Transcript Document

2012
Budget and Tax
Update
1
2012 BUDGET
2
Main Tax Proposals
•
•
•
•
Personal income tax relief of R9.5 billion (2011: R8.1 billion)
Implementing the dividend withholding tax at 15%
An increase in effective capital gains tax rates
Reforms to the tax treatment of contributions to retirement
savings
• Further reforms to the tax treatment of medical scheme
contributions
• Tax preferred savings and investment vehicles for individuals
are to be introduced
• Relief for micro and small businesses
3
Tax Tables - Individuals
2012/2013
Taxable Income (R)
2011/2012
Rate of Tax (R)
Taxable Income (R)
Rate of Tax (R)
0 – 160,000
18%
0 – 150,000
18%
160,001 – 250,000
28,800 + 25%
150,001 – 235,000
27,000 + 25%
250,001 – 346,000
51,300 + 30%
235,001 – 325,000
48,250 + 30%
346,001 – 484,000
80,100 + 35%
325,001 – 455,000
75,250 + 35%
484,001 – 617,000
128,400 + 38%
455,001 – 580,000
120,750 + 38%
617,001 and above
178,940 + 40%
580,001 and above
168,250 + 40%
4
Rebates
2013
Rebates for natural persons(R)
Under 65 – Primary
2012
Rebates for natural persons (R)
Under 65 – Primary
11,440
10,755
65 and over – Secondary
6,390
6,012
65 and over – Secondary
75 and over - Tertiary
2,130
2,000
75 and over - Tertiary
5
Tax Thresholds
2013
2012
(R)
(R)
Under 65
63,556
59,750
65 to 74
99,056
93,150
110,889
104,261
75 and over
6
Interest and Taxable
Dividend Exemption
2013
2012
(R)
(R)
Under 65
22,800
22,800
Over 65
33,000
33,000
Foreign
deleted
3,700
7
Capital Gains Tax
Exclusions
8
2013
2012
(R)
(R)
Annual Exclusion
30,000
20,000
Annual exclusion in year of
death – gains and losses
300,000
200,000
Disposal of small business by
natural person if over age 55
1,800,000
900,000
Max market value of assets to
qualify as a small business
10 million
5 million
Capital Gains Tax
Exemptions
Primary Residence
Exclusion
9
2013
2012
(R)
(R)
2.0 million
1.5 million
Capital Gains Tax Effective
Rates
Disposals after 1 March 2012
Taxpayer
Individuals
Trusts
Special
Other
Companies
Ordinary
Small business corporation
Employment company (personal
provider)
Foreign company (SA branch)
Micro-business subject to turnover tax
10
service
Inclusion
Rate (%)
Statutory
Rate (%)
Effective
Rate (%)
33.3
0 – 40
0 – 13.32
33.3
66.6
0 – 40
40
0 – 13.32
26.64
66.6
66.6
66.6
28
0 – 28
28
18.65
0 – 18.65
18.65
66.6
0
28
0
18.65
0
Travel Allowance Deemed
Expenditure Table
• Changed with effect from 1 March 2012
–
Page 8 of notes
–
Number of bands remain the same
–
Limit on cost remains R480,000
• Reimbursive travel allowance where business km’s less than
8,000 p/a increased from R3.05/km to R3.16/km
11
Retirement Fund Lump Sum
Withdrawal Benefits
2012/ 2013 rates are unchanged from 2011/ 2012
Taxable lump sum (R)
0 – 22,500
0%
22,501 – 600,000
18%
600,001 – 900,000
103,950 + 27%
900,001 and above
184,950 + 36%
Page 15 of notes
12
Rate of tax (R)
Retirement Fund Lump Sum
Benefits on Retirement or
Severance
2012/ 2013 rates are unchanged from 2011/ 2012
Taxable lump sum (R)
13
Rate of tax (R)
0 – 315,000
0%
315,001 – 630,000
18%
630,001 – 945,000
56,700 + 27%
945,001 and above
141,750 + 36%
315,001 – 630,000
18%
Corporate Tax Rates
Years of assessment ending between 1 April and 31 March
2013
2012
Non-mining companies
28%
28%
Close corporations
28%
28%
Employment companies
28%
33%
Non-resident companies (SA
branch)
28%
33%
STC: 10% on net amount of dividends declared before 1 April 2012 even if
dividends are paid on or after 1 April 2012
14
Dividends Tax
Rate of dividends tax on any dividend declared
and paid on or after 1 April 2012
15%
Amongst others, exemptions • Company which is a resident
• The Government, a provincial administration or a municipality
• Approved PBO
• Pension, provident, RAF, benefit funds and medical schemes
• Registered micro business to the extent total dividends paid during the y.o.a do
not exceed R200,000
15
Small Business
Corporations
Years of assessment ending between 1 April and 31 March
2012/2013
Taxable Income (R)
2011/2012
Rate of Tax (R)
Taxable Income (R)
0 – 63,556
0%
63,557 – 350,000
0 + 7%
59,751 – 300,000
0 + 10%
350,001 and above
20,051 + 28%
300,001 and above
24,025 + 28%
16
