Budget & Tax Update 2007. The morning ahead 2007 Budget 2006 Tax update The Small Business Tax...

Budget & Tax Budget & Tax UpdateUpdate

20072007

The The morningmorning ahead ahead

2007 Budget2007 Budget

2006 Tax update2006 Tax update

The Small Business Tax Amnesty and Amendment of The Small Business Tax Amnesty and Amendment of Taxation Laws Act 9 of 2006Taxation Laws Act 9 of 2006

The Second Small Business Tax Amnesty and The Second Small Business Tax Amnesty and Amendment of Taxation Laws Act 10 of 2006Amendment of Taxation Laws Act 10 of 2006

The Revenue Laws Amendment Act 20 of 2006The Revenue Laws Amendment Act 20 of 2006

The Second Revenue Laws Amendment Act 21 of The Second Revenue Laws Amendment Act 21 of 20062006

2006 Tax update - Appetiser2006 Tax update - Appetiser

Small business tax amnestySmall business tax amnesty

Waiver of additional tax, penalty and interestWaiver of additional tax, penalty and interest

Recreational clubs and PBOsRecreational clubs and PBOs

Scientific or technological research and developmentScientific or technological research and development

Small business corporationsSmall business corporations

Section 103 and the new general anti-avoidance rulesSection 103 and the new general anti-avoidance rules

CGTCGT

VATVAT

2007 Budget – Highlights2007 Budget – Highlights Replacing the secondary tax on companies with a dividend tax, Replacing the secondary tax on companies with a dividend tax,

reducing the rate from 12.5% to 10% and broadening the basereducing the rate from 12.5% to 10% and broadening the base

Personal income tax relief for individuals amounting to R8.4 billionPersonal income tax relief for individuals amounting to R8.4 billion

Abolishing the retirement fund taxAbolishing the retirement fund tax

Treating the sale of shares held for more than 3 years as capital Treating the sale of shares held for more than 3 years as capital gainsgains

No change in VAT, CGT, Donations Tax or Estate Duty ratesNo change in VAT, CGT, Donations Tax or Estate Duty rates

Wage subsidy and social security tax reformWage subsidy and social security tax reform

Personal income taxPersonal income tax

Reduction in personal taxReduction in personal tax

Tax thresholdsTax thresholds RebatesRebates Interest exemptionInterest exemption

Couple over 65 earning only interestCouple over 65 earning only interest R190 000 tax freeR190 000 tax free

Monetary caps on medical aid contributionsMonetary caps on medical aid contributions CGTCGT

Corporate tax ratesCorporate tax rates

No change to basic ratesNo change to basic rates

SBCs revised tablesSBCs revised tables

STCSTC

Other taxes, ratesOther taxes, rates

Estate dutyEstate duty

Rate remains unchangedRate remains unchanged

Primary abatement increases NB: revisit willsPrimary abatement increases NB: revisit wills

Donations taxDonations tax

Rate remains unchangedRate remains unchanged

Tax free threshold increasesTax free threshold increases

Transfer DutyTransfer Duty

No changeNo change

Savings and retirement reformSavings and retirement reform

Move to expenditure model of taxing retirement fundsMove to expenditure model of taxing retirement funds

Tax treatment of contributions to pension, provident and Tax treatment of contributions to pension, provident and RAFs to be phased in over timeRAFs to be phased in over time

Favourable tax treatment of basic savings elementFavourable tax treatment of basic savings element

Some tax encouragement above basic elementSome tax encouragement above basic element

No special tax treatment above a specified ceilingNo special tax treatment above a specified ceiling

Aim to encourage savings by lower and middle income Aim to encourage savings by lower and middle income earnersearners

Savings and retirement reformSavings and retirement reform

Abolition of retirement fund taxAbolition of retirement fund tax

Effective 1 March 2007Effective 1 March 2007

Simplifying retirement fund thresholdsSimplifying retirement fund thresholds

Lump sum withdrawal rules too complexLump sum withdrawal rules too complex

Withholding tax on lump sums received by persons Withholding tax on lump sums received by persons earning below R43 000p.a abolishedearning below R43 000p.a abolished

Taxation on dividendsTaxation on dividends

Worldwide model – shareholder level with treaty reliefWorldwide model – shareholder level with treaty relief

STC – company levelSTC – company level

SA company tax rate inflated by STC for comparison SA company tax rate inflated by STC for comparison purposespurposes

STC to be replaced with a tax on dividendsSTC to be replaced with a tax on dividends

Taxation on dividends cont.Taxation on dividends cont. Anti-avoidance measure effective immediatelyAnti-avoidance measure effective immediately

Amalgamation transaction sec 44(9)Amalgamation transaction sec 44(9) Additional measures around corporate reorganisations Additional measures around corporate reorganisations

to be proposedto be proposed First phase – 1 October 2007First phase – 1 October 2007

STC renamed a dividend tax at company levelSTC renamed a dividend tax at company level Tax base broadenedTax base broadened

Cover all distributions not just profitsCover all distributions not just profits Provision for return of capital subject to anti-Provision for return of capital subject to anti-

avoidanceavoidance Tax rate reduced from 12.5% to 10%Tax rate reduced from 12.5% to 10% Targeted exemption for amalgamation transactionsTargeted exemption for amalgamation transactions

Taxation on dividends cont.Taxation on dividends cont.

Second phase – 2008Second phase – 2008

Legal liability for dividend tax moved from company to Legal liability for dividend tax moved from company to shareholdershareholder

Company must withhold the tax @ 10%Company must withhold the tax @ 10%

Implementation depends on renegotiation of several Implementation depends on renegotiation of several tax treatiestax treaties

Imputation system will not be followedImputation system will not be followed

Final withholding taxFinal withholding tax

Companies to apply tax treaty to foreign shareholdersCompanies to apply tax treaty to foreign shareholders

Gains on long term equitiesGains on long term equities

Current section 9BCurrent section 9B

ElectiveElective

Listed shares onlyListed shares only

5 years5 years

Proposed changeProposed change

Expanding to all sharesExpanding to all shares

5 years reduced to 3 years5 years reduced to 3 years

Depreciation allowancesDepreciation allowances

New rail locomotives, wagonsNew rail locomotives, wagons

From 14 yrs to 5 yrsFrom 14 yrs to 5 yrs

New quay walls and other port facilitiesNew quay walls and other port facilities

20 yrs20 yrs

New commercial buildings and upgradesNew commercial buildings and upgrades

20 yrs20 yrs

Environmental capital expensesEnvironmental capital expenses

Dams and tanks etc – allowancesDams and tanks etc – allowances

Clean-up, restoration, decommissioning – immediate Clean-up, restoration, decommissioning – immediate w/offw/off

BEE transactionsBEE transactions Share cross issueShare cross issue

Ords issued in exchange for redeemable prefsOrds issued in exchange for redeemable prefs Gains and losses on dual dispositions to be disregardedGains and losses on dual dispositions to be disregarded

Share buybacks of listed sharesShare buybacks of listed shares Purchase from public then trf to BEE partnerPurchase from public then trf to BEE partner Forced section 311 sale and replacement of sharesForced section 311 sale and replacement of shares Gains on forced sale to be ignored to extent replacedGains on forced sale to be ignored to extent replaced

Intra-group transfersIntra-group transfers Rollover relief for assets moved within the groupRollover relief for assets moved within the group De-grouping charge if company leaves the groupDe-grouping charge if company leaves the group Currently no time limit, proposed 6 yearsCurrently no time limit, proposed 6 years

BEE transactions – cont.BEE transactions – cont.

