National Treasury has published its annual draft tax law amendments for public comment.<\/p>\n\n\n\n
While the amendments are an annual exercise that gives effect to plans and proposals made in the 2023 Budget (published in February), they also bring several notable tax changes into reality.<\/p>\n\n\n\n
According to tax experts at Tax Consulting SA, the 2023 amendments are pertinent given the greater lengths the South African Revenue Service (SARS) is going to bring non-compliant taxpayers into the fold.<\/p>\n\n\n\n
They are also in more focus due to South Africa’s greylisting by the Financial Action Task Force (FATF) earlier in the year.<\/p>\n\n\n\n
Although still at the draft stage, the experts said that historically, regardless of feedback to dissuade Treasury on specific items, the proposed amendments have been promulgated into law, and they are likely to follow the same path this year.<\/p>\n\n\n\n
“This follows the National Strategy on AML\/CTF\/CFP, to combat South Africa\u2019s current grey-listing status, and further drives the \u201cstrategic intent\u201d of SARS,” it said.<\/p>\n\n\n\n
With these changes imminent on the horizon of our tax landscape, Tax Consulting identified seven key considerations for taxpayers to be aware of.<\/p>\n\n\n\n
7 key changes<\/strong><\/p>\n\n\n\n “At a high level, the proposed changes are largely focused on the strengthening of tax treatment in South Africa, as well as making any non-compliance both hard and costly,” the tax experts said.<\/p>\n\n\n\n In summary, these changes, can be distilled as follows:<\/p>\n\n\n\n 1.\u00a0<\/strong>The requirement for South African employers to register for and withhold Pay-As-You-Earn from employee remuneration will apply equally to foreign employers.<\/p>\n\n\n\n 2.<\/strong> Low-interest foreign currency loans made by connected persons to trusts, and subject to donations tax, now have a methodology to calculate the rand value of the donation.<\/p>\n\n\n\n 3. <\/strong>Income distributions from South African trusts to non-resident beneficiaries must be subject to income tax in the trust\u2019s hands, compared with local beneficiaries who could receive the distribution and pay tax at their marginal rate.<\/p>\n\n\n\n 4.<\/strong>\u00a0The \u201cforeign business establishment\u201d exclusion, which applies to South Africans with shares in a controlled foreign company, has been clarified as it related to Group companies, following the recent Coronation judgment.<\/p>\n\n\n\n 5.\u00a0<\/strong>Discretion is given to the Commissioner to allow an extension of the 40-day period for taxpayers to request a revised tax return, where an auto-assessment was issued by SARS.<\/p>\n\n\n\n 6.\u00a0<\/strong>The definition of \u201cbeneficial owner\u201d is to be included in the Tax Administration Act, encompassing the meanings of the term, in regard to a company, trust, and partnership.<\/p>\n\n\n\n 7.<\/strong>\u00a0The inter-organisational sharing of information has extended to now include organisations such as the Companies and Intellectual Property Commission (CIPC), the Directorate of Non-Profit Organisations and the Master of the High Court.<\/p>\n\n\n\n Practical Ramifications<\/strong><\/p>\n\n\n\n According to Tax Consulting, from the proposed changes and from a practical perspective, draft changes ultimately bring a more stringent verification process, with new tax measures being put in place to cast the net as wide as possible for the detection of non-compliance.<\/p>\n\n\n\n “National Treasury has highlighted how crucial the proposed regulations are, to ensure transparency and accountability in all financial transactions, with a keen focus on the cross-border flow of funds. <\/p>\n\n\n\n “This will allow an inter-organisational determination of tax liability whilst preventing tax evasion and profit shifting, as the benefitting parties will be more strictly monitored,” it said.<\/p>\n\n\n\n International cooperation will be facilitated through the proposed changes on Beneficial Ownership reporting, regularisation of interest rates on foreign currency loans, and substance requirements for the application of the \u201cforeign business establishment\u201d exclusion in relation to controlled foreign companies. <\/p>\n\n\n\n This will further aid the agenda of tax-related information sharing between jurisdictions and will serve to bring the wide compliance net already cast to a close.<\/p>\n\n\n\n “In light of the automatic exchanges of information, any singular infringement, regardless of the ramifications, will become common knowledge amongst the various regulatory organisations,” it said.<\/p>\n\n\n\n
\n\n\n\n
\n\n\n\n
\n\n\n\n
\n\n\n\n
\n\n\n\n
\n\n\n\n
\n\n\n\n
\n\n\n\n