0 – 59,750
Rate of Tax (R)
0%
Turnover Tax For Micro
Businesses
Year of assessment ending 28/2/13 and 29/2/12
2012/2013
Taxable Income (R)
2011/2012
Rate of Tax (R)
Taxable Income (R)
Rate of Tax (R)
0 – 150,000
0%
0 – 150,000
0%
150,001 – 300,000
0 + 1%
150,001 – 300,000
0 + 1%
300,001 – 500,000
1,500 + 2%
300,001 – 500,000
1,500 + 3%
500,001 – 750,000
5,500 + 4%
500,001 – 750,000
7,500 + 5%
750,001 and above
15,500 + 6%
750,001 and above
20,000 + 6%
Single combined return for turnover tax, VAT and employees’ tax will be
introduced. Numbers of returns and payments will reduce to 2 from 18
17
Subsistence Allowances
• Travel in the Republic
–
meals and incidental costs: R303 (was R286) per day
–
incidental costs only: R93 (was R88) per day
• Travel outside the Republic
–
18
daily amount per country also changed from 1 March 2012
(pg 9 to 12 of notes)
Transfer Duty (No change)
Natural and juristic persons – agreement on or after 23 Feb
2011
Property value (R)
0–
19
Rate of Tax (R)
600,000
0%
600,001 – 1,000,000
0 + 3%
1,000,001 – 1,500000
12,500 + 5%
1,500,001 and above
37,000 + 8%
Fuel Levies
• To be increased by 28c/l on 4 April 2012
–
General fuel levy on petrol and diesel increases by 20c/l
(2011 - 10c/l)
–
Road Accident Fund levy on petrol and diesel increases by
8c/l (2011 – 8c/l)
• Total = 289.5 c/l on petrol; 274.51c/l on diesel
• Percentage of pump price at Feb 2012 – Petrol 26,9% Diesel
26,7% compared to Feb 2011 – Petrol 29,6% Diesel 30,3%
20
Sin Taxes
• Excise duties increases:
21
–
Cigarettes from R9.74 per pack of 20 cigarettes to R10.32
(6%)
–
Traditional beer no increase
–
Beer from 91c to 101c on a 340ml can (11%)
–
Wine from R2.32 to R2.50 a litre (8%)
–
Sparkling wine from R6.97 to R7.53 a litre (8%)
National Health Insurance
•
NHI to be phase in over 14 years beginning in 2012/13
•
Green paper released in 2011
•
Detailed discussion in Chapter 6 of budget review
•
3 phases
•
22
–
First 5 years – strengthening the public sector, pilot projects
–
Funded by general taxes
Considerations for funding longer term
–
Payroll tax (payable by employers)
–
Increase in the VAT rate
–
Surcharge on individual’s taxable income
Encouraging Savings
•
Tax preferred savings and investment accounts to be introduced
•
Target date April 2014
•
Alternatives to the current exempt portion of interest
•
Returns in the form of interest, dividends and capital gains will be exempt
•
Contributions are likely to be limited
– Annual R30,000
– Lifetime R500,000
•
23
Look out for discussion document by May 2012
Retirement Reforms
•
Changes to be introduced from 1 March 2014
•
Employer’s contributions to pension, provident and RA funds will be deemed a taxable
benefit
•
Employee will be allowed a deduction of
–
up to 22,5% if aged below 45 years, or
–
up to 27,5% if aged 45 and over
–
of the higher of employment or taxable income
–
Annual deduction limited to
• R250 000 if aged below 45 years
• R300 000 if aged 45 and over
24
Retirement Reforms
• Above deduction will be subject to a minimum
annual threshold of R20,000 to encourage
higher saving by low income earners
• Non deductible contributions will be carried
forward and exempt on withdrawal whether
lump sum or annuity
25
•
Medical deductions
converted to medical tax
credits
2011 Amendment Act introduced the concept of tax credits in place of
tax deductions
– Monthly deduction caps for contributions removed for 2013 y.o.a
– Conversion to a tax credit system will be introduced on 1 March
2012
– In addition under 65s (including those with disabilities), excess
contributions and medical expenses are eligible for tax deduction
– Age 65 and over – no credits, 100% of contributions and expenses
can be deducted
26
•
Medical deductions
converted to medical tax
credits
(cont.)
Budget proposals announced following changes -
• Monthly medical scheme tax credits from 1 March 2012
– Taxpayer and first dependant – R230
– Each additional dependant – R154
• 2013 and 2014 will see the hybrid deduction/tax credit system
continue
• 1 March 2014 conversion of all taxpayers to tax credit system
27
•
Medical deductions
converted to medical tax
credits
(cont.)
