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South Africa Consults On 2015 Budget Change Legislation

by Lorys Charalambous, Tax-News.com, Cyprus

24 July 2015


South Africa's Ministry of Finance has published for public comment the 2015 Draft Taxation Laws Amendment Bill (TLAB) and the 2015 Draft Tax Administration Laws Amendment Bill(TALAB), which would give effect to the tax changes announced in the Budget in February this year.

With changes to the tax rates and thresholds announced in the 2015 Budget already included in previous legislation, the draft TLAB and TALAB deal with the Budget's more substantive changes to the country's tax laws and administrative provisions.

The draft TLAB includes the following Budget proposals:

  • Closing a loophole to ensure the consistent tax treatment of all retirement funds, in that all members under the age of 55 who retire will be required to purchase an annuity (those over that age will not);
  • Closing a loophole to avoid estate duty through excessive contributions to retirement funds;
  • Capital gains tax (CGT) and securities tax exemptions for collateral shares will be returned within 12 months;
  • Transitional tax amendments resulting from the regulation of hedge funds as collective investment schemes, such that there are CGT and normal tax exemptions for certain transfers;
  • Measures to counter tax-free corporate migrations, in that the issue of shares by a South African resident company as consideration for the acquisition of shares in a foreign company will no longer be subject to CGT, but there will be a denial of the participation exemption on disposals to connected persons and a claw-back of participation exemption benefits on a change of tax residence;
  • Withdrawal of special foreign tax credits for service fees sourced in South Africa; and
  • Reinstatement of the controlled foreign company diversionary income rules to prevent the shifting of profits offshore through the sale of goods and services.

The draft TALAB would give effect to the following key proposals:

  • Provision for the collection of information by South African financial institutions (FIs), and an associated obligation on FIs to register with the South African Revenue Service (SARS), regarding the Foreign Account Tax Compliance Act intergovernmental agreement with the United States that was signed on July 9, 2014; and
  • In relation to South Africa's permanent Voluntary Disclosure Program, further clarify the persons qualifying for voluntary disclosure, to relax the requirements for voluntary disclosure, and broaden the ambit of voluntary disclosure relief.

The National Treasury and SARS have invited comments on the draft bills by August 24, 2015, prior to the bills being tabled in Parliament.

TAGS: individuals | capital gains tax (CGT) | inheritance tax | South Africa | compliance | tax | investment | business | pensions | tax compliance | law | banking | retirement | investment funds | hedge funds | fees | tax credits | multinationals | legislation | transfer pricing | Compliance | Africa | Tax

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