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Firms To Report Structured Business Transactions To SARS

by Robert Lee, Tax-News.com, London

28 October 2003


Businesses and the financial community in South Africa have expressed concern at government proposals that will require firms to give advance notice of structured finance transactions to SARS (South African Revenue Service).

The proposals, which are contained in the draft Revenue Laws Amendment Bill, will require banks and businesses to report all transactions using a tax benefit to reduce lending costs to the Revenue Service. SARS hopes that by taking this action, firms will be prevented from undertaking structured finance deals such as lease back arrangements as a way of lessening their tax bills.

Whilst critical of the move, business organizations such as the Banking Council have conceded that advanced rulings on such transactions by SARS would be preferable, in order to give taxpayers more certainty in the system.

However, many think the rules as they stand are too broad, and fear that the bill will end up policing transactions that were not intended to be regulated. "The implementation of a disclosure requirement without a concomitant ruling system such as now proposed, is likely to result in the proliferation of ad hoc tax adjustments," Kevin Daly, a consultant for the Banking Council, told Business Day.

Mr Daly also warned that the list of reportable transactions must only be extended as a result of legislation that has been subjected to parliamentary examination, rather than by way of regulation.


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