Author: Peter Dachs (MNE Tax). South Africa’s Minister of Finance has announced tax changes affecting business in the 2016 budget, including a measure to curb perceived abuses associated with hybrid debt instruments and a warning about future action on share buybacks Under South African domestic law, hybrid debt instruments, i.e. debt instruments with certain equity features, result in the return thereon being treated as a tax-exempt dividend. The budget, issued February 24, states that with immediate effect in circumstances where a nonresident issuer obtains a tax deduction for a payment on a hybrid debt instrument, the South African taxpayer receiving the return will be taxable thereon.
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Budget 2016 South African budget speech summary | tax proposals
Overview The Honourable Minister of Finance read the 2016 South African budget speech on 24 February 2016. In this summary, we address only the revenue (i.e. tax) side of the budget proposals. As this budget speech has received an unusual amount of interest, we have set out the tax proposals in more detail than usual, although this summary is not intended to be comprehensive. The economic growth outlook for 2016 has been revised down to 0.9%. Tax revenues are projected to be R11.6-billion down; corporate tax is estimated to be R13-billion down; value added tax (“VAT”) is to be R5.7-billion down and personal income tax R1.9-billion down. On the other hand, customs duties should increase by R4.3-billion.
Experts hail withdrawal of ‘unworkable’ withholding tax
Author: Amanda Visser (BDlive). The withdrawal of a withholding tax on service payments to foreigners, decried by many as unworkable, has been widely welcomed. The Treasury acknowledged that the tax had introduced “unforeseen issues, uncertainty on the application of domestic law and taxing rights under tax treaties”. The withholding tax was introduced into legislation in 2013 but its operation was postponed on several occasions. It was due to come into effect in January next year but will now be withdrawn from legislation.
SARS looks to clear up misconceptions relating to tax exemption for foreign employment income
The South African Revenue Service (SARS) issued Draft Interpretation Note 16 (Issue 2) (Draft IN) for public comment recently. When compared to the current Interpretation Note 16 (IN16), the Draft IN indicates a marked shift, on certain aspects, in SARS’s interpretation of the tax exemption that applies to foreign employment income, under s10(1)(o)(ii) of the Income Tax Act, No 58 of 1962 (Act).
Budget 2016 – Bid to end abuse of trusts
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.
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.