a former employee or partner of the taxpayer was limited to R2 500 per year
The limitation has been removed with effect from the commencement of years of assessment ending on or after 1 January 2008.
76
Connected person limitation
Deemed cost provisions replaced by s 23J
S 11(e)(viii)
S 11(gC) proviso para (bb)
S 12B(4A)
S 12C(4)
No s 11(o) allowance for sales between connected persons
77
Asset purchased from a connected person (s 23J)
Depreciable tax cost of an asset purchased from a connected person is the sum of
The cost (taking into account any subsequent tax adjustments) of the depreciable asset to the connected person seller;
Less: tax allowances
Add: ordinary revenue triggered upon the connected person sale as well as any inclusion stemming from the capital gain triggered on the sale
78
Example
Co. X owns 60% of Co Y and Co Z
Y sells depreciable equipment to Z
Y initially purchased the equipment for R100; TV = R70
Y sells the equipment to Z for R110
R30 recoupment
R10 capital gain = R5 taxable capital gain (50%)
Z’s depreciable cost = R105
79
Deduction for commercial buildings (s 13 quin)
5% p.a. of the cost to the taxpayer
New and unused buildings & improvements
Wholly or mainly used by the taxpayer during the year of assessment for purposes of producing income in the course of trade, other than the provision of residential accommodation
Other deductions take precedence
Applies to buildings contracted for on or after 1/4/07 and construction, erection or installation commenced on or after that date
80
Deductions for environmental expenditure (s 37B)
Capital allowance on new and unused
environmental production assets (waste treatment and recycling facilities & improvements) (40:20:20:20 rate); and
postproduction assets (waste dumps and dams & improvements) (5% p.a.)
If ancillary to manufacturing or similar process of a permanent nature (moveable assets covered by s 11(e))
Assets must be used to meet legal environmental obligations
81
Medical expenses paid by employer
Employees required to undergo medical check-ups in terms of employer’s policy or legislation
if the employer pays, a fringe benefit arises and is taxed (code 3813) Deemed expense for the employee (code 4024) – can deduct excess over 7,5% of taxable income
Exemption if services rendered or medicines supplied are required by law
82
Qualifying medical expenses (s 18(1)( b ), (c) & ( d ))
“Taxpayer, spouse and children” extended to include dependants
if admitted as a dependant of the taxpayer’s medical aid fund
83
Donations (s 18A)
Limit increased to 10% of taxable income
Heading amended
84
Residential accommodation
Taxable unless employee is away from usual place of residence for the purposes of performing his/her employment duties
ITC 1807 – 32 month period accepted
Para 9(7) exemption: 1 year limit if usual place of residence is outside the Republic
Effective 1/3/08
85
Residential accommodation
Para 9(3) formula:
B increased from R40000 to R43000 from 1/3/07
i.e. no tax if employee’s remuneration is less than the tax threshold
86
Prohibition of deductions on certain intellectual property (s 23I)
“Affected intellectual property”
involves a connected person (with lower threshold)
No deduction for royalties, etc if they are not taxed in the recipient’s hands
1/3 deduction if the royalties are subject to s 35 withholding tax (12 %)
87
“Intellectual property”
patent
design
trade mark
copyright
invention, patent, design, trade mark or copyright defined or described in any similar law of any foreign country
property or right of a similar nature
knowledge connected to the use of property
88
Example
IP developed by resident; assigned to non-resident Non resident allows the resident’s company to use the patent an annual licence fee of R1m
12% withholding tax on royalty payments
Royalty receipts exempt in the hands of the licensor (s 10 (1)(l))
Deductions for the SA licensee are reduced from R1million to R333 333 i.t.o. s 23I (2)(a)
89
Anti-avoidance (s 23I(2)(
b
))
Taxpayers prevented from interposing a third party that converts royalty streams into financial instruments (e.g. promissory notes and credit default swaps) and on routing these payments to entities with lower effective tax rates
Example
Licence: Promissory notes for royalties are discounted by the licensor to a tax exempt entity or fund
Deduction denied i.t.o. ss 23I(2)(a) and/or (b)
90
Foreign tax relief – s 6
quat
Now permitted to deduct foreign taxes on SA-source activities
services within SA but foreign government imposes withholding tax
Limited to related taxable income
Replaces s 11C(4) & (5) 91
Research and development allowance (s 11D)
Recoupment – s 8(4)(a) N/A to s 11D(1) Scrapping allowance – s 11(o) Pre-trade expenses – s 11A Limitation for sale & leaseback transactions – s 23D
Reinvestment in replacement assets - Para 66 of the Eighth Schedule
Effective 2/11/06
92
Amendments to s 11D
Asset must be
Owned by the taxpayer or acquired i.t.o an instalment credit agreement
Brought into use for the 1 st time Used solely and directly for qualifying R&D (NB “part of a building”)
If expenditure qualifies for both the 150% deduction and the 50/30/20 allowance, the capital allowance takes precedence
S 11D(6) – taxpayer can elect that another capital allowance applies (if the asset qualifies)
93
Foreign currency transactions
Exchange difference subject to s 24I(7A) (10% p.a.) cannot be subject to s 24I(10) (deferral of exchange differences until loans are realised)
NB: s 24I(7A) applies to loans granted in any YOA ending before 8/11/05
94
Dividend stripping / extraordinary div’s (para 19 of Eighth Schedule)
Capital loss disregarded
up to the amount of the extraordinary dividend
distributed within 2 years before disposal of the share
95
Example
H Co purchased 100% of S Co for R20 million in 2000
S Co has increased in value to R35 million
15/3/2008: S Co distributes R20 million to H Co & H Co then sells the S Co shares for R15 million (R5 million loss)
Extraordinary dividend = amount exceeding 15% of the R15 million proceeds (R20m – 2.25m = R17.75m)
H Co must disregard the R5 million loss (up to the amount of the extraordinary dividend)
96
Capital distributions (paras 76 and 76A of the Eighth Schedule)
Previously deferred, i.e.
distributions on or after 1/10/01 were added to proceeds on the eventual disposal of the shares
pre-2001 distributions reduced base cost of the share
From 1/10/07: each capital distribution will trigger a part-disposal
Distributions before 1/10/07 will be deemed to trigger a part disposal on 1 July 2011
97
Example
Taxpayer acquired a share for R120 in 2002; now has a value of R200
Taxpayer receives a capital distribution of R20 in July 2009
Capital distribution gives rise to a part disposal. 10% of base cost (10% x R120) is allocated to the part-disposal
Capital gain = R20 – R12 = R8
98
Sporting bodies (s 11E)
National sporting organisations can amalgamate amateur and professional divisions before 31/12/09
professional arm’s disposal of all its assets to the amateur arm will be tax neutral
professional arm then ceases to exist
amalgamated entity will be taxable
Section 11E: special deduction for non-capital expenditure incurred on development and promotion of qualifying amateur sport
99
Withholding of CGT from payments to non resident sellers of immovable property (s 35A)
Disposals on/after 1/9/07
5% of the amount payable if the seller is a natural person
7,5% of the amount payable if the seller is a company
10% of the amount payable if the seller is a trust
If the selling price of the property exceeds R2 million
100
Waiver of debt
Regulations published 13 April 2007
101
THANK YOU!
102