8 August 2009

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National Treasury this week issued the response document on the submissions made by stakeholders to the draft Taxation Laws Amendment Bills, 2009. We are pleased to announce that the majority of our proposals were accepted and will be reflected in the amended Taxation Laws Amendment Bills, to be tabled before Parliament the first week in September.

Based on the response document, the provisional tax legislation is due to be amended to include proposals that SAIT, jointly with SAICA, LSSA, SAIPA and the Banking Association, made subsequent to Parliament's public hearings in June 2009. Our proposals were outlined in a joint submission dated 10 July 2009, where we proposed the introduction of a two-tier system with different rules for smaller and larger taxpayers. The joint submission can be downloaded here.

According to the revised proposals, a two-tier approach is envisaged for second provisional tax estimates:

Tier 1: Smaller taxpayers:

A return to the old 'basic amount' safe-harbour system, which includes the 20% penalty for estimating below the lesser of 'basic amount' and 90% of actual taxable income. However, the 'basic' amount will now include an automatic annual 8% increase.

Tier 2: Larger taxpayers:

The current requirement of 80%-of-actual taxable income will be retained, but the 20% penalty will be made discretionary rather than automatic. This means that SARS will no longer be able to apply an automatic penalty and would have to give due consideration to whether the taxpayer intended to delay the payment of provisional taxes. This is a welcome relief for corporate taxpayers who would otherwise have to disclose such penalties in their financial statements pending an appeal to SARS.

Differentiation:

Smaller taxpayers will mean taxpayers with a taxable income up to R1million.
According to National Treasury’s response document to Parliament, the R1m threshold will place 90% or more of provisional taxpayers by volume in Tier 1.





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