The Taxation Laws Amendment Act No. 24 of 2011 ("the
Act") was published on 10 January 2012 under Government
Gazette No. 34927. The Act has introduced some controversial and
wide ranging amendments to the already complex South African tax
landscape. The most significant changes impact the corporate sector
with reforms that spread across a wide spectrum of areas including:
intra-group transactions, hybrid equity instruments, the regulation
of third party backed shares, transfer pricing, the controlled
foreign company regime and headquarter companies. Some amendments
that should be highlighted are discussed briefly below. A new tax
concept of 'return of capital' has been introduced that
replaces capital distributions. From 1 April 2012 returns of
capital payments will trigger a reduction in the base cost of the
shares in the hands of the shareholder as opposed to the current
tax treatment which triggers a deemed part disposal of the shares.
The use of section 45 intra-group company restructures which
largely facilitated the deduction of interest upon the acquisition
of shares was a hotly contested issue during 2011. Debt-push down
structures were utilised to secure the interest deductions that
were not otherwise available. Debt used to fund section 45 and 47
reorganisations will now be controlled as a pre-approval from the
South African Revenue Service will be required in the form of a tax
directive being obtained in order to secure the deduction of
interest. The new withholding Dividends Tax regime which replaces
the secondary tax on companies will come into effect from 1 April
2012. The new regime imposes a 10 per cent tax on the beneficial
owner of the dividend, with the company paying the dividend bearing
the withholding obligation. The legislation has different rules
that apply in respect of cash dividends and dividends paid in kind
(in specie). Furthermore a new dispensation has been introduced to
regulate the taxation of foreign dividends. It is important to note
that even though the Act has a general effective date, most
provisions have their own specific effective date, which can have
either retrospective or prospective application. Therefore it is
imperative for taxpayers to ensure that they do not fall foul of
the law by applying obsolete laws.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The expansion of the West African regional market to foreign investors, and the search for emerging markets has led to a continuous increase in business mobility and cross border investments with Nigeria.
Effective collaboration amongst government agencies, automation of processes and capacity building by tax authorities have always been identified by stakeholders as strategies for achieving an efficient tax system.
The major objective of the waiver is to promote voluntary compliance and consequently generate revenue for government which otherwise, could have been lost.
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