South Africa’s National Treasury has released for public comment draft legislation
that would give effect to proposed tax laws announced in the 2009 budget.
The draft legislation deals with a number of matters announced by former Finance
Minister Trevor Manuel in his budget speech last February, including environmental
incentives, the new dividends tax, employee training incentives, travel allowances,
retirement withdrawals, estate duty and provisional tax.
The consultation closes on June 26, 2009.
The Treasury stated: “The draft 2009 Taxation Laws Amendment Bills are
published for public comment before the Bills are formally tabled in Parliament.
The Standing Committee on Finance (previously the Portfolio Committee on Finance),
established in terms of the Money Bills Amendment Procedure and Related Matters
Act, convenes informal hearings on the draft bills and considers public comments
received. The Bills are then revised by the National Treasury and presented
to the Committee, before being formally tabled by the Minister of Finance.”
“For technical reasons, the draft tax laws also have to be split into
two bills - a money bill (section 77 of Constitution) and an ordinary section
75 (of the Constitution) bill - as has been the practice in previous years.
There will therefore be no Revenue Laws Amendment Bills in 2009. The Taxation
Laws Amendment Bills incorporates the Revenue Laws Amendment Bills, as well
as the draft bills published on February 19, 2009 dealing with rates, thresholds
and urgent matters.”
Below is a summary of the legislation:
Environmental incentives: The Income Tax Act contains two incentives
in support of the environment. The sale of certified emission reductions (also
known as carbon emission reductions credits) will be exempt from income tax.
Secondly, businesses will obtain notional deductions for income tax purposes
for energy efficiency savings from certified baselines based on energy efficiency
certificates issued by the National Energy Efficiency Agency. The implementation
of the environmental levy of 2 cents per kWh on electricity generated from non-renewable
resources as announced in 2008 was delayed and will now take effect on July
1, 2009. The imposition of this levy does not require any new legislation in
these draft bills.
Conversion of the Secondary Tax on Companies to the new Dividends Tax:
In 2008, the basic rubric for the new Dividends Tax was enacted. The proposed
2009 legislation contains supporting amendments. These amendments prevent taxpayers
from converting the taxable sale of shares into tax-exempt pre-sale dividends,
and impose the new Dividends Tax in respect of deemed dividends (e.g. loans
to connected persons). The legislation also creates an equal playing field for
both domestic and foreign shares listed on the Johannesburg Stock Exchange (JSE),
and hence the 10% charge on dividends will also apply to foreign shares listed
on the JSE.
Learnership tax allowance: The tax incentive to encourage employers
to train/up-skill their employees through registered learnerships or apprenticeships
will be streamlined and further enhanced. If an employee successfully completes
a 12 month learnership, his or her employer will be able to claim an additional
deduction of ZAR60,000. This will result in a tax relief for the employer of
ZAR16,800 per employee. Where an employee successfully completes a three year
apprenticeship, the employer will be able to claim an additional allowance of
ZAR180,000 at the end of the third year, resulting in a tax relief of ZAR50,400
per employee. A more generous dispensation applies to employers who train employees
with disabilities, with employers qualifying for a 66.67% higher tax relief
than for that for employees without disabilities.
Travel (car) allowances: Repeal of the deemed kilometre method: The
deemed kilometer method for deducting travel expenses will be repealed with
effect from March 1, 2010. The repeal of this method will eliminate an unintended
subsidy for commuting by car (a personal expense). Individuals who use their
private vehicles for businesses purposes and who receive a travel (car) allowance
will still be able to claim such expense by maintaining a logbook of business
kilometres travelled. The PAYE system for travel (car) allowances will be adjusted
so that 80% of this allowance will be subject to PAYE. The 80% rule will prevent
under-withholding from taxpayers once the deemed kilometre method is repealed.
Retirement withdrawals: The proposed legislation completes the reform
process set in motion in 2008 regarding the taxation of retirement and pre-retirement
withdrawal lump sums. Most of the proposed legislation dealing with lump sum
tables and clarification of anomalies was published in the first batch of draft
legislation in February 2009. The proposed legislation also seeks to simplify
the taxation of minor beneficiary funds subject to regulation by the Financial
Services Board, and to clarify the law when employers legitimately withdraw
employer surpluses from retirement funds.
Estate Duty: The proposed amendments seek to assist middle-income families
while deterring Estate Duty avoidance at the upper end. In terms of assisting
the middle class, the proposed amendments allow the ZAR3.5m deduction from Estate
Duty to rollover from the deceased to a surviving spouse (so that the surviving
spouse can use a ZAR7m deduction amount on death). In terms of anti-avoidance,
the rules close a commonly utilised 1-year usufructory arrangement that artificially
seeks to undermine the value of inherited property.
Provisional tax: In 2008, the provisional tax system was tightened to
require 80% accuracy in respect of the second provisional payment when compared
to final assessed taxes due. Amid concerns that this requirement may not always
be possible (especially for smaller businesses), the 20% penalty will be waived
in certain circumstances.
The National Treasury and the South African Revenue Service are scheduled to
brief the Parliament’s Standing Committee on Finance regarding the draft
legislation in mid-June 2009.