Draft Tax Laws Amendments Bills
National Treasury published a media release titled “Publication of the 2018 Draft Taxation Laws Amendment Bill and 2018 Draft Tax Administration Laws Amendment Bill for public comment” on 16 July.
The draft Taxation Laws Amendment Bill, 2018 (TLAB) and draft Tax Administration Laws Amendment Bill, 2018 (TALAB) include the legislative amendments for the more complex tax proposals that were announced in the 2018 Budget Review on 21 February 2018.
The main tax proposals contained in the draft TLAB are:
- Providing more flexibility for the treatment of retirement fund transfers and withdrawals;
- Introducing a fringe benefit exemption for lower-income employees who receive a loan from their employer for low-cost housing;
- Reviewing the International Shipping exemption for purposes of accommodating the use of replacement ships;
- Shortening the write-off period for electronic communications cables;
- Refinements and clarification for the conversion of debt to equity;
- The refinement of the interaction between the anti-avoidance rules for dividend stripping with corporate re-organisation rules;
- Inserting rules addressing the use of trusts to defer tax or re-characterise the nature of income; and
- Introduction of a one year income characterisation rule for amounts accrued to portfolios of collective investment schemes to provide certainty and limit potential abuse.
The main tax administration proposals contained in the draft TALAB relate to:
- A removal of the requirement to submit tax returns for individuals receiving a tax-exempt dividend;
- Anti-forestalling amendments for excise duties;
- Clarifications on handling incorrect invoices for value-added tax refunds; and
- Allowing the collection of value-added tax payments to apply across branches and divisions.
Other issues arising from previous legislative commitments
Extension of the Employment Tax Incentive
The draft TLAB contains a draft proposal to extend the Employment Tax Incentive for a further term of 5 years. This proposal is subject to further consultation and review.
Review panel for VAT zero-rated items
Amendments to these bills or the Rates Bill may also be effected before October, to take into account recommendations made from by the Davis Tax Committee’s panel reviewing the current list of VAT zero-rated items.
Annuitisation for provident fund members
The draft TLAB does not contain amendments related to annuitisation for provident fund members. The legislation that is currently in effect states that from 1 March 2019 provident fund members may be required to purchase an annuity from contributions made to their provident fund after 1 March 2019. Provident fund members who are over the age of 55 on 1 March 2019 or who make additional contributions to their provident fund after 1 March 2019 that do not exceed R247 500 at the time of their retirement will not be affected in any way. The process of consultation within NEDLAC is taking longer than anticipated following the release of the paper on comprehensive social security on 25 November 2016. Government may introduce further legislative amendments related to the start-date of 1 March 2019 once the NEDLAC process is completed or provides any recommendation, expected to be no later than end-October.
There can be little doubt that the “…consultation within NEDLAC…” will continue for a long time to come, and, in all likelihood result in such a watered-down resolution that very little, if any of the original intent will be seen. This was of course to ensure that provident fund members utilised their retirement savings, rather than spend it and become a burden on the state.
Another factor is the looming general election next year. Do not expect any unpopular decisions to be made which can impact on voter sentiments.
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