Connected person sale of depreciable assetsConnected person sale of depreciable assets

Deals where BEE partner acquires close to 50% of Deals where BEE partner acquires close to 50% of ownershipownership

Transfer of depreciable assets to BEE entity subject to Transfer of depreciable assets to BEE entity subject to connected person anti-avoidance levelsconnected person anti-avoidance levels

Exceptions to be accommodated where avoidance not Exceptions to be accommodated where avoidance not the driverthe driver

Broad-based share incentive schemesBroad-based share incentive schemes

Sec 8B not successful and so to be reviewedSec 8B not successful and so to be reviewed

Public benefit organisationsPublic benefit organisations

Level of tax deductible donationsLevel of tax deductible donations

Current level 5% of taxable incomeCurrent level 5% of taxable income

Increase to 10% of taxable incomeIncrease to 10% of taxable income

PBO threshold for trading activitiesPBO threshold for trading activities

Greater of 5% of Gross inc or R50 000Greater of 5% of Gross inc or R50 000

Increased toIncreased to

Greater of 5% of Gross inc or R100 000Greater of 5% of Gross inc or R100 000

Municipal Property Rates ActMunicipal Property Rates Act

4 year implementation of new valuation roll and rating4 year implementation of new valuation roll and rating

Have you received your letter yet?Have you received your letter yet?

Valuations are close to market valueValuations are close to market value

Look out for the new rating formulaLook out for the new rating formula

Wage subsidy & social securityWage subsidy & social security

A wage subsidy by 2010A wage subsidy by 2010

Reduce direct cost of employmentReduce direct cost of employment

Help alleviate high rate of unemployment amongst the Help alleviate high rate of unemployment amongst the youthyouth

Facilitate the social security reformFacilitate the social security reform

SARS to administer the social security tax and wage SARS to administer the social security tax and wage subsidysubsidy

Payroll based taxPayroll based tax

PAYE system will be administrative platformPAYE system will be administrative platform

Small business developmentSmall business development

Small business tax compliance cost studySmall business tax compliance cost study

Develop a simplified tax regime for very small businesses Develop a simplified tax regime for very small businesses – target 2008– target 2008

Enhanced tax administrationEnhanced tax administration

SARS to place greater emphasisSARS to place greater emphasis E-filingE-filing Re-engineer formsRe-engineer forms Scanning and imagingScanning and imaging Reliance on 3Reliance on 3rdrd party data party data

3 cross-industry areas of focus3 cross-industry areas of focus Trusts – co-operation with master’s officeTrusts – co-operation with master’s office Undervaluation of stock – additional audit activityUndervaluation of stock – additional audit activity Employees’ tax – SARS audit teams to be trainedEmployees’ tax – SARS audit teams to be trained

Small business tax amnestySmall business tax amnesty

11 301 applications by 13 Feb 200711 301 applications by 13 Feb 2007

Pace of applications expected to pick upPace of applications expected to pick up

Technical issue on certain types of trustsTechnical issue on certain types of trusts

Legislation may follow to clarifyLegislation may follow to clarify

Miscellaneous income tax Miscellaneous income tax amendmentsamendments

Residential accommodation fringe benefitResidential accommodation fringe benefit Exemption for South Africans working abroadExemption for South Africans working abroad Streamlining the medical regimeStreamlining the medical regime Deductibility of foreign taxesDeductibility of foreign taxes Simplifying the averaging formula for individual farmersSimplifying the averaging formula for individual farmers Provisional payment systemProvisional payment system Reciprocal tax relief for sportspersonsReciprocal tax relief for sportspersons Employee tax relief for sole proprietorsEmployee tax relief for sole proprietors

Miscellaneous VAT Miscellaneous VAT amendmentsamendments

E-commerce downloadsE-commerce downloads Dried maizeDried maize Streamlining business reorganisationsStreamlining business reorganisations Transfer among rental pool membersTransfer among rental pool members Horse-racing industryHorse-racing industry Game-viewing clarificationGame-viewing clarification Change of use adjustments to fixed propertyChange of use adjustments to fixed property Improper use of turnover apportionment methodImproper use of turnover apportionment method Clarifying payment datesClarifying payment dates Documentary evidence for input taxDocumentary evidence for input tax Documentary evidence for zero-rated exportsDocumentary evidence for zero-rated exports Electronic storage of cheques, bank deposit slips and other docsElectronic storage of cheques, bank deposit slips and other docs

Pension Funds Act, 1956Pension Funds Act, 1956

Forced early withdrawal from retirement fundForced early withdrawal from retirement fund

Through divorce or maintenance orderThrough divorce or maintenance order

Deferred until final retirement dateDeferred until final retirement date

Tax complications at that stageTax complications at that stage

Amendment to trigger immediate severanceAmendment to trigger immediate severance

Living annuity drawdownsLiving annuity drawdowns

Current rate 5% to 20%Current rate 5% to 20%

Proposed change 2.5% to 17.5%Proposed change 2.5% to 17.5%

Cross-border enforcementCross-border enforcement

SARS will explore memoranda of cooperation SARS will explore memoranda of cooperation with neighbouring jurisdictionswith neighbouring jurisdictions

Counter avoidance and abuseCounter avoidance and abuse

Artificial dual residenceArtificial dual residence

Transfer pricingTransfer pricing

Non-declaration of foreign incomeNon-declaration of foreign income

Indirect tax proposalsIndirect tax proposals

Fuel taxesFuel taxes

General fuel levy up 5 cents a litre toGeneral fuel levy up 5 cents a litre to

Petrol R1.21 per litrePetrol R1.21 per litre

Diesel R1.05 per litreDiesel R1.05 per litre

Road Accident Fund levy up 5 cents a litreRoad Accident Fund levy up 5 cents a litre

41.5 cents per litre41.5 cents per litre

Indirect tax proposals – cont.Indirect tax proposals – cont.

