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Draft Taxation Laws Amendment Bills, 2009

Presented by Stiaan Klue

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Executive Summary Clause 5: Section 4A of the Estate Duty Act Clause 23: Amendment of section 12E of the Income Tax Act Clause 44: Amendment of ss 30A & 10(1)(cO) of the Income Tax Act Clause 14: Amendment of section 88 of the Income Tax Act Clause 22: Amendment of para 20, Fourth Schedule of the Income

Tax Act Clauses 33, 34 and 36: Sections 1, 6(6) and 23 of the VAT Act Clause 37: Section 36 of the Value-Added Tax Act Clause 38: Section 39 of the Value-Added Tax Act

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Draft Taxation Laws

Amendment Bill, 2009

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Draft Taxation Laws Amendment Bill, 2009

Clause 5: Section 4A of the Estate Duty Act

Concern:

- Concession applies only in the very limited circumstances where “all assets” are bequeathed to the other spouse/s

- In the majority of cases one or more assets may be bequeathed to a child / PBO / relative

Recommendation:- Remove the requirement of “all assets”; or

- List specific assets to be excluded

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Draft Taxation Laws Amendment Bill, 2009

Clause 23: Amendment of section 12E of the Income Tax Act

Concern:

- Many small businesses are precluded from benefiting from the small business tax concessions because one or more of the shareholders / members has a share / interest in a property-holding company or other dormant company that may once have traded

Recommendation:

- The definition should be extended to allow the shareholding / interest in a property-holding company / dormant company

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Draft Taxation Laws Amendment Bill, 2009

Clause 44: Amendment of ss 30A & 10(1)(cO) of the ITA

Concern:- Extending the date for registration to 30 September 2010 and then

allowing SARS the discretion to back-date the club’s registration only opens the clubs to uncertainty regarding their tax status

Recommendation:- Retain the previous legislation until the new date

- Result would not be much (if any) loss of tax to the fiscus

- Clubs would save huge additional administrative costs

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Draft Taxation Laws Second

Amendment Bill, 2009

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Draft Taxation Laws Second Amendment Bill, 2009

Clause 14: Amendment of section 88 of the Income Tax Act

Concerns:1. Extension of the “pay-now-argue-later” rule to assessment stage may

infringe taxpayers’ right to access to court.

2. Discretionary powers in amended s 88 are not made subject to objection and appeal

3. Commissioner, a party to the dispute, is provided with the discretionary power to consider whether the taxpayer has an “arguable case”

4. No timeframes are provided

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Draft Taxation Laws Second Amendment Bill, 2009

Clause 14: Amendment of section 88 of the Income Tax Act

Recommendations:1. “Pay-now-argue-later” rule only enforced once objection finalised.

2. Discretions expressly made subject to objection and appeal.

3. Provide timeframes which must be adhered to by the Commissioner and taxpayers.

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Draft Taxation Laws Second Amendment Bill, 2009

Clause 22: Amendment of par 20, 4th Sch of the Income Tax Act

Concern:- May result in the situation where taxpayer’s do not know what their

potential liability is until shortly before the due date for payment.

Recommendation:

- Commissioner to announce in Gazette at least 1 year in advance.

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Draft Taxation Laws Second Amendment Bill, 2009

Clauses 33, 34 and 36: Sections 1, 6(6) and 23 of the VAT Act

Concern:- The new VAT registration verification procedures since November 2008

significant delays VAT registration, cost and other

- Expected that the proposed additional biometrical information will exacerbate the situation.

- Premature to introduce further verification procedures whilst SARS is still in discussion with stakeholders.

- Foreign entities with no presence in South Africa will not be able to comply

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Draft Taxation Laws Second Amendment Bill, 2009

Clauses 33, 34 and 36: Sections 1, 6(6) and 23 of the VAT Act

Recommendations:- Apply proposed amendment to voluntary registrations only.

- Finalise stakeholder discussions first and consider all alternatives first.

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Draft Taxation Laws Second Amendment Bill, 2009

Clause 37: Section 36 of the Value-Added Tax Act

Concern:

- Proposed amendment is too subjective.

- The mere fact that the case is under objection or appeal means in principle that the Commissioner believes that the vendor does not have an arguable case.

Recommendation:

- The amount of the tax under dispute should not influence the Commissioner’s decision whether or not to suspend payment. The proposed section 36(4)(b) should therefore be deleted.

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Draft Taxation Laws Second Amendment Bill, 2009

Clause 38: Section 39 of the Value-Added Tax Act

Concern:

- Interest is not intended to be a penalty or additional tax payable by the vendor for non-compliance with the VAT Act, but payable to compensate the fiscus for a financial loss incurred, or a cash flow cost incurred by the fiscus. If the fiscus did not suffer any financial loss, there is in principle no reason to pay interest.

Recommendation:

- Delayed until the regulations have been published and have been made subject to public comment.