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)

• Remove this concession completely.
  
• This means the full amount of foreign employment income will be taxed in South Africa, considering the provisions of any applicable Double Taxation Agreement and any tax credits available to the South African taxpayer.

Proposed effective date

1 March 2019, with the change applying to years of assessment from that date.

Proposed change(s)

• The first R1 million of foreign employment income will be exempt from tax in South Africa if the taxpayer is outside of South Africa for more than 183 days (of which 60 are continuous) in a tax year.
• The balance of foreign employment income in excess of R1 million will be subject to tax in South Africa regardless of the number of days spent outside South Africa, based solely on tax residency.

Proposed effective date

1 March 2020, with the changes applying to years of assessment from that date.

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)

• Include interest-free or low-interest loans made to a company in which the trust (or a beneficiary of the trust) holds at least 20% of the equity shares or voting rights in that company within the ambit of section 7C.
• (The original draft of the TLAB referred to companies that are connected persons in relation to a trust but did not require a shareholding by the trust in that company.)

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.

• South African residents are subject to tax on a global basis. To curb avoidance, the Income Tax Act contains rules relating to CFCs.
• According to the current rules, the net income of a CFC is included in the income of a South African resident according to the resident's participation rights in proportion to the total participation rights of the company.

Proposed change(s)

• Extend the existing South African tax rules relating to CFCs to a foreign company where the shares in that foreign company are held through a non-resident trust or foundation.
• In other words, CFCs held by interposed foreign trusts or foreign foundations (where the participation or voting control requirements are met) will be subject to the CFC rules.
• Any distributions made by a foreign trust or foreign foundation that holds shares in a foreign company (that would have otherwise been regarded as a CFC) to a South African resident beneficiary will be taxed. These distributions will be deemed to be income in the beneficiary's hands and taxable in South Africa.

Proposed effective date

1 January 2018, with the changes applying to years of assessment from that date.

Proposed change(s)

• The original proposed amendments were considered too wide. The TLAB therefore no longer contains any provisions relating to foreign companies where the shares in that foreign company are held through a non-resident trust or foundation.
• However, the CFC definition has been expanded to include any foreign company whose financial results are consolidated in the financial statements of a parent company that is a South African resident.

Proposed effective date

1 January 2018, with the change applying to years of assessment from that date.

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)

• The anti-avoidance rules dealing with zero- or low-interest loans should apply in spite of the application of either the statutory in duplum rule or the common law in duplum rule.
• This means that in instances where a low-interest or no-interest loan exists between, for example, an employer and employee, a shareholder and company, and/or a section 7C relationship, the interest will not stop accruing when the amount that has accrued or been incurred as interest equals the amount of the debt.

Proposed effective date

1 January 2018, with the changes applying to years of assessment ending on or after that date.

Proposed change(s)
As per the July proposal

Proposed effective date
As per the July proposal

This section was not in the original draft of the TLAB.

Proposed change(s)
Include a new section in the Income Tax Act that states that any amount payable by SARS in respect of interest is deemed to have accrued on the date that the amount is paid. 

Proposed effective date
1 March 2018, with the change applying to interest paid by SARS on or after that date.