Duties on alcoholic beveragesDuties on alcoholic beverages

Up between 8% and 10.5%Up between 8% and 10.5%

Traditional beerTraditional beer

Duties on tobacco productsDuties on tobacco products

Up between 5.3% and 10.7%Up between 5.3% and 10.7%

Look out for ‘snus’ smokeless tobaccoLook out for ‘snus’ smokeless tobacco

Tips for TrevorTips for Trevor

2005 & 2006 Lobola2005 & 2006 Lobola

‘‘Lobola is a social responsibility put upon one’s Lobola is a social responsibility put upon one’s shoulder unwillingly so it should be tax-deductible’shoulder unwillingly so it should be tax-deductible’

2007 Lobola the sequel2007 Lobola the sequel

‘‘Impose VAT and tax on lobola trusts, since some Impose VAT and tax on lobola trusts, since some people are making money out of them’people are making money out of them’

Tax UpdateTax Update 2006 2006

Developments in 2006Developments in 2006

Small Business Tax Amnesty and Amendment of Taxation Small Business Tax Amnesty and Amendment of Taxation Laws Act 9 of 2006Laws Act 9 of 2006

25 July 200625 July 2006

Second Small Business Tax Amnesty and Amendment of Second Small Business Tax Amnesty and Amendment of Taxation Laws Act 10 of 2006Taxation Laws Act 10 of 2006

25 July 200625 July 2006

Revenue Laws Amendment Act 20 of 2006Revenue Laws Amendment Act 20 of 2006

7 February 20077 February 2007

Second Revenue Laws Amendment Act 21 of 2006Second Revenue Laws Amendment Act 21 of 2006

7 February 20077 February 2007

Interpretation notes and guidesInterpretation notes and guides

Small Business Tax Small Business Tax Amnesty and Amendment of Amnesty and Amendment of Taxation Laws Act 9 of 2006Taxation Laws Act 9 of 2006

Second Small Business Tax Second Small Business Tax Amnesty and Amendment of Amnesty and Amendment of Taxation Laws Act 10 of 2006Taxation Laws Act 10 of 2006

Small Business Tax AmnestySmall Business Tax Amnesty

Astounding move from government which must Astounding move from government which must leave all law abiding taxpayers a little irritated.leave all law abiding taxpayers a little irritated.

Purpose and objectivePurpose and objective

Broaden the tax baseBroaden the tax base

Facilitate normalisation of tax affairs of small businessFacilitate normalisation of tax affairs of small business

Increase and improve tax compliance cultureIncrease and improve tax compliance culture

Facilitate participation in the taxi recapitalisation Facilitate participation in the taxi recapitalisation programme programme

Small Business Tax Amnesty – Small Business Tax Amnesty – cont.cont.

Separate unit within SARS has been established Separate unit within SARS has been established to process all applications.to process all applications.

The secrecy provisions of section 4 are The secrecy provisions of section 4 are extended to cover tax amnestyextended to cover tax amnesty


Persons who may applyPersons who may apply

A natural personA natural person

Deceased or insolvent estate of natural personDeceased or insolvent estate of natural person

A trust (inter vivos or testamentary) where all A trust (inter vivos or testamentary) where all beneficiaries (discretionary and vested) throughout beneficiaries (discretionary and vested) throughout 2006 y.o.a were natural persons2006 y.o.a were natural persons


Requirements to qualify –Requirements to qualify –

Must have carried on a businessMust have carried on a business

The gross income of the business or businesses for The gross income of the business or businesses for the 2006 y.o.a was not more than R10 millionthe 2006 y.o.a was not more than R10 million

Apportion the R10 million if y.o.a is less than 12 Apportion the R10 million if y.o.a is less than 12 months and part of a month is treated as a full monthmonths and part of a month is treated as a full month


Method and period of applicationMethod and period of application

Form SBA-001 together with supporting docsForm SBA-001 together with supporting docs

1 August 2006 to 31 May 20071 August 2006 to 31 May 2007


Information required in the applicationInformation required in the application

2006 taxable income from carrying on of business2006 taxable income from carrying on of business

‘‘Carrying on of business’ includes investment income Carrying on of business’ includes investment income incidental to the regular carrying on of a businessincidental to the regular carrying on of a business

Capital gains?Capital gains?

What if business ceased in 2006?What if business ceased in 2006?

Income tax return for 2006 y.o.aIncome tax return for 2006 y.o.a

Statement of assets (at cost) and liabilities at end of 2006 Statement of assets (at cost) and liabilities at end of 2006 y.o.ay.o.a

SARS liabilities subject to amnesty?SARS liabilities subject to amnesty?


Information required in the application - contInformation required in the application - cont

If actual amounts cannot be ascertained for purposes If actual amounts cannot be ascertained for purposes of the SBA-001 or statement of assets & liabilities, of the SBA-001 or statement of assets & liabilities, reasonable estimates can be providedreasonable estimates can be provided

Must disclose which amounts are estimatesMust disclose which amounts are estimates

Beware materially wrong estimatesBeware materially wrong estimates


Evaluation and approvalEvaluation and approval

Commissioner must approve an applicationCommissioner must approve an application

If applicant is a qualifying personIf applicant is a qualifying person

Applies on correct form and within period allowedApplies on correct form and within period allowed

Provides all informationProvides all information


Evaluation and approval - contEvaluation and approval - cont Commissioner must not approve an applicationCommissioner must not approve an application

If before submission of applicationIf before submission of application

Formally notified of an audit, investigation or other enforcement Formally notified of an audit, investigation or other enforcement actionaction

This disqualification falls away if before the application is submittedThis disqualification falls away if before the application is submitted

Notice of audit, investigation or other enforcement action has Notice of audit, investigation or other enforcement action has been withdrawnbeen withdrawn

The audit or investigation has been concludedThe audit or investigation has been concluded

Commissioner must issue a notice of approval or rejectionCommissioner must issue a notice of approval or rejection

Subject to objection and appealSubject to objection and appeal

Tax court has jurisdiction to hear any appealTax court has jurisdiction to hear any appeal


Amnesty levyAmnesty levy

Based on 2006 y.o.a taxable income but only from Based on 2006 y.o.a taxable income but only from carrying on of businesscarrying on of business

Sliding scale see page 20 of notesSliding scale see page 20 of notes

2005 Assessed loss2005 Assessed loss

2005 Assessed capital loss2005 Assessed capital loss

What does 2006 y.o.a mean?What does 2006 y.o.a mean?

Year end during 1 April 2005 to 31 March 2006Year end during 1 April 2005 to 31 March 2006


ExampleExample

2006 y.o.a sources of income2006 y.o.a sources of income Salary 2006 - R200 000Salary 2006 - R200 000

Printing business net income - R300 000Printing business net income - R300 000

Profit on sale of printing press - R100 000 = Capital gainProfit on sale of printing press - R100 000 = Capital gain

Capital gain on sale of holiday cottage - R50 000Capital gain on sale of holiday cottage - R50 000

Rental from holiday cottage by a friend - R5 000Rental from holiday cottage by a friend - R5 000

2006 other deduction/allowances2006 other deduction/allowances RAF contributions - R10 000RAF contributions - R10 000

Medical expenses – R10 000Medical expenses – R10 000


Example - contExample - cont 2006 y.o.a taxable income from business2006 y.o.a taxable income from business

Printing business net income = R300 000Printing business net income = R300 000

Capital gain (100 000 – 10 000) x 25% = R22 500Capital gain (100 000 – 10 000) x 25% = R22 500

Taxable income from business = R322 500Taxable income from business = R322 500

Levy table pg 20, levy = 1 300 + 4 500 + 2 900Levy table pg 20, levy = 1 300 + 4 500 + 2 900

