The draft Revenue Laws Amendment Bills 2008, released by the National Treasury on 1st August, give effect to the tax proposals presented by Manuel in the 2008 National Budget, tabled in Parliament on 20th February, 2008. Proposed measures dealt with in the bills include, among others, the phasing out of the Secondary Tax on Companies (STC), simplification of the tax regime for micro-business, improved tax environment for venture capitalists, SAR5bn in new industrial tax incentives, and the extension of tax breaks for property in Urban Development Zones.

Perhaps the most important matter dealt with in the new legislation is the proposal for the STC to be converted to the 'New Dividends Tax' at the shareholder-level in line with international practice. The new Dividends Tax will contain a withholding mechanism so that the company declaring the dividend is the party mainly responsible for collection, although the consultation also proposes that responsibility for collection may be shifted to intermediaries "in several circumstances as a matter of practicality."

One notable point in the consultation document relates to the continued existence of what are popularly known as STC credits. While it was announced by the government in February that all STC credits would be completely eliminated upon conversion to the new Dividends Tax, due to concerns of administrative feasibility, it has been decided that STC credits be maintained within the new Dividends Tax system for a limited period. As a result, STC credits will be available as an offset against the new Dividends Tax for a three-year transition period, after which all remaining STC credits will fall away.

However, the Treasury emphasised that the full introduction of the Dividends Tax is contingent on several tax treaties being renegotiated.

The target date set for the new Dividends Tax is late 2009, but only "core" legislation will be enacted as part of the Revenue Laws Amendment Bills, 2008, in order to provide all stakeholders with sufficient time to adjust their systems by the target date. Certain other "collateral issues," such as the taxation of foreign dividends, the taxation of deemed dividends and anti-avoidance rules, will be dealt with in a separate policy statement to be issued in 2009, the Treasury announced.