Transcript Public private partnerships

Afzal Khan
RAFT
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083 786 4709
Business Day 30 May 2012
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Public private partnerships refer to contractual
arrangements in which a private party
performs part of a government function and
assumes the associated risks. In return, the
private party receives a fee according to
predefined performance criteria. A public
private partnership may also be a project in
which a private party uses state assets for its
own commercial purposes, and government
benefits from the profits generated by the
enterprise.
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2.5.11 Public Private Partnership (PPP)
a) If there is a need, SARS may enter into a PPP
in accordance with the National Treasury
Regulations.
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“Public Private Partnership” means a Public
Private Partnership as defined in Regulation 16
of the Treasury Regulations issued in terms of
section 76 of the Public Finance Management
Act, 1999 (Act No. 1 of 1999);
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“public-private partnership” means a commercial transaction
between an institution and a private party in terms of which –
(a) the private party either performs an institutional
function on behalf of the institution for a specified or
indefinite period; or acquires the use of state property for
its own commercial purposes for a specified or indefinite
period;
(b) the private party receives a benefit for performing the
function or by utilising state property, either by way of:
(i) compensation from a revenue fund;
(ii) charges or fees collected by the private party
from users or customers of a service provided to them;
or
(iii) a combination of such compensation and such
charges or fees;
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WESTERN CAPE
Destination Marketing Organisation
Western Cape Commissioner for the Environment
Western Cape Cultural Commission
Western Cape Gambling and Racing Board
Western Cape Investments and Trade Promotion
Agency
Western Cape Language Committee
Western Cape Liquor Board
Western Cape Nature Conservation Board
Western Cape Provincial Development Council
Casidra (Pty) Ltd
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Can a municipality enter into a PPP?
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Section 120
Yes you may enter into a PPP
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To third parties who contract with you
on PPPs
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(zI) any amount received by or accrued to or in
favour of any person from the Government,
where—
(i)
that amount is granted for the
performance by that person of its
obligations pursuant to a Public
Private Partnership; and
(ii)
that person is required in terms of that
Public Private Partnership to expend an
amount at least equal to that amount in
respect of any improvements on land or to
buildings owned by any sphere of
government or over which any sphere of
government holds a servitude.
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Will need to get clarity on that since
government is not defined.
Reference is made to “all spheres of
government”.
Reference is to PFMA and not MFMA.
My answer - yes
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12N. Deductions in respect of improvements not owned by taxpayer.—(1) If a
taxpayer—
(a)
holds a right of use or occupation of land or a building;
(b)
incurs an obligation to effect an improvement on the land or
to the building in terms of—
(i)
a Public Private Partnership; or
(ii)
an agreement in terms of which the right of use or
occupation is granted, if the land or building is owned by—
(aa)
the government of the Republic in the national,
provincial or local sphere; or
(bb)
any entity of which the receipts and accruals are
exempt from tax in terms of section 10 (1) (cA) or
(t);
(c)
incurs expenditure to effect the improvement contemplated in paragraph
(b);
(d)
completes the improvement contemplated in paragraph (b); and
(e)
uses or occupies the land or building for the production of income or
derives income from the land or building,
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the taxpayer must, for the purposes of any
deduction contemplated in section 11D, 12D,
12F, 12I, 13, 13bis, 13ter, 13quat, 13quin, 13sex
or 36, and for the purposes of the Eighth
Schedule, be deemed to be the owner of the
improvement so completed.
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11D –
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12D –
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12F –
12I –
Scientific or technological research and
development – 100%
Pipelines, transmission lines and
railway lines – 100%
Airport and port assets – 100%
Industrial policy projects
 35% to 100%
 R36000 per employee
 R20million to R30million additional training allowance
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13 –
Buildings used in a process of
manufacture – 10%
13bis – Buildings used by hotel keepers 5% or
20%
13ter Residential buildings 2%, 10%
13quat – Erection or improvement of
buildings in urban development zones
 20% then 8%, 20% over five years.
 Low cost housing 25%, 13% 10%, 25% over four years
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13quin – Commercial buildings - 5%
13sex – Residential units – 5%
36 Unredeemed balance of capital
expenditure in connection with mining
operations
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(cA)
the receipts and accruals of—
(i)
any institution, board or body (other than a company
registered or deemed to be registered under the
Companies Act, 1973 (Act No. 61 of 1973), or the
Companies Act, 2008 (Act No. 71 of 2008), any cooperative, close corporation, trust or water services provider, and any
Black tribal authority, community authority, Black regional authority
or Black territorial authority contemplated in section 2 of the Black
Authorities Act, 1951 (Act No. 68 of 1951)) established by or under
any law and which, in the furtherance of its sole or principal object—
(aa)
conducts scientific, technical or industrial research;
(bb)
provides necessary or useful commodities, amenities or
services to the State (including any provincial
administration) or members of the general public; or
(cc)
carries on activities (including the rendering of financial
assistance by way of loans or otherwise) designed to
promote commerce, industry or agriculture or any branch
thereof;
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Not specifically defined
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“designated entity” means a vendor—
(iii)
which is a party to a “Public Private
Partnership Agreement” as defined in
Regulation 16 of the Treasury
Regulations issued in terms of section
76 of the Public Finance Management
Act, 1999 (Act No. 1 of 1999), to the
extent that that party supplies goods or
services in terms of that Agreement to
the “institution” defined in that
Regulation;
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Designated entities essentially carry out work
which would otherwise be done by
government, but compete with other vendors
in the economy. The funding that these entities
receive is treated on the same basis as the
consideration received by other vendors for
making the same or similar taxable supplies.