Total levy payable = R8 700Total levy payable = R8 700


Payment of amnesty levyPayment of amnesty levy Within 12 months of delivery of notice of approvalWithin 12 months of delivery of notice of approval


Scope of reliefScope of relief Income Tax - receipts and accruals for all years pre 2006 Income Tax - receipts and accruals for all years pre 2006

from carrying on of a businessfrom carrying on of a business Employees tax – remuneration paid on or before 28 Feb Employees tax – remuneration paid on or before 28 Feb

2006. NB ‘paid’2006. NB ‘paid’ VAT - any supply or import on or before 28 Feb 2006VAT - any supply or import on or before 28 Feb 2006 Withholding tax on royalties – amount paid on or before 28 Withholding tax on royalties – amount paid on or before 28

February 2006February 2006 STC – div declared or deemed to be declared in y.o.a STC – div declared or deemed to be declared in y.o.a

preceding 2006 i.e. year ends prior to 1 April 2005preceding 2006 i.e. year ends prior to 1 April 2005 UIF levies – remuneration paid on or before 28 Feb 2006UIF levies – remuneration paid on or before 28 Feb 2006 SDL – remuneration paid on or before 28 Feb 2006SDL – remuneration paid on or before 28 Feb 2006


Scope of reliefScope of relief

Not only the tax but also any additional taxes, Not only the tax but also any additional taxes, penalties and interestpenalties and interest

SARS may extend the date to submit all subsequent SARS may extend the date to submit all subsequent returns and waive all penalties and interest on thesereturns and waive all penalties and interest on these

No prosecutionNo prosecution Deemed not to have committed any offenceDeemed not to have committed any offence

No criminal prosecutionNo criminal prosecution


Exclusion from reliefExclusion from relief

Any amount already paidAny amount already paid

Payable as a result of any return submitted to SARSPayable as a result of any return submitted to SARS

Payable as a result of assessmentPayable as a result of assessment

VAT not paid due to false declaration of input tax claim VAT not paid due to false declaration of input tax claim or false zero-rating of exportsor false zero-rating of exports


Deductions and losses going forwardDeductions and losses going forward

Assessed loss and capital losses arising during Assessed loss and capital losses arising during qualifying period are lostqualifying period are lost

STC credits are lostSTC credits are lost

VAT input tax lost for any supply during the qualifying VAT input tax lost for any supply during the qualifying periodperiod


Circumstances where approval is voidCircumstances where approval is void

Failure to pay levy in timeFailure to pay levy in time

Failure to make full disclosure-Failure to make full disclosure-

On application formOn application form

Of taxable income for 2006Of taxable income for 2006

Information in 2006 tax returnInformation in 2006 tax return

Statement of assets and liabilitiesStatement of assets and liabilities

Any estimate provided is materially incorrectAny estimate provided is materially incorrect

Waiver of additional tax, Waiver of additional tax, penalty and interestpenalty and interest

Draft regulation issued on 24 January 2007 to prescribe Draft regulation issued on 24 January 2007 to prescribe circs that SARS may waive-circs that SARS may waive-

Additional tax, penalty or interestAdditional tax, penalty or interest

Imposed on a failed applicantImposed on a failed applicant

Business tax debt-Business tax debt-

Any additional tax, interest and penalty imposed in Any additional tax, interest and penalty imposed in respect ofrespect of

All taxes covered by the tax amnestyAll taxes covered by the tax amnesty

Payable during the qualifying periods prescribed in Payable during the qualifying periods prescribed in the tax amnestythe tax amnesty

Waiver of additional tax, Waiver of additional tax, penalty and interest – cont.penalty and interest – cont.

Who qualifies?Who qualifies?

Anyone who qualifies for tax amnestyAnyone who qualifies for tax amnesty

But is to extent prohibited from applying because-But is to extent prohibited from applying because-

amount owing or becomes owing to SARS due to amount owing or becomes owing to SARS due to information furnished in a return to SARSinformation furnished in a return to SARS

amount owing to SARS in terms of an assessment amount owing to SARS in terms of an assessment issuedissued

May apply for waiver of business tax debtMay apply for waiver of business tax debt

No later than 31 May 2007No later than 31 May 2007

On prescribed formOn prescribed form


Information required in applicationInformation required in application

List categories for waiverList categories for waiver

Statement of assets (at cost) & liabilities for 2006Statement of assets (at cost) & liabilities for 2006

All returns outstanding as on 31 Dec 2006 (except All returns outstanding as on 31 Dec 2006 (except returns covered by a successful amnesty approval)returns covered by a successful amnesty approval)

If actual amounts not available then reasonable If actual amounts not available then reasonable estimates can be providedestimates can be provided

SARS must approve if all requirements are metSARS must approve if all requirements are met


Business tax debt will not be waivedBusiness tax debt will not be waived

Sheriff has attached assetsSheriff has attached assets

Sequestration or liquidation proceedings have startedSequestration or liquidation proceedings have started

Notice of audit or investigation delivered by SARSNotice of audit or investigation delivered by SARS

N/A if SARS withdraws or concludesN/A if SARS withdraws or concludes


What is being waived?What is being waived? Business tax debt outstanding on 31 July 2006 after Business tax debt outstanding on 31 July 2006 after

setting off any refunds or credits duesetting off any refunds or credits due

What will not be waived?What will not be waived? Business tax debt above R1 millionBusiness tax debt above R1 million

Amounts paid after 31 July 2006Amounts paid after 31 July 2006

If approved agreement must be signedIf approved agreement must be signed Agreeing balance owing to SARS and payment termsAgreeing balance owing to SARS and payment terms

Any other conditions required by SARSAny other conditions required by SARS


SARS not bound to waiver if-SARS not bound to waiver if-

Failure to make full disclosureFailure to make full disclosure

Materially incorrect information supplied to SARSMaterially incorrect information supplied to SARS

Failure to comply with conditions of signed agreementFailure to comply with conditions of signed agreement

If SARS not boundIf SARS not bound

full amount of business tax debt can be reinstated full amount of business tax debt can be reinstated plus interest thereon from 1 August 2006plus interest thereon from 1 August 2006

FICA ExemptionFICA Exemption

Persons who assist or advise a client in terms of the Persons who assist or advise a client in terms of the Small Business Tax AmnestySmall Business Tax Amnesty

Applies for the duration of the amnesty application periodApplies for the duration of the amnesty application period

Currently 1 Aug 2006 to 31 May 2007Currently 1 Aug 2006 to 31 May 2007

Auditing Profession Act (APA)Auditing Profession Act (APA)

Registered auditorRegistered auditor

Assists or advises a client in terms of the Small Business Assists or advises a client in terms of the Small Business Tax AmnestyTax Amnesty

Exempt from section 45 of the APA from 1 Aug 2006Exempt from section 45 of the APA from 1 Aug 2006

ConditionCondition

Must have signed engagement letter in placeMust have signed engagement letter in place

