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Tax change 'deters foreign investment'

Tuesday, 24 February 2015   (0 Comments)
Posted by: Author: Ingé Lamprecht
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Author: Ingé Lamprecht (Moneyweb)

Tax experts are concerned that an amendment to tax legislation could signal that South Africa is not open for business and deter foreign investment.

A 2013 anti-avoidance measure introduced by National Treasury imposes capital gains tax (CGT) when a South African company issues its own shares in exchange for shares in a foreign company.

Keith Engel, deputy chief executive of the South African Institute of Tax Professionals (Sait), says there were concerns that the initial provision was too generous and that it was misused, but the amendment went much further than it was intended to.

"The goal was simply to prevent disguised corporate migrations that externalise value, but the subsequent legal wording inadvertently went beyond this narrow purpose,” Engel says.

Anne Bennett, head of tax at Webber Wentzel, says the anti-avoidance legislation is aimed at any South African company (which could include a headquarter company) that buys foreign shares and pays for it by issuing its own shares.

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