Author: Amanda Visser (IOL). Proposed changes to the tax treatment of trusts could bring an end to a common abuse of trusts as a way of reducing estate duty. National Treasury and the South African Revenue Service (SARS) have increasingly attacked the use of trusts to limit the tax liability of especially the very wealthy through estate planning.
Month: February 2016
The intentional creation of hybrid debt instruments that result in interest being deemed to be dividends
Author: Emil Brincker Section 8F and s8FA of the Income Tax Act have been promulgated with a view to convert interest into dividends. These sections deal with a scenario where the debt instrument displays a number of equity characteristics, for instance if amounts are only payable if the assets of the issuer exceed its liabilities and/or where interest is not calculated with reference to the time value of money. Unfortunately a number of transactions have been implemented which make use of the intentional recharacterisation of the interest into dividends.
Breaking records – Thank you for your trust
“Yesterday, SA Tax Guide had 4325 visitors in one day on its website. This is a milestone for the founder, considering the humble beginnings we had. Thank you for your visit, thank you for helping reaching new heights. The last record was 2391 per day.” Nyasha Musviba
Budget 2016 – Budget in a nutshell
Author: Jaco Leuvennink (Fin24). Finance Minister Pravin Gordhan’s first comeback National Budget tabled on Wednesday afternoon in Parliament was relatively calm and workmanlike one after all the expectations of tax hikes and spending cuts amid tough economic times. He stressed the need to reaffirm government’s commitment to close the gap between spending and revenue, implementing a plan for stronger economic growth and cooperation between government and the business sector. That should keep the rating agencies that want to downgrade SA’s debt position to junk status temporarily at bay.
Budget 2016 wrap: Gordhan dishes out tough love for everyone
Author: Thalia Holmes (Mail & Guardian). Finance Minister Pravin Gordhan’s budget focused on reining in government expenditure, raising tax revenues and preventing a ratings downgrade. This February, Finance Minister Pravin Gordhan is everyone’s Valentine. But civil servants may feel he’s handing out empty boxes of chocolate and wilted roses. On Wednesday, Gordhan faced the unenviable task of presenting a budget speech that straddled almost impossible territory. He did it with an almost abrasive optimism – one that, at times, seemed disingenuous with the economic and social desperation that has gripped many South Africans. He had a melody in his heart, repeated as a refrain throughout his speech: “We are resilient. We are committed. We are resourceful.”
Budget 2016 – Gordhan announces sugar tax
Author: Lynley Donnelly (Mail & Guardian). Finance Minister Pravin Gordhan has revealed plans to introduce a tax on sugar-sweetened beverages, similar to the sin taxes on alcohol and tobacco. Among the sins that the government taxes, you can now include sugar along with the likes of alcohol and tobacco. In his 2016 budget speech released on Wednesday Finance Minister Pravin Gordhan announced plans to introduce a tax on sugar-sweetened beverages.
Budget 2016 – Budget in a nutshell: higher income taxes and a tighter belt for government
Author: Linda Ensor (BDlive). A higher tax burden for all except low- to middle-income earners, a higher fuel levy and a lower rate of growth in government expenditure this year have allowed Treasury to fill the holes left in its budget by lower revenue collection. The measures announced by Finance Minister Pravin Gordhan in the R1.5-trillion budget he tabled in Parliament on Tuesday are just the start of what is anticipated to be a tough three years ahead as the government battles to ward off a credit ratings downgrade, address falling revenue and reignite economic growth.
Budget 2016 – A budget of prods and tweaks in the right direction
Finance minister Pravin Gordhan adopted a tenor at the start of his budget speech which, at last, matches SA’s parlous economic position. Gone is the attitude of faux bullishness, underpinned by some measured caution, that were the hallmarks of previous budget speeches, many presented by himself, and his predecessor Nhlanhla Nene. In its place was a more humble, more real, and more appealing presentation. It was, in many ways, the state of the nation speech that President Jacob Zuma should have given earlier this month. “We are conscious of the difficulties we face. Our resilience as a nation, black and white, can propel us to a better future if we make the right choices,” he said.
Budget 2016 – The re-characterisation of proceeds in the case of a share buyback
It was announced as part of the Budget proposals that National Treasury may recharacterise the proceeds that are received by a shareholder that is a company in circumstances where it disposes of its shares through means of a share buyback as opposed to selling the shares outright to a third party. This conundrum is currently arising on a daily basis where a shareholder in a company has two ways in which to dispose of the shareholding in the company, being:
Budget 2016 – The anomaly that dividends are not exempt when declared by a reit
The introduction of tax legislation pertaining to Real Estate Investment Trusts (REITs) has resulted in significant development of this industry over the last few years. Apart from the fact that a REIT is not subject to capital gains tax in respect of properties that it disposed of, an additional consequence is that dividends declared by a REIT to South African shareholders are not exempt, but are in fact part of taxable income. The distribution is also deductible in the hands of the REIT on the basis that a flow-through principle is essentially adopted with reference to rentals and similar income that are received by the REIT.