Small Business CorporationsSmall Business Corporations

Section 12E turnover limit increasedSection 12E turnover limit increased

R6 million up to R14 millionR6 million up to R14 million

Learnership AllowancesLearnership Allowances

Section 12H was set to expire in Oct 2006Section 12H was set to expire in Oct 2006

Extended to Oct 2011Extended to Oct 2011

Maximum allowance on entering increasedMaximum allowance on entering increased

From R17 500 to R20 000 for existing employeesFrom R17 500 to R20 000 for existing employees

From R25 000 to R30 000 for new employeesFrom R25 000 to R30 000 for new employees

Maximum allowance on completion increasedMaximum allowance on completion increased

from R25 000 to R30 000from R25 000 to R30 000

Effective for agreements entered into on or after 1March Effective for agreements entered into on or after 1March 20062006

Learnership Allowances – cont.Learnership Allowances – cont. New section 12H(2A) for disabled learners entering New section 12H(2A) for disabled learners entering

learnerships on or after 1 July 2006learnerships on or after 1 July 2006 On commencementOn commencement

Existing disabled employees – lesser ofExisting disabled employees – lesser of

150% of the annual remuneration150% of the annual remuneration R40 000R40 000

New disabled employees – lesser ofNew disabled employees – lesser of

175% of the annual remuneration175% of the annual remuneration R50 000R50 000

Completion allowance – lesser ofCompletion allowance – lesser of 175% of the annual remuneration175% of the annual remuneration R50 000R50 000

VAT – Small scale farmers and VAT – Small scale farmers and other vendorsother vendors

Section 27 of the VAT ActSection 27 of the VAT Act

Farmers falling into category D – 6 monthlyFarmers falling into category D – 6 monthly

Small vendors falling into category F – 4 monthlySmall vendors falling into category F – 4 monthly

Annual turnover threshold increased from R1 mill to R1.2 Annual turnover threshold increased from R1 mill to R1.2 millmill

Revenue Laws Amendment Revenue Laws Amendment Act 20 of 2006Act 20 of 2006

Second Revenue Laws Second Revenue Laws Amendment Act 21 of 2006Amendment Act 21 of 2006

Section 1 definitionsSection 1 definitions

CompanyCompany

Now includes a co-operativeNow includes a co-operative

Co-operativeCo-operative

Section 1 of the Co-operatives ActSection 1 of the Co-operatives Act

Autonomous association of persons united voluntarily Autonomous association of persons united voluntarily to meet their common economic and social needs to meet their common economic and social needs through a jointly owned enterprisethrough a jointly owned enterprise

ShareholderShareholder

Includes a member of a co-operativeIncludes a member of a co-operative

Recreational clubsRecreational clubs

Clubs received full exemption in terms of section 10(1)(d)Clubs received full exemption in terms of section 10(1)(d)(iv)(aa) and para 64 of 8(iv)(aa) and para 64 of 8thth Schedule Schedule

Club amenities used by general public and membersClub amenities used by general public and members

Growing level of trading activities to raise fundsGrowing level of trading activities to raise funds

Were treated more leniently than PBOsWere treated more leniently than PBOs

System of partial taxation has been implementedSystem of partial taxation has been implemented

Exemption narrowed to only cost sharingExemption narrowed to only cost sharing

Income from non-members subject to taxIncome from non-members subject to tax

Now treated consistently with PBOsNow treated consistently with PBOs

Recreational clubs – cont.Recreational clubs – cont.

Section 10(1)(cO) is addedSection 10(1)(cO) is added

Applies to clubs approved in terms of sec 30AApplies to clubs approved in terms of sec 30A

Defines the limits of the new system for partial Defines the limits of the new system for partial taxationtaxation

Separates exempt income from taxable incomeSeparates exempt income from taxable income

Section 30A is addedSection 30A is added

covers the conditions for exemptioncovers the conditions for exemption


Section 10(1)(cO) exempts receipts and accruals from-Section 10(1)(cO) exempts receipts and accruals from- Membership feesMembership fees Any business or trade that-Any business or trade that-

Integral to provision of amenities or facilities for the Integral to provision of amenities or facilities for the membersmembers

On cost recovery basisOn cost recovery basis No unfair competitionNo unfair competition

Occasional fundraising activities by volunteersOccasional fundraising activities by volunteers Any other source on condition receipts and accruals fall below Any other source on condition receipts and accruals fall below

greater ofgreater of

5% of total annual membership fees and subs5% of total annual membership fees and subs R50 000R50 000


Expenditure incurred in producing exempt Expenditure incurred in producing exempt income cannot be offset against taxable club income cannot be offset against taxable club incomeincome

Sec 10(1)(cO) is effective for years of Sec 10(1)(cO) is effective for years of assessment commencing on or after 1 April assessment commencing on or after 1 April 20072007


Capital gains taxCapital gains tax

Rollover provisions apply (same as para 65 and Rollover provisions apply (same as para 65 and 66)66)

Assets used mainly forAssets used mainly for

Providing social and recreational facilitiesProviding social and recreational facilities

The proceeds on disposal must be reinvested in The proceeds on disposal must be reinvested in another recreation club directed assetanother recreation club directed asset

Elective provisionElective provision


New section 30A definition of a recreational clubNew section 30A definition of a recreational club

Section 21 company, society or associationSection 21 company, society or association

Principal purpose to provide social and recreational Principal purpose to provide social and recreational amenities or facilities to its members.amenities or facilities to its members.

Exemption is not automaticExemption is not automatic

Clubs must apply for approvalClubs must apply for approval


Approval must be granted if-Approval must be granted if- Non-profit motiveNon-profit motive

Surplus funds may not be distributedSurplus funds may not be distributed

On dissolution assets may only be transferred to On dissolution assets may only be transferred to another club or PBOanother club or PBO

No excessive remuneration or commission basedNo excessive remuneration or commission based

All members entitled to annual or seasonal All members entitled to annual or seasonal membershipmembership

No sale of membership rightsNo sale of membership rights

No tax avoidance schemesNo tax avoidance schemes


Penalties for violating section 30APenalties for violating section 30A

Withdrawal of approvalWithdrawal of approval

6 months to transfer remaining assets to another 6 months to transfer remaining assets to another approved club or PBOapproved club or PBO

If fail to transferIf fail to transfer

Market value of those assets less liabilities Market value of those assets less liabilities deemed to be an amount of taxable income in deemed to be an amount of taxable income in year approval withdrawnyear approval withdrawn


Effective datesEffective dates

Transitional period for sec 30A approval, Transitional period for sec 30A approval, applications must be made before the later ofapplications must be made before the later of

31 March 2009, or31 March 2009, or

Last day of its 1Last day of its 1stst y.o.a y.o.a

Scholarship and bursariesScholarship and bursaries Section 10(1)(q)Section 10(1)(q)

Taxed employees on salary sacrifice schemesTaxed employees on salary sacrifice schemes Prohibited deduction sec 23(j)Prohibited deduction sec 23(j)

