South African Bourses Set To Lose Tax Exempt Status Under New Plans

by Robert Lee, Tax-News.com, London

08 October 2004

Two of South Africa’s principal trading exchanges may lose their tax exempt status under new legislation set to be examined by parliament, something which could drive up costs for brokers and traders.

According to national publication Business Day, the change in the tax status of the Johannesburg Securities Exchange and the Bond Exchange of South Africa will come about as a result of their anticipated incorporation under the new Securities Services Bill, allowing them to distribute surplus assets to members.

As a consequence, the JSE and the Bond Exchange may have to pay corporate tax on earnings at a rate of 30%, and some fear that the tax may ultimately be passed on to traders via higher brokerage fees.

Nevertheless, a memorandum to the new bill argues that the amended rules are necessary, as the current tax exemption creates an uneven playing field amongst exchanges “which is directly contrary to the principles” of the proposed legislation.

The memo also observed that a growing number of bourses around the world are choosing to move to a taxable “for profit” status.

However, the JSE's marketing and communications director, Geoff Rothschild, has reportedly expressed dismay that the proposals have been drafted whilst the institution is still in talks with the South African Treasury.

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