The Taxation Laws Amendment Bill of 2013 was published on 4 July and written comments were received until 5 August. Most of the amendments appear to me to be reasonable and sensible. Some are as follows:
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Income protection
In order to ensure uniform treatment of insurance products, it is proposed that the premiums of income protection policies be disallowed as a tax deduction and that the payments received from such policies thus be rendered tax-free.
Share incentive scheme dividends
Dividends paid in respect of services rendered are at present not taxed. The proposed amendment seeks to rectify this so that such dividends are re-characterised as ‘employment income’ and thus taxable in the hands of the payee or employee, with a corresponding deduction in the hands of the payer.
Retirement funds
It is proposed that an employer’s contributions to a retirement fund be taxed as a fringe benefit in the hands of the employee. The aggregate of contributions from employer and individual will be deductible up to 27,5% of the greater taxable income or remuneration, or up to a monetary cap of R350 000, in the individual’s hands. The value of the employer’s contributions towards a defined benefit fund will be valued through the application of a formula.
Low-cost housing
According to the proposal, there will be no tax payable in the case of an employee who earns R200 000 or less, who acquires a property with a cost to the employer of not more than R350 000. This is not limited to a certain sector.
Tax base erosion through debt
The use of debt instruments located offshore, where such use results in the erosion of the SA tax base, will be limited in terms of this proposal, which is a particularly important one. In short, this will limit or deny the interest deduction under certain circumstances, such as the non-redemption of the loan within 30 years, or if the debt can be converted to equity shares.
Collective investment schemes
It is proposed that, at the scheme level, the income or gain is tax-free and that upon distribution or sale to or by the unit holder, tax is triggered. However, the three-year safe harbour rule will also apply to units held for three years or more and the sale of such will be seen as capital receipts.
Special economic zones
Companies within ‘special economic zones’ will be taxed at low rates and be eligible for enhanced employment incentives and accelerated tax write-offs, as well as customs and VAT relief.
Other proposals
In addition to the above, the authorities are proposing the possibility of implementing withholding taxes (discussed in a previous column) and creating certainty about research and development expenditure and the deductions allowed in terms of these rules. They are also proposing that VAT be levied on Internet commerce under ‘place of supply’ rules, that VAT registration be streamlined and that the rules with regard to mineral royalties be overhauled to remove current anomalies.
Peter O’Halloran is head of tax at BDO, Gaborone. Phone him on 00267 390 2779