Skills shortage in SA needs to be addressedSkills shortage in SA needs to be addressed Amendment provides for exemption of all bona fide schemesAmendment provides for exemption of all bona fide schemes However, if granted purely because of employment relationshipHowever, if granted purely because of employment relationship

To an employee, the employee must agree to reimburse employer To an employee, the employee must agree to reimburse employer if fails to complete his or her studiesif fails to complete his or her studies

To a relative of an employee, will only be exempt ifTo a relative of an employee, will only be exempt if

Remuneration of employee below R60 000 per annum, Remuneration of employee below R60 000 per annum, andand

Only exempts up to R3 000 per year, anything more is Only exempts up to R3 000 per year, anything more is taxabletaxable

Registration of intellectual Registration of intellectual propertyproperty

Sec 11(gB) has been extended and allows Sec 11(gB) has been extended and allows deduction fordeduction for

The grant, restoration or extension of a patentThe grant, restoration or extension of a patent

Registration or extension of a designRegistration or extension of a design

Renewal of the registration of a trade markRenewal of the registration of a trade mark

Applies to all expenditure after 2 Nov 2006Applies to all expenditure after 2 Nov 2006

Pre 2 Nov 2006 sec 11B(2)(b) appliedPre 2 Nov 2006 sec 11B(2)(b) applied

Scientific or technological Scientific or technological research & developmentresearch & development

Sec 11B allowedSec 11B allowed

a deduction for R&D expenditure including registering, a deduction for R&D expenditure including registering, extending or renewing intellectual prop rightsextending or renewing intellectual prop rights

Capex 40:20:20:20Capex 40:20:20:20

Improved R&D tax incentives to stimulate R&DImproved R&D tax incentives to stimulate R&D

New sec 11D for expenditure after 2 Nov 2006New sec 11D for expenditure after 2 Nov 2006

Scientific or technological research Scientific or technological research & development – cont.& development – cont.

Section 11D provides 2 sets of incentivesSection 11D provides 2 sets of incentives Operating expenses deductible up to 150%Operating expenses deductible up to 150% Capital allowance 50:30:20Capital allowance 50:30:20

Applies to R&D undertaken in RSAApplies to R&D undertaken in RSA Discovery of novel, practical and non-obvious information of Discovery of novel, practical and non-obvious information of

a scientific or technological naturea scientific or technological nature Or creation of any invention, patent, design or computer Or creation of any invention, patent, design or computer

copyright or other similar property of scientific or copyright or other similar property of scientific or technological naturetechnological nature

Specific exclusions – prospecting, business Specific exclusions – prospecting, business processes, trade mark creation, social science processes, trade mark creation, social science and humanities and market research, sales or and humanities and market research, sales or marketingmarketing


Part R&DPart R&D Apportion 150% deduction only for R&DApportion 150% deduction only for R&D

Capital allowance 50:30:20 applies only to R&D portion Capital allowance 50:30:20 applies only to R&D portion of asset used regularly for R&D (e.g. pg 48)of asset used regularly for R&D (e.g. pg 48)

RecoupmentsRecoupments Recovery of R&D expenditure will result in Recovery of R&D expenditure will result in

recoupment of the previously allowed deduction (e.g. recoupment of the previously allowed deduction (e.g. pg 49)pg 49)

Cease of use of building on which R&D allowance Cease of use of building on which R&D allowance claimed subject to recoupment limited to 100% of cost claimed subject to recoupment limited to 100% of cost less 10% for each year used for R&D (e.g. pg 49)less 10% for each year used for R&D (e.g. pg 49)


Government grant funded R&D projectsGovernment grant funded R&D projects

If grant is taxableIf grant is taxable

150% allowed only to extent expenditure 150% allowed only to extent expenditure exceeds twice the amount of the grant (e.g. exceeds twice the amount of the grant (e.g. pg 50)pg 50)

If grant exempt then no deductionIf grant exempt then no deduction

Reporting requirementReporting requirement

Info on R&D project to Minister of Science & Info on R&D project to Minister of Science & technologytechnology

Small business corporationsSmall business corporations

Small co-operative did not qualify for 12E statusSmall co-operative did not qualify for 12E status

UnfairUnfair

Section 12E now available to co-operativeSection 12E now available to co-operative

Small business corporations – Small business corporations – cont.cont.

Sec12E disqualification through dual shareholding or Sec12E disqualification through dual shareholding or membership other thanmembership other than Listed share or unit trustListed share or unit trust

Body corporateBody corporate

Share blockShare block

Collective interest entityCollective interest entity

List of exceptions extendedList of exceptions extended allowed to act as members of non-business co-operatives allowed to act as members of non-business co-operatives

e.g. consumer buy-aids, social co-operatives (nursery e.g. consumer buy-aids, social co-operatives (nursery school) and funeral societiesschool) and funeral societies

can be members of friendly societies.can be members of friendly societies.

Small business corporations – Small business corporations – cont.cont.

Section 12E(4)(c) definition of investment Section 12E(4)(c) definition of investment incomeincome

Limits rentals to those derived from immovable Limits rentals to those derived from immovable property onlyproperty only

Section 12E(4)(d) definition of personal serviceSection 12E(4)(d) definition of personal service

Requirement to employ at least 4 full-time non Requirement to employ at least 4 full-time non connected employeesconnected employees

Decreased to 3 or moreDecreased to 3 or more

Public Benefit OrganisationsPublic Benefit Organisations

Tax rates of PBOsTax rates of PBOs

Depended on legal form of PBODepended on legal form of PBO

Company 29%Company 29%

Trust 40%Trust 40%

Unfair for PBO trustsUnfair for PBO trusts

Tax rate applicable to all PBOs irrespective of Tax rate applicable to all PBOs irrespective of legal formlegal form

29%29%

Effective y.o.a ending in the 12 months to 31 March 2007Effective y.o.a ending in the 12 months to 31 March 2007

Public Benefit Organisations – Public Benefit Organisations – cont.cont.

Refining the PBO activity listRefining the PBO activity list Low cost housing PBO - minimum earnings of Low cost housing PBO - minimum earnings of

beneficiaries to be increased from current R3 500 (chg beneficiaries to be increased from current R3 500 (chg to Part I and II)to Part I and II)

PBOs that issue guarantees for low income housing PBOs that issue guarantees for low income housing loans (added to Part I)loans (added to Part I)

Conservation, environment and animal welfare (All Conservation, environment and animal welfare (All activities in part I added to part II)activities in part I added to part II)

Foreign established charitiesForeign established charities Agencies or branchesAgencies or branches Qualify for exemption but not section 18A donationsQualify for exemption but not section 18A donations


Liberalising permissible investmentsLiberalising permissible investments

Sec 30(3)(b)(ii) limitations deletedSec 30(3)(b)(ii) limitations deleted

Free to invest as desiredFree to invest as desired

CGT on disposal of PBO assetsCGT on disposal of PBO assets

Clarifies how to deal with assets used for dual trading Clarifies how to deal with assets used for dual trading and public benefit purposesand public benefit purposes