Medical deductions (above 7,5% of TI) will be converted to tax credits
– Under 65s - @ 25% of deductible amount
– Employer contributions to medical schemes for ex-employees will
be a fringe benefit and ex-employee can claim tax credit
– Age 65 and older and disabled taxpayer (or with disabled
dependant) can convert
• contributions in excess of 3 times the tax credit, plus
• out of pocket expenses
• @ 33,3%
28
Gambling
• Proposal in 2011 budget has been changed
• Now a national gambling tax on gross gambling revenue
• Effective 1 April 2013
• Additional 1% national levy on the provincial gambling tax base
• Similar tax base will be used to tax the national lottery
29
Business Taxes
• Limiting excessive debt in businesses
– Rules to deeming certain debt to be shares
– 2013 consider ‘across-the-board’ % ceiling on interest
deductions relating to EBITDA
• Special economic zones
– Build on the IDZ policy
– Focused support for businesses – reduction in tax rate,
exemption for operators, additional deduction for low level
employees
30
International Tax
• Rationalisation of withholding tax on foreign payments
– Royalties withholding in place
– Interest from 1 Jan 2013
– Dividends from 1 April 2012
– Co-ordinate procedures, rates and timing for withholding
– Uniform 15% proposed
31
Taxation of luxury goods
• Effective 1 October 2012
• Ad valorem tax
– Aeroplanes and helicopters with mass between 450kg and 5
000kg – 7%
– Motorboats and sailboats longer than 10m – 10%
32
Miscellaneous
• False job terminations
– Resign in order to get access to retirement funds and
immediately thereafter rehired, no longer permissible
• Value of fringe benefits
– A formula is currently prescribed in some cases. Where the
employer can determine or obtain the actual cost of
providing the benefit, actual cost should be allowed to be
used. E.g. Actual business vs. private mileage for a
company car and a rental car provided to an employee
33
Miscellaneous
• Learnership allowances
– Requirement to have registered the learner in order to
qualify for the deduction will be re-examined. Delays in
registration will no longer negatively impact the allowances
• Debt cancellation and restructuring
– In light or weak economic climate, tax consequences will be
investigated
34
Miscellaneous
•
Company law reform
– New Co’s Act provisions will be reviewed to consider whether the tax
reorganisation provisions need updating
•
Taxing of Government Grants
– Unless specifically exempt, grants are taxable. A review of which grants
should be exempt is being undertaken and an explicit list will be published
•
Sale of trading stock to connected person
– Currently tax cost to purchaser is lower of cost to purchaser or cost to
seller. Cost manipulation is a concern for CGT but is unlikely to be used for
trading stock and this provision will be scrapped for trading stock
35
Miscellaneous
• Share issue mismatch
– Concern that this is being used to shift value. Value of
shares issued in excess of consideration received will
become taxable
36
Miscellaneous
• UDZ incentive (13quat)
– Set to expire in 2014, extension will be considered and in
addition qualifying date is currently date buildings are
brought into use, consideration will be given to change this
to date of initial construction
• South African investment into Africa
– H Co often funds foreign Subco by way of loans. Transfer
pricing is an issue if these loans are interest free.
Consideration to be given to treating these loans as share
capital.
37
Miscellaneous
• Clarification of the date of liability for VAT registration
– On date of reaching compulsory registration threshold
vendor has 21 days to apply for registration. Vat cannot be
charged on supplies until registered as a vendor with SARS.
Transition rules will be clarified to streamline transition from
non-vendor to vendor
38
Miscellaneous
• Tax policy projects for 2012/13
– Reforms to the primary, secondary and tertiary rebates in the
context of a review of the means testing for the old age grant
with the intention of introducing a child and/or dependant tax
rebate/credit
– Taxation of income from capital (interest, dividends, capital
gains and rental) to be reviewed to ensure greater equity
and minimise opportunity for arbitrage
39
2012
AMENDMENTS
40
Medical Scheme Credits
(Sections 6A and 18, para 2(4) of the 4th Schedule and
para 12A(5)(d) of the 7th Schedule )
• Conversion from a deduction to a credit system
• Phased introduction
• 2013 – combination for under 65s and persons with disability
• Age 65 and over
– Not moved to the credit system
– Retained full deduction system
• Longer term – move everyone to only tax credits (refer 2012
budget)
41
Medical Scheme Credits
(Sections 6A and 18, para 2(4) of the 4th Schedule and
para 12A(5)(d) of the 7th Schedule
•
‘Dependant’ definition has been broadened for purposes of the section 18
deduction only and not for purposes of calculating the section 6A tax credit
•
Previously ‘dependant’ limited to rules of medical scheme
•
New section 18(4A) – ‘dependant’ means
– Spouse
– Child and spouses child
– Member of immediate family if taxpayer is liable for family care and support,
and
– Any dependant recognised by the rules of a medical scheme
•
42
Meaning of immediate family?
Medical Scheme Credits
(Sections 6A and 18, para 2(4) of the 4th Schedule and
para 12A(5)(d) of the 7th Schedule
•
Section 6A tax rebate has been inserted for 2013
–
•
Natural persons under age 65 including those with a disability
•
Applies to contributions paid to-
•
•
43
Medical scheme fees tax credit
–
Registered SA medical aid scheme
–
Foreign medical aid scheme
Amount of the tax credit (irrespective of level of contribution) –
Taxpayer – R230
–
First dependant – R230
–
Additional dependants – R154
The credit is not refundable and cannot exceed the tax payable
Medical Scheme Credits
(Sections 6A and 18, para 2(4) of the 4th Schedule and
para 12A(5)(d) of the 7th Schedule
•
Limitation of medical deduction for 2012 (under 65 and no disability)
– Part 1 - Capped amounts relating to contributions
– Part 2 • Contributions above the capped amount, plus
• Other qualifying medical expenses,
as exceeds 7.5% of taxable income
– Taxable income
• Excluding lump sum benefits
• Before Part 2 of the medical expenditure deduction
•
44
Age 65 and over and under 65 with disability – no limitations
Medical Scheme Credits
(Sections 6A and 18, para 2(4) of the 4th Schedule and
para 12A(5)(d) of the 7th Schedule
•
Limitation of medical deduction for 2013 (under 65 no disability)
– Contributions to medical aid schemes
• In excess of 4 times the tax credits
– Plus
– Sum of other qualifying medical expenses
– As exceeds 7.5% of taxable income
– Taxable income
• Excluding lump sum benefits
