1. PwC Tax Services*, South Africa
Portfolio Committee on Finance Submissions on the (Draft) Revenue Laws Amendment Bills, August 2008
*connectedthinking

2. Contents Timing & process Intellectual property STC Credits
Passive Holding Companies
Provisional Tax
Contents

3. I. Timing and Process Very short consultation period – AGAIN [1]
Recognition that RLAB requires more time than TLAB, but less time granted
Complexity and volume
Seasoned tax practitioners require more time. What about average taxpayers
No chance of further debate after today
Further submissions to NT/SARS – but not to PCoF
Need for rebuttal acknowledged previously – but?
Retroactivity – E.g. funnel transactions, s43 deletion, etc.

4. II. Intellectual property
Incentive for SA contract-researchers – Granted then immediately withdrawn? [23.3]
Hype about initial incentive
No reasons given for withdrawal
Disincentive for acquisition of existing foreign IP companies [23.1]
CFCs with active royalty income exempt from SA tax – but not if IP is used in SA

5. III. STC credits system [4]
Applaud preservation of STC credits
But burdensome tracking / record-keeping requirement
For taxpayers & for SARS
Consider allowing the credit against Normal Income Tax
STC credit stays in one company
No reduction in Treasury’s tax collection
Purist income-tracking Vs administrative ease

6. How STC-credited dividends will be trackedF E D B C A

7. IV. Passive Holding Companies
Timing of status-determination [11]
Annual determination
Companies cannot know their status at the time of dividend receipts and payments
Compliance problematic in practice
Excluded companies [12]
Treasury & intermediate holding companies – tax deferral is not the purpose
Subsidiaries of excluded companies

8. Excluded companies Deferral PHC? OpCo OpCo OpCo OpCo OpCo OpCo
Cash Deposit
HoldCo
PHC
OpCo
OpCo
PHC?
OpCo
Group Cash
Management
OpCo
Cash Deposit

9. Excluded companies Deferral Charity Excluded Company OpCo Cash Deposit
PHC?
PHC
OpCo
Cash Deposit
OpCo
Cash Deposit

10. V. Provisional Tax 2nd Payment
Not unexpected (consistent with international norms)
Compliance difficult
Penalty considered to be harsh
Consider alternatives
Penalty on top-up
Higher basic (+10% p.a.)
Treasury bonds / Certificates of Tax Deposit

11. PwC Tax Services*, South Africa
Portfolio Committee on Finance Submissions on the (Draft) Revenue Laws Amendment Bills, August 2008
PwC
*connectedthinking