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PORTFOLIO COMMITTEE ON FINANCE

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Presentation on theme: "PORTFOLIO COMMITTEE ON FINANCE"— Presentation transcript:

1 PORTFOLIO COMMITTEE ON FINANCE
BUDGET HEARINGS: 2008

2 BUDGET 2008 CORPORATE TAX Reduction of rate: 28% (from 29%)
Effective rate: 34.55% (from 35.45%) In STC context STC being phased out Widening gap with personal IT rate… = Tax arbitrage APPLYING LAW DIFFERENTLY

3 BUDGET 2008 CORPORATE TAX Arbitrage anti-avoidance based on:
“closely held companies” Tax rate prescribed: 40% What is it? Ill fit with Companies Act… APPLYING LAW DIFFERENTLY

4 Companies Act, since Dec 2007:
BUDGET 2008 CORPORATE TAX Tax rules: Seem to rely on Companies Act Companies Act, since Dec 2007: “Widely Held Company” (WHC) “Limited Interest Company” APPLYING LAW DIFFERENTLY

5 “Widely Held Company” (WHC) WHC:
BUDGET 2008 CORPORATE TAX “Widely Held Company” (WHC) WHC: Articles must provide: Unlimited transfer Offers to public Special resolution Any subsidiary of WHC APPLYING LAW DIFFERENTLY

6 Implications of use of “CHC”
BUDGET 2008 CORPORATE TAX Implications of use of “CHC” Confusion of concepts Many companies tax rate to go to 40% overnight… APPLYING LAW DIFFERENTLY

7 BUDGET 2008 STC COMPANIES Conversion to Withholding Tax Remain 10%
Tax exempt entities exempt Implementation 2009 No carry over of STC credits Cascading relief APPLYING LAW DIFFERENTLY

8 BUDGET 2008 Anti-avoidance COMPANIES (cont.)
Dividends paid to “closely held (passive) companies” will be taxed at 10% (i.e. no cascade relief) This is double tax! (not anti-avoidance) Same issues as with Income Tax APPLYING LAW DIFFERENTLY

9 BUDGET 2008 VAT SARS – under current VAT legislation:
Refund may be paid into third party accounts Very convenient for international groups / shipping companies Section 23: Draft Taxation Laws Second Amendment Bill, 2008: Proposes to scrap this APPLYING LAW DIFFERENTLY

10 BUDGET 2008 VAT Refunds into third party accounts:
Scrapping may lead to practical difficulties: Non-resident: has to open bank account for one payment a month Internal control Difficulty and cost of NR account Risk? APPLYING LAW DIFFERENTLY

11 BUDGET 2008 VAT Refunds into third party accounts – Consider:
Allowing non residents to nominate resident third party account, if; Connected persons In agent principal arrangement Relaxing the provisions of section 23(2)(ii)(bb) APPLYING LAW DIFFERENTLY

12

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