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Ok. Got itProposed tax laws may come into effect towards the end of the year
In July this year, National Treasury and SARS published two tax bills for public comment:
These are collectively referred to as the ‘Bills’.
On 25 October, following the Medium Term Budget Policy Statement, National Treasury and SARS released the revised versions of the Bills. The final Bills are likely to be promulgated towards the end of this year or at the beginning of next year.
Five of the proposed amendments may affect you – below are the summaries
The TLAB contains various proposed amendments. We have highlighted five of the proposed amendments (compared to the first draft of the TLAB issued in July), in the tables below. In our view, these are most likely to affect our clients, depending on your personal circumstances.
1 Changes in exemption from foreign employment income tax for South African residents
Current situation | July proposal | October proposal |
South African residents who work abroad are currently exempt from tax on their foreign employment income if they are outside of South Africa for more than 183 days (of which 60 are continuous) in a tax year. |
Proposed change(s)
Proposed effective date 1 March 2019, with the change applying to years of assessment from that date. |
Proposed change(s)
Proposed effective date 1 March 2020, with the changes applying to years of assessment from that date. |
2 Refinement of measures to prevent tax avoidance using trusts
Current situation | July proposal | October proposal |
Section 7C of the Income Tax Act deters the use of trusts for ‘perceived’ tax avoidance. Put simply, interest forgone on interest-free or low-interest loans to a trust by a South African resident is treated as a donation and is subject to donations tax. |
Proposed change(s) Extend the application of section 7C to interest-free or low-interest loans made by a natural person or a company (lender) to a company (borrower) that is a connected person in relation to a trust. Proposed effective date 19 July 2017, with the change applying to any amount owed by a trust or company before, on or after that date. |
Proposed change(s)
Proposed effective date 19 July 2017, with the change applying to any amount owed by the trust or company before, on or after that date. |
3 Extending the application of controlled foreign company (CFC) rules to certain foreign trusts and foreign foundations
CFCs are defined as any foreign company where:
Current situation | July proposal | October proposal |
|
Proposed change(s)
Proposed effective date 1 January 2018, with the changes applying to years of assessment from that date. |
Proposed change(s)
Proposed effective date 1 January 2018, with the change applying to years of assessment from that date. |
4 In duplum rule relating to the accumulation of interest and costs on debt
Current situation | July proposal | October proposal |
According to the in duplum rule interest and finance costs stop accruing when the total of these amounts equals the capital portion of the debt. |
Proposed change(s)
Proposed effective date 1 January 2018, with the changes applying to years of assessment ending on or after that date. |
Proposed change(s) Proposed effective date |
5 Time of accrual of interest payable by SARS
Current situation | October proposal |
This section was not in the original draft of the TLAB. |
Proposed change(s) Proposed effective date |
We are here to provide support and advice about matters that affect your wealth
Please contact your relationship manager if you have any questions about how these potential changes may affect you. If you would like to read the revised tax bills, you can access these from the National Treasury (www.treasury.gov.za) and SARS (www.sars.gov.za) websites.