Definition of PBODefinition of PBO

Sole object test relaxed to principal objectSole object test relaxed to principal object


Dual registrationDual registration Director of Non-profit Organisations (NPO)Director of Non-profit Organisations (NPO)

Precondition for tax exemption statusPrecondition for tax exemption status

RemovedRemoved

PBO exemption now without NPO registrationPBO exemption now without NPO registration

Provisional taxProvisional tax PBOs are exempt from the systemPBOs are exempt from the system

Only for 3 years from 1Only for 3 years from 1stst y.o.a commencing on or after y.o.a commencing on or after 1 April 20071 April 2007


Withdrawal of approvalWithdrawal of approval

PBO in violation of section 30 or its founding PBO in violation of section 30 or its founding statementstatement

Failed to transfer assets to another PBOFailed to transfer assets to another PBO

Subject to tax on ‘accumulated net revenue’Subject to tax on ‘accumulated net revenue’

ChangeChange

Amount taxable is market value of assets not Amount taxable is market value of assets not transferred less liabilitiestransferred less liabilities

Personal service companies Personal service companies and trustsand trusts

Section 23(k) limits deductions toSection 23(k) limits deductions to SalariesSalaries

Legal expenses (sec 11(c))Legal expenses (sec 11(c))

Bad Debts (sec 11(i))Bad Debts (sec 11(i))

Benefit fund contributions (sec 11 (l))Benefit fund contributions (sec 11 (l))

Expenses i.r.o premises, finance charges, insurance, Expenses i.r.o premises, finance charges, insurance, repairs and fuel and maintenance i.r.o assetsrepairs and fuel and maintenance i.r.o assets

Condition that assets are used whollyCondition that assets are used wholly and and exclusively for tradeexclusively for trade

Oil and Gas Exploration and Oil and Gas Exploration and ProductionProduction

Section 26B and Tenth Schedule insertedSection 26B and Tenth Schedule inserted

Oil & Gas exploration and production will be Oil & Gas exploration and production will be subject to provisions of IT Act but subject to 10subject to provisions of IT Act but subject to 10 thth Schedule overrideSchedule override

Mining environmental Mining environmental rehabilitation fundsrehabilitation funds

New section 37A and 10(1)(cP)New section 37A and 10(1)(cP)

Fund growth is exempt from taxFund growth is exempt from tax

Contributions by eligible parties will be tax deductibleContributions by eligible parties will be tax deductible

General anti-avoidance ruleGeneral anti-avoidance rule

Part IIA inserted in Chapter IIIPart IIA inserted in Chapter III

Old section 103 required 4 elementsOld section 103 required 4 elements

Transaction, operation or schemeTransaction, operation or scheme

Avoidance, reduction or postponement of taxAvoidance, reduction or postponement of tax

Manner not normally employed for business purposes, Manner not normally employed for business purposes, other than tax benefit or abnormal rights and other than tax benefit or abnormal rights and obligations createdobligations created

Purposes solely or mainly for avoiding, postponing or Purposes solely or mainly for avoiding, postponing or reducing taxreducing tax

General anti-avoidance ruleGeneral anti-avoidance rule

Old section 103 – cont.Old section 103 – cont.

If requirements satisfiedIf requirements satisfied

SARS determined liability for tax as if the transaction SARS determined liability for tax as if the transaction had not been entered into or carried outhad not been entered into or carried out

103 has been ineffective103 has been ineffective

Deleted for any arrangement or scheme after 2 Deleted for any arrangement or scheme after 2 Nov 2006 and new sections apply.Nov 2006 and new sections apply.

General anti-avoidance rule – General anti-avoidance rule – cont.cont.

Sections 80A to L of Part IIA inserted in Chapter Sections 80A to L of Part IIA inserted in Chapter IIIIII

Requirements for an impermissible avoidance Requirements for an impermissible avoidance arrangementarrangement An arrangementAn arrangement

Plus the tax effectPlus the tax effect

Results in an avoidance arrangeResults in an avoidance arrange

Plus the sole or main purpose is tax avoidancePlus the sole or main purpose is tax avoidance

Plus a tainted elementPlus a tainted element

Results in an impermissible tax avoidanceResults in an impermissible tax avoidance


Definitions section 80L similar to sec 103Definitions section 80L similar to sec 103

ArrangementArrangement Transaction, operation, scheme, agreement or Transaction, operation, scheme, agreement or

understandingunderstanding

Avoidance arrangementAvoidance arrangement Any arrangement that results in a tax benefitAny arrangement that results in a tax benefit

PartyParty Anyone who participates or takes part in an Anyone who participates or takes part in an

arrangementarrangement


Section 80A - Impermissible tax avoidance Section 80A - Impermissible tax avoidance arrangement ifarrangement if Sole or main purpose to obtain a tax benefit, andSole or main purpose to obtain a tax benefit, and

A tainted element is presentA tainted element is present

Abnormality (based on sec 103)Abnormality (based on sec 103)

Lack of commercial substance (sec 80C expands)Lack of commercial substance (sec 80C expands)

Misuse or abuse of tax provisions (Canada and Misuse or abuse of tax provisions (Canada and Europe)Europe)

The 2 new elements provide a far more effective The 2 new elements provide a far more effective remedy for SARSremedy for SARS


Section 80B – Tax consequencesSection 80B – Tax consequences Provides SARS withProvides SARS with

specific remediesspecific remedies

and general remedy modelled on 103(1)and general remedy modelled on 103(1)

Specific remediesSpecific remedies Disregard, combine, re-characterise any stepsDisregard, combine, re-characterise any steps

Disregard any accommodating or tax-indifferent partyDisregard any accommodating or tax-indifferent party

Treat any accommodating or tax indifferent party and Treat any accommodating or tax indifferent party and the other person as one and same personthe other person as one and same person

Reallocate amounts, re-characterise amountsReallocate amounts, re-characterise amounts


Section 80C – Lack of commercial substanceSection 80C – Lack of commercial substance

Contains indicators to determine when an Contains indicators to determine when an avoidance arrangement lacks commercial avoidance arrangement lacks commercial substancesubstance Substance over form ‘unblinkered approach’Substance over form ‘unblinkered approach’

Round trip financingRound trip financing

Accommodating or tax indifferent partiesAccommodating or tax indifferent parties

Offsetting or cancelling elementsOffsetting or cancelling elements

No reasonable expectation of pre-tax profitNo reasonable expectation of pre-tax profit

Pre-tax profit insignificant compared to tax benefitPre-tax profit insignificant compared to tax benefit


Section 80D – Round trip financingSection 80D – Round trip financing

Section 80E – Accommodating or tax indifferent Section 80E – Accommodating or tax indifferent partiesparties

Section 80F – Treatment of connected person Section 80F – Treatment of connected person and accommodating or tax indifferent partiesand accommodating or tax indifferent parties

Section 80G – Presumption of purposeSection 80G – Presumption of purpose

Rebuttable presumption if tax benefitRebuttable presumption if tax benefit

Step or part may have different purpose to wholeStep or part may have different purpose to whole