• Before this deduction
45
Medical Scheme Credits
(Sections 6A and 18, para 2(4) of the 4th Schedule and
para 12A(5)(d) of the 7th Schedule
• Limitation of medical deduction for 2013 (under 65 with
disability)
– Contributions to medical aid schemes
• In excess of 4 times the tax credits
– Plus
– Sum of other qualifying medical expenses – no limitation
46
Medical Scheme Credits
(Sections 6A and 18, para 2(4) of the 4th Schedule and
para 12A(5)(d) of the 7th Schedule
• Medical deduction 2013 - taxpayers aged 65 and over
• No limitation of deduction for– Contributions to a medical scheme, plus
– Qualifying medical expenses
47
Medical Scheme Credits
(Sections 6A and 18, para 2(4) of the 4th Schedule and
para 12A(5)(d) of the 7th Schedule
•
7th Schedule amendments
•
Medical scheme contributions made by an employer for the benefit of
an employee are regarded as a taxable benefit
•
Nil value if
– The employee is retired
– Dependants on death of current or retired employee
– Employee aged 65 and above
48
•
Nil value has been removed
•
For PAYE and IPR5 purposes, employer must now account for both the
fringe benefit and the deduction
Medical Scheme Credits
(Sections 6A and 18, para 2(4) of the 4th Schedule and
para 12A(5)(d) of the 7th Schedule
•
4th Schedule – 2013
•
Employer deducts from remuneration – if employee under 65 and with or without a disability
–
•
Employer deducts from remuneration – if employee 65 or older
–
•
No deduction allowed
Medical aid contributions, no limit
Employer deducts from employees’ tax
–
Medical scheme fees tax credit, if
• Employer effects payment, or
• Employee effects payment and provides employer with proof
49
Medical Scheme Credits
(Sections 6A and 18, para 2(4) of the 4th Schedule and
para 12A(5)(d) of the 7th Schedule
•
50
See page 42 and 43 of notes to work through example
Employer Provided
Insurance
(Gross income para (d) and (m), section 10(1)(gG), (gH) and
23(p),para 2(4)(cA) of the 4th Schedule, para 2(e), (k) and (12C)
of the 7th Schedule and para 55 of the 8th Schedule)
•
•
•
51
Types of policies
– Group life and/or disability cover – ‘Approved plan’ (No change in treatment)
– Group life and/or disability cover – ‘Unapproved plan’
– Income protection policies
• Income capacity
• Income protection
– Deferred compensation policies
– Key person policies
2010 amendments have been removed
2011 complete overhaul to clarify treatment– Contributions
– Proceeds
– Exit route for existing deferred compensation policies
Employer Provided
Insurance
(Section 11(w), 23(m)(iii), para 2(4)(cA) of the 4th Schedule and
para 2(k) and (12C) of the 7th Schedule)
• Contributions
• Policy relates to death, disablement or severe illness of
employee or director (where proceeds destined for employee)
– Explicit rules added for employer to tax as fringe benefit – 1
March 2012
– If employee is entitled to a deduction of the contribution
(income protection), employer must take into account for
PAYE
– If employee is taxed as a fringe benefit, employer can claim
a deduction for contributions
52
Employer Provided
Insurance
(Section 11(w))
•
•
53
Contributions (cont.)
Policy relates to insurance of employer against loss from death, disablement or
severe illness of employee or director
– Following conditions to be satisfied for premiums to be deductible by
employer
– Policy is a risk policy with no cash or surrender value
– Employer is the policyholder, and
– Post 1 March 2012 policies
• Agreement states that premiums are deductible
– Pre 1 March 2012 policies
• Addendum to agreement stating that premiums are deductible must in
place by 31 Aug 2012
Employer Provided
Insurance
(Gross income para (d) and (m), section 10(1)(gG), (gH))
• Proceeds
– If funded by post-tax contributions - exempt
– If funded with pre-tax contributions – taxable
• General rule
– Include proceeds in gross income
– Try and find an exemption
• Exemptions
– Employer, if proceeds retained
– Employee
54
Employer Provided
Insurance
(Gross income para (d) and (m), section 10(1)(gG), (gH))
•
55
Exemptions (continued)
– Proceeds received and retained by employer after 1 March 2012
• Keyperson policies
• Proceeds exempt, unless
• Employer has elected in policy agreement that premiums are deductible in which
case proceeds are taxable
– Proceeds received by the employee will be exempt if
• Pure risk policy
– Premiums after 1 March 2012 taxable as fringe benefit and not deductible
by employee
– If premiums are taxable as fringe benefit and deductible then proceeds not
exempt
• Other policies
– All premiums were taxable as fringe benefit
• Where exemption does not apply employer must withhold PAYE
Employer Provided
Insurance
(Gross income para (d) and (m), section 10(1)(gG) and 23(p))
•
56
Exit routes for existing deferred compensation policies
– From 1 March 2012 employer contributions are taxable as fringe benefits
– Implication - taxable contributions and taxable proceeds on payout
– Exit routes provided for pre 1 March 2012 policies
• Cede the policy to the employee
– Value on cession deductible by employer (deduction removed
from 1 March 2012)
– Value on cession fully taxable in employees hands
• Make policy paid up - employer receives proceeds and pays to
employee
– Employer tax neutral – proceeds taxable and payment deductible
– Employee fully taxable on proceeds received
Motor Vehicle Fringe
Benefits
(Para 7(8A) of the Seventh Schedule)
• Judicial commuting
– Judges are provided with government cars
– Serve various courts and must travel long distances
– Home to work is deemed private travel
– Judges have been adversely affected by log book
requirement
– From 1 March 2011 home to court is deemed business
mileage
57
Retirement Annuity
Contributions
(Section 11(n)(i)(aa))
•
Severance benefit’
•
Added to amounts which cannot be taken into account when calculating
permissible deduction for RAF contributions
•
Deduction limited to– 15% of income from non ‘retirement-funding employment’ (excluding
retirement lump benefits and retirement lump sum withdrawal benefits and
severance benefits) less
– Deductions or assessed losses admissible against such income
– Excluding this deduction, sec 17A (land let for farming), sec 18 (medical
expenses), 18A (donations) and para 12(1)(c) to (i) of the 1st Schedule
(farming CDE)
58
Connected Person
Definition
(Section 1)
• Focus on voting rights has been introduced
• In relation to a company any group company
• Group company definition threshold – At least 70% of the equity shares…
• Connected person definition threshold –
– More than 50% of the equity shares of or voting rights in…
59
Pre Production Interest
Deletion of section 11(bA)
• Section 11(bA) – deduction of pre-production interest and
related ‘finance charges’.
