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National Treasury public consultation workshop on draft TLAB 2014

03 September 2014   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

National Treasury and SARS held its public workshops on corporate tax, international tax, individual’s tax and VAT on the 1st and 2nd of September 2014 to discuss the proposals in the Taxation Laws Amendment Bill 2014. The workshops attempt to address some of the concerns raised by the public including those raised at the presentations held in the Standing Committee on Finance in parliament on the 26th August 2014. 

SAIT’s Technical Department attended the workshops and was represented by Erich Bell (Acting Head of Tax Technical), Pieter Faber (Tax Technical), Prof. Pieter van der Zwan (Corporate Tax committee member), Dan Foster (Individuals Committee Member), and Dorwin Nyaga (VAT Committee member).  The discussions at these workshops do not create binding undertakings on National Treasury but rather serve as a method for them to get further input and clarity on concerns raised by the public. The proceedings are conducted based on the agenda of matters drafted by National Treasury and therefore only cover matters on which they still require further clarity and therefore did not deal with all the public submissions made.

Set out below are some of the main matters discussed at the workshop:

Corporate & international tax

  • No discussions were held on the small business tax regime change proposals as National Treasury indicated that they required more time to first discuss the proposals and concerns raised with the Davis Tax Committee before responding to the public and parliament;
  • Proposed de minimums dividends tax withholding threshold in the proposed section 64F(1)(p) will be deleted;
  • Various concerns were raised by the public in respect of the provisions of section 23M (i.e. limitation of interest deductions on debts owed to persons not subject to tax) and National Treasury are considering the following proposals and hold these views:
    • Removing guarantees in section 23M(2)(b)(ii) from the scope of the provision;
    • Decreasing the 40% adjustable taxable income threshold even further to 30% but may leave it at 40% in the interim due to all the other proposed changes;
    • Will keep the proposed effective date of 1 January 2016;
    • Will consider excluding banks once the relevant data from taxpayers is received;
    • Will consider changes regarding concerns that this section prevents pensions funds and insurers from acquiring these long term interest debts in the market;
    • Will not reconsider changing the controlling relationship requirement to a threshold less than connected person;
    • The view was expressed that the interaction between section 23M, section 23N and section 31 is clear and National Treasury did not  feel it necessary to insert provisions regarding the timing of application of these provisions;
    • The view was expressed  that when a double taxation agreement provides taxing rights on the interest to another country this does not preclude SARS from applying section 23M;  
  • Various concerns were raised in respect of section 11D and the regulations that are to be issued in terms of this provision. National Treasury are considering the following proposals and hold these views:
    • Where an application is rejected the taxpayer will have to request SARS to reopen previous years of assessment to claim the 100% expenses. They will however relook at splitting the 100% and 50% additional allowance again, of which the former would then be claimable in the specific year and the latter on approval of the research;
    • Have noted concerns by taxpayers that there is no appeals process where applications are rejected and will consider the matter;
    • Epidermal research is still, from a policy perspective, excluded as it is not viewed as a science;
  • National Treasury expressed surprise at the amount of concerns raised on the proposed change in section 31 to replace the deemed loan regime with a dividend in specie regime. They however did concede that there were various practical concerns in implementing the proposal and will consider the following:
    • Changes to the proposal will be considered but not with retrospective effect;
    • The proposal will stand and will not be withdrawn;
    • Will consider concerns how to deal with pre-existing loans.
  • The concerns regarding the proposed deletion of the reduced capital gain inclusion rate for individuals in section 9D(2A)(f) were noted and the policy decision taken on this matter will be discussed internally before a policy response is formulated;
  • Section 24I(10A)(a)(ii) will be corrected by replacing the "or” with an "and” between subsection (aa) and (bb) as proposed. Furthermore National Treasury will consider clarifying the current liability requirement as it is conceded that in terms of IFRS all long term debt will have a current portion, the latter which was not the intended current liability for the exclusion to apply.    


  • Various concerns were raised in respect of section 12T (i.e. Tax Free Investments) which included the following matters :
    • National Treasury have conceded that the proposed definition of "tax free investment” is overly broad and will be redrafting the definition;
    • The public concerns regarding the low thresholds were dismissed as it was felt that the thresholds were reasonable considering that taxpayers could still utilise the interest exemption which is not being repealed;
    • National Treasury have noted the financial industry concerns that the administration of maintaining these accounts may prevent industry from implementing the investment products. This would be discussed with SARS who are still preparing the Business Requirement Specifications;      
    • The transfer of accounts between taxpayers would not be considered as this did not accord with the official policy view;
  • Proposals regarding shared accommodation and transport in paragraph 9 and 7 of the Seventh Schedule will not be considered for the current legislative cycle as there is insufficient time and various practical difficulties regarding apportioning the benefit value. It was noted that taxpayers could still in the interim apply to SARS for a directive in respect of shared accommodation. The proposal regarding applying the retail market value across all company cars will be retained to ensure equity, with the timing of the determination being when the car is acquired. National Treasury are however considering splitting new and used car determined values with the latter being determined based on the official retail trade values per the traders book on used vehicles;
  • The proposed amendments to section 11(k), as applying from 1 March 2015, which would clarify that the employer contribution also be considered in determining the employees’ tax liability, was accepted as this was merely a technical oversight. Concerns raised regarding the base of the deduction being limited to employment income, where the person is not in employment, were also accepted and will be corrected in line with the old provisions;
  • National Treasury noted the concerns in respect of the definition of "full time employee” for the purposes of the Employment Tax Incentive and would look at this, especially in respect of full time employees who work only half day or a few days per week. They would also discuss with SARS a proposal that an objection and appeal process apply regarding the compliance status determination for this purpose of the incentive;


  • The proposed repeal of the zero rate on goods acquired by agricultural businesses was not discussed as National Treasury required more time to discuss the policy aspects thereof and formulate a more comprehensive submission as requested by parliament. It was however noted that the delayed refunds process would be considered in formulating any further proposals in this regard;
  • In respect of the proposal to apply the standard rate  to second hand precious metals, National Treasury noted the concerns regarding defining "precious metals” as well the possible  unfair competition that would result between precious metal coin producers and the Kruger rand that would result from the proposal. More discussions would be had with industry to better understand the impact of the proposal. 
National Treasury noted that the time frames to consider the various submissions for changes was very limited as the preliminary dates for a response to parliament was already the 15th September 2014 and the preliminary date for the bill to be tabled in parliament by the Minister was the 23rd October 2014. Matters not addressed in this legislative cycle would have to stand over to the 2015 legislative proposals for consideration or correction.


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