Payments to designated entities are therefore
taxable at the standard rate of 14% (unless the
deemed supply is by a welfare organisation, in
which case the zero rate applies).
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8(5) For the purposes of this Act a designated
entity shall be deemed to supply services to
any public authority or municipality to the
extent of any payment made by the public
authority or municipality concerned to or on
behalf of that designated entity in the course or
furtherance of an enterprise carried on by that
designated entity.
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(u)
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the services are deemed to be supplied
in terms of section 8 (5) by a designated
entity in respect of any payment made
in terms of section 10 (1) ( f ) of the
Skills Development Act, 1998 (Act
No. 97 of 1998), to that designated
entity.
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Establishing learnerships
Approving workplace skills plans
Allocating grants
Monitoring education and training
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Accounting
Building Income
R100,000
Expenses
R70,000
Profit
R30,000
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Accounting
Building Income
Expenses
Tax
R100,000
Building Income
R70,000
Exempt income
Expenses
Profit
R30,000
R100,000
(R100,000)
(R70,000)
Taxable income
Income tax saved
Percentage return on tax
saving on investment
R0
R8,400
12%
• Please remember that the VAT Act deems this private party to be carrying
on an enterprise.
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11D –
Scientific or technological research and
development – 100%
12D – Pipelines, transmission lines and
railway lines – 100%
12F – Airport and port assets – 100%
12I –
Industrial policy projects
 35% to 100%
 R36000 per employee
 R20million to R30million additional training allowance
(021) 559 9600
[email protected]
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13 –
Buildings used in a process of
manufacture – 10%
13bis – Buildings used by hotel keepers 5% or
20%
13ter Residential buildings 2%, 10%
13quat – Erection or improvement of
buildings in urban development zones
 20% then 8%, 20% over five years.
 Low cost housing 25%, 13% 10%, 25% over four years
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13quin – Commercial buildings - 5%
13sex – Residential units – 5%
36 Unredeemed balance of capital
expenditure in connection with mining
operations
(021) 559 9600
[email protected]
Accounting
Building Income
Expenses
Tax
R100,000
Building Income
R70,000
Exempt income
Expenses
Profit
R30,000
(R100,000)
(R70,000)
Taxable income
Income tax saved
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R100,000
R0
R8,400
Percentage return on tax
saving on investment
12%
Additional
25%
Percentage return on tax
saving on investment
37%
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No PPP
Qualifying Income
R100,000
Expenses
(R70,000)
Cannot claim VAT
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R9,800
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Deemed to be carrying on an enterprise.
Hence can make vatable supplies and claim input VAT.
Further zero-rating opportunities if related to skills development.
No PPP
PPP
Qualifying Income
R100,000
Qualifying Income
R100,000
Expenses
(R70,000)
Expenses
(R70,000)
Cannot claim VAT
R9,800
Can claim VAT
If SDL the zero-rating benefit
Percentage return on tax
saving on investment
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R9,800
R14,000
14% or 34%
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16.3.2 The relevant treasury may grant such
approval only if it is satisfied that the proposed
PPP will –
(a) provide value for money;
(b) be affordable for the institution; and
(c) transfer appropriate technical, operational
and financial risk to the private
party.
16.6.3 A PPP agreement must be procured in
accordance with applicable procurement
legislation.
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16.12.1 An agreement between an institution
and a private party for the latter to perform an
institutional function without accepting the
significant risks is not a PPP and must be dealt
with as a procurement transaction.
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(y) any government grant or government scrapping payment received or accrued in
terms of any programme or scheme which has been approved in terms of the national
annual budget process and has been identified by the Minister by notice in the Gazette
with effect from a date specified by the Minister in that notice (including any date that
precedes the date of such notice) for purposes of this paragraph, having regard to—
(i)
whether the programme or scheme meets government policy priorities
and objectives with respect to—
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(aa)
(bb)
(cc)
(dd)
(ee)
( ff )
(gg)
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(ii)
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(iii)
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(iv)
the extent to which the programme or scheme will support the policy
priorities and objectives contemplated in subparagraph (i);
the financial implications for government should government grants or
government scrapping payments in terms of that programme or scheme
be exempt from tax; and
whether the tax implications were taken into account in determining the
appropriation or payment in respect of that programme or scheme;
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the encouragement of economic growth and investment;
the promotion of employment creation;
the development of public infrastructure and transport;
the promotion of public health;
the development of innovation and technology;
the provision of housing and basic services; or
the provision of relief in the case of natural disasters;
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Afzal Khan
RAFT
[email protected]
083 786 4709