• It has been deleted
• We now have to look to section 11A
• Beware not the same provisions
• SARS view that assets must be brought into use before trade
has started
60
Learnership Allowances
(Section 12H)
• Section 12H has been extended
• Definition of ‘registered learnership agreement’ has been
amended– Contract of apprenticeship entered into before 1 October
2016,or
– Registered learnership entered into between a learner and
an employer before 1 October 2016
61
Micro-Business Turnover
Tax
(Sixth Schedule)
• Very poor uptake
• Further steps to attract more taxpayers
• VAT and turnover tax have been delinked
• Three year lock in rule has not been relaxed
– Voluntarily exit only after three years
– Still cannot re-enter
62
Film Owners
(Section 12O and section 24F)
• S 24F accelerated allowance has been removed
• Replaced by s 12O exemption
63
Research & Development
(Section 11D, section 12C, section 13 and section 23B)
•
•
•
•
64
The deduction process has been streamlined
Three categories
– Deduction for eligible R&D activities including capital expenditure, no pre
approval needed by DST
– 50% uplift only applies to DST approved R&D expenditure
– All other R&D expenditure remains eligible for 11(a) deduction
Accelerated allowance for R&D assets
– New and unused R&D machinery and plant and improvements thereto
– Owned by taxpayer
– Eligible for 40:20:20:20
Buildings used for R&D are eligible for 5% allowance over 20 years
Industrial Policy Projects
(Section 12I(2) )
• Renewed effort to encourage development in IDZs
• Amendments to promote capital expenditure
• Industrial projects in IDZs – Allowance for new assets
– Preferred status – 55% up to 100%
– Non-preferred status – 35% up to 75%
65
Urban Development Zones
(Section 13quat)
• Developers – economic downturn
• Allowance prohibited if property is used for anything other than
sale
• Purchaser also prohibited from claiming allowance
• Relaxation introduced
• Developer can rent the property for up to 3 years
66
Group Relief Provisions
(Section 23K and section 10(1)(hA))
67
•
Concern – using s 45 and s 47 provisions
•
Create an interest deduction on 3rd party loan to acquire shares
•
S 23K now limits the deduction of interest on certain intra-group
transactions
•
S 45 from 3 June 2011 and s 47 from 3 August 2011
•
Directive must be issued by SARS in order to qualify for interest
deduction
•
To extent interest is not deductible, if holder of debt is a group company
interest received by it is exempt
Group Relief Provisions
(Section 41, section 42, section 44, section 45 and section 47
•
•
•
•
•
•
68
S 41 – HQ companies are out
S 42 – CFCs and CTC of shares issued in exchange for assets
S 44 - CFCs and numerous other changes
S 45 – Pref shares now permitted, tax cost NIL
S 46 – CFCs and election out has changed
S 47 – CFCs
Debt without a set maturity
date
(Section 24J)
• Section 24J requires a maturity date for ‘yield to maturity’
• 24J is not catching loans with an uncertain maturity date
• 24J amended to catch 3 types of debt instruments
– Without a maturity date (Perpetual debt)
– Uncertain maturity date
– Demand instruments
• Effective for interest incurred/accrued after 1 March 2012
69
Debt without a set maturity
date
•
•
•
•
70
(Section 24J)
Uncertain maturity dates
– ‘no fixed terms of repayment’
– Specified repayment but this can change
– Total uncertainty
Identify date repayment will most likely apply
Use this date for ‘yield to maturity’ calculation
Annual process and dates and calculations will change
Debt without a set maturity
date
(Section 24J)
• Demand instruments
– Repayable on demand
– Must have a maturity date
• Term is deemed to last 365 days
• ‘yield to maturity’ calculation based on PV of amounts payable
over 1 year
71
Dividends Tax
(Part VIII of Chapter II of the IT Act)
• Inserted in 2008 and amended every year since
• Sections 64D to N
• Government Gazette published 20 December 2011 confirmed
effective date will be 1 April 2012
• Applicable to any dividend declared and paid on or after 1 April
2012
• A dividend is deemed to be paid on the earlier of date of
payment or date it becomes payable
• Dividends tax is payable to SARS by end of month following
month during which the dividend was paid
72
Dividend Definition
(Section 1)
•
•
73
Any amount transferred or applied by a company that is a resident for the benefit or on
behalf of any person in respect of any share in that company, whether that amount is
transferred or applied –
–
By way of a distribution made by; or
–
As consideration for acquisition of any share in,
that company but does not include any amount so transferred or applied to the extent it–
Results in a reduction of CTC of the company;
–
Constitutes shares in the company; or
–
Constitutes an acquisition by the company of its own securities by way of a general
repurchase of securities as contemplated by the JSE Listings Requirements, where
that acquisition complies with those requirements
Contributed Tax Capital
definition
(Section 1)
•
CTC must be determined per class of shares
•
CTC = stated capital or share capital + share premium on 31 Dec 2010
–
74
Less any amount included in the above which is ‘tainted’
•
Plus consideration received or accrued to the company for the issue of shares in that class
on or after 1 Jan 2011
•
Reduced by–
Any amount transferred on or after 1 Jan 2011 for the benefit of any person holding a
share in that company of that class in respect of that share, and
–
The directors of the company have determined that such amount is transferred out of
CTC
•
The CTC allocated to an individual shareholder may not exceed that shareholder’s pro-rata
share of the total CTC of the class of shares
•
CTC received by a shareholder is dealt with under the company distribution provisions of the
8th Schedule
Dividends in Specie
(Part VIII of Chapter II of the IT Act)
•
Withholding mechanism works on payment
•
Problems with dividends in specie
•
75
–
No payment to withhold from
–
Valuation of the asset changes over time
Solution
–
Liability is not shifted to the shareholder as with a cash dividend
–
Liability is retained by the company
–
Company paying the dividend must pay the dividends tax
•
