Emigrating? National Treasury confirms 3 years wait to access preservation and RA lump sums

Author: Joon Chong, Partner & Wesley Grimm, Associate at Webber Wentzel. National Treasury proposes to introduce a 3-year rule to replace the financial emigration trigger which allows individuals to withdraw all amounts in their preservation funds and retirement annuity funds before retirement. The proposed amendment in the draft Taxation Laws Amendment Bill 2020 provides that pre-retirement individuals will only be able to access their preservation funds and retirement annuity funds after ceasing to be tax resident in South Africa for three years, as opposed to completion of the financial emigration process. Please refer to our article which discusses some of the issues of the proposed amendment.

TLAB 2020: Section 45 Proposed rollover relief amendments tabled

Author: Louis Botha. The rollover relief provisions contained in Part III of the Income Tax Act 58 of 1962 (the Act) provide valuable commercial flexibility to corporate groups. This is achieved by enabling corporate groups to undertake certain transactions in a tax neutral manner and defer the tax costs, where such transactions would otherwise give rise to immediate income tax and/or capital gains tax costs. The intra-group transactions covered by the rollover relief provisions include the introduction of assets into a group company, transfer of assets between group companies, and the unbundling of indirectly held subsidiaries to a group holding company.

Want to withdraw retirement funds on emigration? National Treasury and SARS say try again in 3 years’ time

Authors: Joon Chong, Partner &Wesley Grimm, Associate at Webber Wentzel. The National Treasury published the Draft Taxation Laws Amendment Bill, 2020 (Draft Tax Bill) for public comment. One of the more contentious proposals in the Draft Tax Bill relates to the ability of people emigrating from South Africa to access amounts in their pension preservation fund, provident preservation fund and retirement annuity fund (retirement funds) when they leave. In accordance with the policy decision to phase out “financial emigration” for exchange control purposes, which was announced in the 2020 Budget Speech, National Treasury and the South African Revenue Service (SARS) have proposed to amend the definitions of the terms “pension preservation fund”, “provident preservation fund” and “retirement annuity fund”.

SA Budget 2019/20 – A further win for the youth

The historically high levels of unemployment among the youth in South Africa has led to the introduction of various tax incentives and benefits aimed at encouraging the employment and training of such persons. Among these is the employment tax incentive (ETI) scheme which was introduced by the Employment Tax Incentive Act, No 26 of 2013 (ETI Act). The ETI is a temporary tax incentive aimed at encouraging employers to employ young employees between the ages of 18 and 29, as well as employees of any age in special economic zones and industries indicated by the Minister of Finance. The benefit for employers is that the ETI enables eligible employers to reduce the amount of employees tax due by them by the ETI amount claimed.

Finality to Debt Benefit Rules

Author: Siyanda Gaetsew. The Taxation Laws Amendment Act, 2018 (TLAA), which was promulgated on 17 January 2018, amended South African tax legislation by overhauling two provisions relating to the reduction of debt, (the Debt Benefit Rules), namely section 19 of the Income Tax Act, 1962 (the ITA) and paragraph 12A of the Eighth Schedule to the ITA (the Eighth Schedule). This article will examine the notable areas where the legislation per the TLAA differs and the importance of the timing of the application of such amendments.

Major new tax burden introduced

Author: David Warneke (Partner and head of Tax Technical at BDO South Africa). The Taxation Laws Amendment Act of 2017 (Act 17 of 2017) which was promulgated on 18 December 2017 contains provisions, namely section 22B of the principal Income Tax Act and paragraph 43A of the Eighth Schedule to the Income Tax Act, that will result in a significant compliance burden for companies, even in cases in which they do not result in additional taxation. The provisions deal with disposals of shares in a company (say A) that are held by another company (say B) in circumstances in which B held a significant portion of the equity shares (which the Amendment Act defines as a qualifying interest) in A at any time within the 18 months preceding the disposal. Section 22B applies in situations in which the shares that are the subject of the provision are held as trading Read More …

The lawfulness of retrospective amendments in tax law

Author: Beric Croome. On 29 May 2017, Judge Fabricius delivered judgment in the Gauteng High Court in the case of Pienaar Brothers (Pty) Ltd vs Commissioner for the South African Revenue Service and the Minister of Finance, in a case dealing with the Taxation Laws Amendment Act, 2007 (the Amending Act) which inserted section 44(9A) into the Income Tax Act, 1962 (the Act). The taxpayer sought an order declaring that section 34(2) of the Amending Act is inconsistent with the Constitution, and invalid to the extent that it provides that section 44 (9A) of the Act shall be deemed to have come into operation on 21 February 2007 and to be applicable to any reduction or redemption of the share capital or share premium of a resultant in company, including the acquisition by that company of its shares in terms of section 85 of the Companies Act, on or after Read More …

Ubi ius, ubi remedium: Proposed amendments to the Tax Administration Act

Author: Louis Botha (Associate at Cliffe Dekker Hofmeyr). Currently, in terms of section 9 of the Tax Administration Act, No 28 of 2011 (TAA) a decision made by a South African Revenue Services (SARS) official and a notice to a specific person issued by SARS, excluding a decision given effect to in an assessment or notice of assessment is regarded as made by a SARS official, authorised to do so or duly issued by SARS, until proven to the contrary. Furthermore, s9 makes provision for such a decision to be withdrawn or amended by the SARS official, a SARS official to whom the SARS official reports or a senior SARS official, at the request of the relevant person.  

Foreign employment income exemption is this the end?

Author: Nandipha Mzizi (Candidate Attorney at Cliffe Dekker Hofmeyr). Currently, s10(1)(o)(ii) of the Income Tax Act, No 58 of 1962 (Act), states that if a South African resident works in a foreign country for more than 183 days a year, with more than 60 of those days being continuous, foreign employment income earned is exempt from tax, subject to certain conditions. This exemption is only available to employees from the private sector. Early this year in the 2017 Budget, it was proposed that the exemption be adjusted as it was excessively generous for those that still benefited from it, ie private sector employees. It was proposed that foreign employment income will only be exempt from tax if it was subject to tax in the foreign country.