Most Read Contributor in South Africa, September 2016
On 24 August 2016, the Davis Tax Committee ("DTC")
released its long-awaited report on estate duty, which was submitted to
the South African Minister of Finance ("the Minister")
for consideration on 28 April 2016. The report takes into account
public commentary and submissions received following the release of
the committee's first interim report.
As noted by the DTC, the committee is advisory in nature, and
will merely make recommendations to the Minister of Finance. After
reviewing the report, the Minister will take into account the
recommendations. As is the process with all tax policy proposals,
these recommendations are subject to the normal consultative
processes and review by Parliament.
The DTC is expected to submit an additional report on a possible
wealth tax for South Africa, as agreed to with the Minister. Both
reports will have significant and far-reaching implications for
persons planning their affairs, especially in respect of estates
The report makes, inter alia, the following recommendations:
estate duty: the
primary abatement should be increased to ZAR15-million (from
ZAR3.5-million).The estate duty rate should be increased from 20%
to 25% in respect of estates exceeding ZAR30-million.
donations tax: the
inter-spouse exemption in respect of donations should be removed,
subject to a reasonable maintenance exemption.
tax: an investigation should be conducted into the
implementation of wealth taxes in South Africa.
estate duty and
trusts: in respect of interest-free loans or low-interest
loans to trusts, the holder should be subject to annual taxation on
interest paid on the loan account (at least the official rate of
interest) and the holder of the loan should be deemed to be in
effective control of the trust for estate duty purposes.
donors and beneficiaries of all vested trusts should be subject to
stricter disclosure requirements and risk profiling from the South
African Revenue Service ("SARS").
trusts: income and capital gains of discretionary trusts
should be taxed in the hands of the trust at 41% for income and an
effective 32.8% for capital gains.
trusts: SARS should establish a separate investigations
unit "to thoroughly and comprehensively examine foreign trust
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.
In response to information provided by FIRS, NSE has sent letters to publicly listed companies, who were purportedly identified by FIRS as non-compliant.
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