All the exemptions will still apply, written declaration needed unless inter group
•
Amount is the market value of asset on date dividend is deemed to be paid
•
Tax is 10% of the amount of the dividend (increased to 15% in budget)
•
STC credits can be used as normal
Hybrid Equity Instruments
(Section 8E)
• Equity instruments where the label differs from the substance
• Dividends received (local or foreign) are treated as interest and
taxable
• In addition to the other provisions of the definition a new
provision has been added to the definition of ‘Hybrid equity
instruments’
– A rate of interest or capital amount subscribed is used to
calculate the dividend
– Secured by financial instrument that is not an equity share
– No regard to 3 year redemption period
76
Hybrid Equity Instruments
(Section 8E)
•
3rd party backed shares
•
Holder of preference shares takes security from anyone other than the
issuer
•
Dividends or foreign dividends received are deemed income and so
taxable
•
Exemptions apply for funding used to –
– Directly or indirectly purchase shares in an operating company
– Replace bridging loans used to effect above
– To redeem preference shares if they were used to purchase equity
shares in an operating company
77
Dividend Cessions
(Section 10(1)(k)(i)(ee), (ff), (gg))
•
Cession of dividends either before or after declaration
•
In past retained their character as a dividend
•
Significant change from 1 April 2012
•
Only applies to companies (local and foreign) receiving dividends
•
Dividend loses its exemption and becomes taxable if
– Receipt by way of a cession
– Received from shares borrowed by the company
78
Dividend Cessions
(Section 6sex)
• Tax credits
• New rules apply in 3 scenarios– 1. Dividends between domestic companies
– 2. Foreign dividends received by local companies
– 3. Local dividends received by foreign companies
• In 1. above no double tax
• In 2. section 6 quat is available to give tax credit
• In 3. we need a new section to allow a tax credit
• Section 6sex has been introduced for this purpose
79
Value Extraction Tax
(Section 64O to R)
•
VET was to replace section 64C
•
New dividend definition has been expanded
•
Covers disguised dividends
•
VET provisions have been repealed
•
S 64E now deals with low interest loans
•
Amount owing to a company by –
– Anyone other than a company
– Resident, and
– Connected to the company
– Loan made by virtue of any share held by above person
– Dividend = Market related interest rate less interest paid
80
Foreign Dividends
(Section 1, section 10B, section 10(1)(k)(ii), section 11C and
section 23(q))
• Existing treatment – basic rules
– Included in gross income and taxed at marginal rates
– Participation exemption
– Previously taxed income exemption
– Dual listed exemption
– Natural person exemption R3.700 (deleted 1 March 2012)
– S6quat rebate for foreign tax paid
– Deduction for interest incurred
• Disparity between local and foreign dividends has been removed
81
Foreign Dividend Definition
(Section 1)
•
Any amount that is paid or payable by a foreign company in respect of a
share in it where that amount is treated as a dividend or similar payment
by it for the purposes of the laws relating to– Tax on income on companies of the country in which that foreign
company has its place of effective management; or
– If no tax law then company law of the country in which it is
incorporated, formed or established;
•
But does not include any amount so paid or payable that– Constitutes a redemption of a participatory interest in a foreign unit
trust; or
– Is deductible by it in determining any tax on income payable by it in
the country where it has its place of effective management
82
Foreign Dividends
(Section 10B)
• ‘Foreign dividend’ – s 1 definition + dividend paid by a headquarter
company
•
S 10B exempts a foreign dividend received or accrued if – Participation exemption now 10% (other than foreign unit trust)
– Company shareholder and company declaring dividend are situated
in the same country
– Shareholder is resident to extent that s 9D attributed income of the
foreign company
– Foreign dividend is from a JSE listed share and not a dividend in
specie
83
Foreign Dividends
(Section 10B)
•
If exemptions do not apply then apply the formula –
•
If shareholder is a natural person, deceased or insolvent estate or special trust
– Exempt amount = 25/40 = 62.5% x taxable foreign dividend (37.5% x 40% =
15% max) (2012 budget proposal increases rate to 15%)
– Effective date 1 March 2012
•
Shareholder is company or trust
– Exempt amount = 13/28 = 46.43% x taxable foreign dividend (53.57% x 28%
= 15%)
– Effective date 1 April 2012
84
•
If foreign withholding tax applies, claim section 6quat tax credit
•
Deduction for interest incurred has been removed
Passive Holding Companies
(Section 9E)
•
85
Effective date has been postponed from 1 April 2012 to 1 April 2013 (budget
proposal has scrapped altogether)
Timing of Rebate for
Foreign Taxes on Income
(Section 6quat)
• Current tax credit mismatch on foreign sourced income
– Income recognised in SA on accrual date
– Foreign tax withheld on payment date
– Cannot claim tax credit in SA until payment received
• Changes to allow a better match
– Credit allowed in the year the income accrues
– Mechanism will be to reopen the accrual y.o.a
86
Special Foreign Tax Credit
for Management Fees
(Section 6quin)
• S 6quat does not apply to SA sourced income
• African countries withhold tax on all payments for services
rendered
• S 6quin now allows for a tax credit if SA have a DTA with that
country
• Foreign tax is to be translated into Rand on last day of y.o.a in
which the tax is withheld or imposed and converted to Rand at
the average exchange rate for that y.o.a
87
Unification of Source Rules
(Section 9)
• SA residents taxed on worldwide income with foreign sourced
income eligible for tax credits if foreign tax payable
• Non-residents taxed on SA source income
• Subject to DTA
• Previously no definition of ‘source’ in IT Act
• Case law – originating cause, what and where
• Deemed source rules – e.g. interest and capital gains
• Combination of case law and deemed source rules
• Uncertainty has added cost to cross-border business
88
Unification of Source Rules
(cont.)