Section 80H – Steps in or parts of an arrangementSection 80H – Steps in or parts of an arrangement Section 80I – Use in the alternativeSection 80I – Use in the alternative

SARS may apply GAAR as an alternative basis for raising an SARS may apply GAAR as an alternative basis for raising an assessmentassessment

Section 80J – NoticeSection 80J – Notice SARS must give notice of intention to invoke, with reasonsSARS must give notice of intention to invoke, with reasons Taxpayer has 60 days to reply (extendable)Taxpayer has 60 days to reply (extendable) SARS has further 180 days to raise queries, withdraw or SARS has further 180 days to raise queries, withdraw or

invokeinvoke

Section 80K – Interest may not be waived if GAAR Section 80K – Interest may not be waived if GAAR invokedinvoked

Reportable arrangementsReportable arrangements

Old section 76A – introduced 1 March 2005Old section 76A – introduced 1 March 2005

2 classes of arrangement2 classes of arrangement

Interest, fees etc vary depending on actual tax benefitsInterest, fees etc vary depending on actual tax benefits

Hybrid debt and equity instrumentsHybrid debt and equity instruments

Intended to provide early warning to SARSIntended to provide early warning to SARS

Section 76A not effective and replaced with Section 76A not effective and replaced with sections 80M to Tsections 80M to T

New provisions not yet effective, date to be New provisions not yet effective, date to be announcedannounced

Reportable arrangements – Reportable arrangements – cont.cont.

New provisions trigger reporting when an New provisions trigger reporting when an arrangementarrangement

Interest, finance costs, fees or other charges are Interest, finance costs, fees or other charges are dependant on tax treatmentdependant on tax treatment

lack of commercial substance as contained in GAARlack of commercial substance as contained in GAAR

financial liability for GAAP but not for taxfinancial liability for GAAP but not for tax

No expectation of pre-tax profit for any of the No expectation of pre-tax profit for any of the participantsparticipants

Pre-tax profit is less than NPV of tax benefitsPre-tax profit is less than NPV of tax benefits

Reportable arrangements – Reportable arrangements – cont.cont.

Responsibility for reporting is placed on the Responsibility for reporting is placed on the promoter of the arrangementpromoter of the arrangement

In the absence of a promoter all participants In the absence of a promoter all participants must reportmust report

On reporting only a list of agreements to be On reporting only a list of agreements to be reported and not the actual agreementsreported and not the actual agreements

Penalty for not reporting is R1 millionPenalty for not reporting is R1 million

Small personal service entitiesSmall personal service entities

Para 1 of the 4Para 1 of the 4thth Schedule Schedule

Obligation to withhold 34%Obligation to withhold 34%

Denial of tax deductions except for salariesDenial of tax deductions except for salaries

Three amendment to relax provisionsThree amendment to relax provisions

Client supervision applies only if must be at clients Client supervision applies only if must be at clients premisespremises

Regular payments deletedRegular payments deleted

Escape hatch 4 or more employees now 3 or moreEscape hatch 4 or more employees now 3 or more

Small personal service entities Small personal service entities – cont.– cont.

Relaxation of client withholdingRelaxation of client withholding

Onus of proof on client relaxedOnus of proof on client relaxed

Rely on affidavit or solemn declaration that not PSERely on affidavit or solemn declaration that not PSE

If in good faith then no liability to withholdIf in good faith then no liability to withhold

Directives available againDirectives available again

Relief for over withholdingRelief for over withholding

Reduce rate below 34%Reduce rate below 34%

CGT valuations – submission CGT valuations – submission datesdates

Para 29(5) of 8Para 29(5) of 8thth Schedule Schedule Value asset by 30 Sept 2004, andValue asset by 30 Sept 2004, and

Lodge CGT 2L form, generally y.o.a asset soldLodge CGT 2L form, generally y.o.a asset sold

High value assets had to submitted with 1High value assets had to submitted with 1stst return after 30 Sept 2004return after 30 Sept 2004 Value exceeds R10 millionValue exceeds R10 million

Intangibles exceed R1 millionIntangibles exceed R1 million

Unlisted shares, all share exceed R10 millionUnlisted shares, all share exceed R10 million

If forgot to submit can still use the valuation just If forgot to submit can still use the valuation just prove it was done pre 30 Sept 2004prove it was done pre 30 Sept 2004

Capital gain attributed to trust Capital gain attributed to trust beneficiariesbeneficiaries

Concern that old wording of para 80(2) did not Concern that old wording of para 80(2) did not permitpermit

Attribution of portion of a capital gainAttribution of portion of a capital gain

Attribution of a capital gain in multiple beneficiariesAttribution of a capital gain in multiple beneficiaries

Amendment confirmsAmendment confirms

VAT - Excessive considerationVAT - Excessive consideration

Section 8(27) 10(26) and 16(3)(m)Section 8(27) 10(26) and 16(3)(m)

Any amount received in excess of amount chargedAny amount received in excess of amount charged

If not refunded in 4 monthsIf not refunded in 4 months

Account for output taxAccount for output tax

If amount is refunded later then input tax can be If amount is refunded later then input tax can be claimedclaimed

VAT – Entertainment expensesVAT – Entertainment expenses

Section 17(2)(a)Section 17(2)(a)

Generally deniedGenerally denied

Exception for subsistence i.r.o employees away on Exception for subsistence i.r.o employees away on businessbusiness

Extended to self employed natural persons Extended to self employed natural persons (contractors) where meals, refreshments and (contractors) where meals, refreshments and accommodation is paid by the vendoraccommodation is paid by the vendor

VAT – Deemed output on VAT – Deemed output on cessation of enterprisecessation of enterprise

Section 22(3) triggered where supplier has not Section 22(3) triggered where supplier has not been paid within 12 monthsbeen paid within 12 months

Creditors outstanding on date of cessation of Creditors outstanding on date of cessation of enterprise did not trigger output taxenterprise did not trigger output tax

Amended to trigger output tax on all amounts Amended to trigger output tax on all amounts unpaid on date of cessation of enterprise if input unpaid on date of cessation of enterprise if input tax has been claimedtax has been claimed

2010 FIFA World Cup2010 FIFA World Cup

Schedule 1 of VAT ActSchedule 1 of VAT Act

Schedules 1 and 2 of Revenue Laws Amendment Schedules 1 and 2 of Revenue Laws Amendment Act, 2006Act, 2006

Customs and Excise Act, 1964Customs and Excise Act, 1964

2010 FIFA World Cup – cont.2010 FIFA World Cup – cont.

Tax free bubble conceptTax free bubble concept

Income tax and VAT (not other taxes)Income tax and VAT (not other taxes)

Restricted to FIFA designated sightsRestricted to FIFA designated sights

For specified periodsFor specified periods

Receipts and accruals exempt from income taxReceipts and accruals exempt from income tax

VAT on supplies at zero rateVAT on supplies at zero rate

Expenses on tax free income not deductibleExpenses on tax free income not deductible

Tickets sales VAT at 14%Tickets sales VAT at 14%

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