• New s 9 introduced
(Section 9)
• Consistent with DTA principles (OECD)
• Deemed source has been eliminated
• Source categories
– Dividends – Share register concept removed, now where is
company resident
– Interest – 2 part test, residence of debtor who pays the
interest, or place where loan funds are used (new 10%
withholding tax only applies to SA sourced interest payable to
non-resident persons)
89
Unification of Source Rules
(cont.)
•
Source categories (cont.)
(Section 9)
– Royalties – Residence of party paying the royalty or if it relates to use of IP
within SA
– Ancillary services – Know-how, similar to above
– Services, pensions/annuities – Unchanged based on where the service is
rendered which gives rise to the payment
– Government service and pensions – Unchanged, no matter where service
rendered will be SA sourced
– Gains from sale of assets – Where immovable property is situated, movable
property is where person disposing is resident
– Exchange differences – Depends where the person is resident
– Other – Default to originating cause, what and where
90
CFCs
(Section 9D)
91
•
Foreign company in which SA residents own > 50% equity or votes
•
Tainted income – Passive income and diversionary income
•
Passive income – interest, dividends, royalties, rentals, annuities, exchange
differences, insurance premiums and associates capital gains
•
Diversionary income – derived from suspect transactions between a CFC and
SA resident, transfer pricing risk
•
Attribution rules subject to exemptions - Foreign business establishment and
high foreign tax exemption, amongst others
•
Overly rigid and too complex
•
Core calculations have been simplified
•
Stronger focus on transfer pricing
Single Charge for Company
Emigration
92
(Section 9H)
•
Place of effective management moves offshore
•
In past deemed disposal of all assets at market value and deemed dividend of
reserves
•
Move to single level of company tax on emigration
•
Either capital gain or revenue, no deemed dividend
•
Deemed disposal day before change of residence and immediate re-acquired
•
All assets deemed to be sold and re-acquired at market value
•
Resulting tax consequences
•
This will apply to SA companies that become headquarter companies
CFC Restructuring
(Section 42 to section 47)
93
•
Local company group relief rules have been extended to allow for restructure of
foreign group companies
•
Asset for share transactions - Transfer of foreign company equity shares to
CFCs.
•
Amalgamations – Foreign company into certain resultant foreign companies
•
Unbundling – Foreign holding company can be unbundled to another foreign
company
•
Liquidation transaction – Liquidation of a foreign company into a foreign holding
company
Headquarter Companies
(Section 9I)
•
Introduced in 2010
•
Encourage using SA as a base to invest into Africa
•
Changes
– Must elect to be a HQ company
– Annual report to be submitted to the Minister
– Reduced minimum participation by shareholders – 20% to 10% (max 10)
– Relaxation of 80-20 asset test – now 80% of assets (excluding cash in bank)
must comprise investments in companies which are at least 10% held
– Relaxation of the 80-20 receipt and accruals test – now 50% of gross income
(not total receipts and accruals) must come from the 10% held companies
• Safe haven for small companies, gross income below R5million
• Gross income does not include exchange differences
94
Transfer Pricing
(Section 31)
95
•
2010 amendments deleted, so never happened
•
New changes introduced
•
Deemed dividend rule stemming from a transfer price adjustment has been
deleted
•
A transfer price adjustment is now treated as a low interest loan until the loan has
been repaid.
•
Market related interest rate will be applied to the deemed loan
Withholding Tax on Interest
(Section 37 I to N)
96
•
Introduced in 2010
•
Withholding tax on interest paid to non residents
•
Interest must be from a SA source
•
Effective date 1 January 2013
•
Changes
•
Nature of the liability – clarity that the beneficial owner is liable if tax is not paid by
the person withholding
•
Payment due dates – end of month after month during which the interest was
paid
•
Provision for refund – 3 year time limit for amounts wrongfully withheld
Capital Gains
Tax
th
8
97
Schedule
Foreign Currency Rules
(Para 84 to 96)
98
•
Part VIII of the 8th Schedule has been repealed
•
Effective for years of assessment commencing on or after 1 March 2011
•
In future calculate the gain or loss in foreign currency and translate into Rand
Disposal of Equity Shares in
Foreign Companies
(Para 64B)
• Disregard any gain or loss
• Must not be a ‘foreign financial instrument holding company’
• Participation exemption has been reduced from 20% to 10%
• 10% must have been held for 18 months
• Additional conditions
– Must be sold to a non resident
– Will apply on emigration
– Can be sold to that persons CFC but not to any other CFC
– Will apply if sold by a HQ company
99
Company Distributions
(Para 74, 75, 76, 76A, 76B, 77 and 78)
•
Old rules
– 1. Pre 1 Oct 2001 - reduced pre 2001 cost
– 2. After 1 Oct 2001 and pre 1 Oct 2007 added to proceeds on
disposal
– 3. After 1 Oct 2001 and pre 1 Oct 2007 and using weighted average
method to calc cost – reduce base cost (could go negative)
– 4. After 1 Oct 2007 part disposal treatment
100
•
All proceeds in 2. above trigger part disposal if shares have not been
sold by 1 July 2011
•
All negative base costs in 3. above trigger a capital gain if shares not
sold by 1 July 2011
Company Distributions
(cont.)
(Para 74, 75, 76, 76A, 76B, 77 and 78)
• Changes to ‘date of distribution’ which is –
• Date of payment, or
– If an LDR date is given then LDR date, or
– If no formal declaration then date of entitlement
– In liquidation, the date of entitlement
• New rules – next slide
101
Company Distributions
(cont.)
(Para 74, 75, 76, 76A, 76B, 77 and 78)
•
Capital distribution in cash or assets, received
– 1. Pre 1 Oct 2001 – reduces pre 1 Oct 2001 cost
– 2. After 1 Oct 2001 and pre 1 Oct 2007 and share sold pre 31 Dec 2011 –
treat as proceeds when share sold
– 3. After 1 Oct 2001 and pre 1 Oct 2007 and using weighted average method
to calc cost – reduce base cost (could go negative)
– 4. On or after 1 Oct 2007 but before 1 April 2012 – treat as proceeds and
part disposal
•
If the share has not been disposed of by 1 April 2012 then
– Treat proceeds in 2. above as a distribution on 1 April 2012
– If 3. above treat negative base cost as capital gain on 31 March 2012
102
Company Distributions
(cont.)
(Para 74, 75, 76, 76A, 76B, 77 and 78)
• Capital distribution in cash or assets, received
• On or after 1 April 2012 and prior to disposal of the share
• If a pre 1 Oct 2001 share
– Deemed sale immediately prior = market value of share
– Immediately re-acquired the share @ market value less any
capital gain or plus any capital loss
– Effect is to peg the base cost of the pre 1 Oct 2001 share
• Reduce full base cost by amount of the capital distribution
• To extent this results in negative base cost, gain is triggered
103
Transfer of Residence from
Company or Trust
(Para 51A)
•
Exemption from CGT, STC and transfer duty
•
No relief from donations tax
•
Window open to 31 December 2012
•
Changes
– Person acquiring the residence must be a connected person to the company
or trust
– Those connected persons must have mainly used the property for domestic
purposes
– Relief has been extended to holiday houses used mainly for domestic
purposes
•
104
Beware many pitfalls in this process
VAT
105
Delinking VAT from Transfer
Duty
(Section 1, section 16(3) and section 18(4))
•
Second hand fixed property purchased by a vendor from a non-vendor
•
Previously
– Notional input tax based on lesser of purchase price or market value
– Limited to the transfer duty payable
•
The change
– Notional input tax based on lesser of purchase price or the market
value
– No claim until property has been transferred in the deed registry
– Can only claim to the extent payment has been made
106
Temporary relief for the
rental of residential property
by developers
(Section 10(7) and section 18B)
107
•
The weak property market has forced developers to rent properties that cannot
sell
•
Temporary rentals to funds extended carrying costs
•
Change in use was triggered immediately creating a deemed supply
•
Deemed supply at market value
•
Short-term solution – sunset 1 January 2015
•
Grace period of max 36 months to rent residential properties before sale
•
If rented beyond the 36 months deemed output is triggered
•
In order to qualify must be a ‘developer’ and intention to sell must remain
•
If intention changes deemed supply is triggered
VAT exemption for imported
service
(Section 14(5))
108
•
VAT is payable on importation of goods into SA
•
Minimum threshold for exemption of goods is R100
•
VAT is also payable in importation of services by a non-vendor into SA
•
No minimum threshold existed for services
•
Minimum threshold has been introduced of R100 per invoice
•
Beware online purchases
Unpaid group member debt
(Section 22)
109
•
If debts which resulted in an input tax claim are not paid within 12 months a
deemed supply is triggered for the debtor
•
The creditor can claim input tax on bad debts written off
•
Group companies often run loan accounts via journal entry and these loans are
not settled
•
The pay-back provisions no longer apply within wholly owned groups
•
But the creditor cannot claim input tax on a bad debt written off as long as both
companies remain in the group (wholly owned)
Tax Administration Bill
No. 11B of 2011
110
•
Approved by Parliament on 24 November 2011
•
Should be promulgated during 2012
•
Runs to 201 pages
•
Page 1 to 92 – The TAB with 272 sections
•
Page 93 to 177 – Schedule 1 amends all the underlying tax Acts covered by the
Bill
•
Page 178 to 201 – Memorandum on the objects of the TAB
Tax Administration Bill
No. 11B of 2011
•
111
Attempt to incorporate and align the administration provisions of all the following Acts into
one TAA
–
Transfer Duty Act
–
Estate Duty Act
–
Income Tax Act
–
Value-Added Tax Act
–
Skills Development Act
–
Unemployment Insurance Contributions Act
–
Diamond Export Levy (Administration) Act
–
Securities Transfer Tax Administration Act
–
Mineral and Petroleum Resources Royalty (Administration) Act
Critical Areas
112
•
If TAB and principal Act clash then principal Act prevails
•
Some administrative provisions have been left in the principal Act
•
Will need to refer to both TAB and principal Act
•
‘Self-assessment’ – new concept, date a return is submitted or if no return required the date
payment is made. Move to self assessment process
•
Powers of SARS – information gathering has been extended but taxpayers have also been
given rights
•
Tax debt now prescribes in 15yrs not 30yrs
•
Non compliance penalties are strictly codified
•
Tax Ombud
•
Permanent VDP (Recent VDP applications captured - 17 938)
Thank-you
Fasset Call Centre
086 101 0001
www.fasset.org.za
113