This past year seven new finance bills were passed by government. We examine the implications of the new tax laws for South African citizens.
Published: Friday, January 20th 2017
In the past few months, former US President Barack Obama has been 'Trump-proofing' America. Our own President has been focusing on taxing SA citizens. Over the past year, he’s signed seven new finance bills into law with considerable tax implications for South Africans.
President Jacob Zuma Passes Seven New Finance Bills
The Presidency stated, on 12 January 2017, that seven new finance bills have been passed by the National Assembly and National Council of Provinces in the past year. These have now been signed into law by President Jacob Zuma. The seven bills are as follows:
The Taxation Laws Amendment Act
The Finance Act
The Rates and Monetary Amounts and Amendment of Revenue Laws (Administration) Act
The Rates and Monetary Amounts and Amendment of Revenue Laws Act
The Tax Administration Laws Amendment Act
The Adjustments Appropriation Act
The Unemployment Insurance Amendment Act
Of these, there are some goodies. For example, the Finance Act seeks to provide provisions for the ‘recovery of unauthorised expenditure’, among other things. We’re surprised his presidency signed this, since it probably involves paying back the money...We joke.Another one we’re quite fond of is the Unemployment Insurance Amendment Act. The main purpose of this legislation is to amend the current Unemployment Insurance Act. This by extending unemployment insurance benefits to learners undergoing related training, and civil servants. As well as to “provide for the process of application for maternity benefits”, etc.The three new tax laws, however, namely the Taxation Laws Amendment Bill; the Tax Administration Laws Amendment Bill; and the Rates and Monetary Amounts and Amendment of Revenue Laws Bill, are going to require some adjusting.
Recently, the Taxation Laws Amendment Bill; the Tax Administration Laws Amendment Bill; and the Rates and Monetary Amounts and Amendment of Revenue Laws Bill, were introduced. The new tax laws are aimed at providing new incentives to taxpayers. This along with amending issues with the current South African tax law.
Implications Of The Taxation Laws Amendment Act
Tax director for Norton Rose Fulbright, Dale Cridlan, says the Taxation Laws Amendment Act has several amendments. Of the many implications, he notes the following as the most significant:
Interest-free or low-interest loans to trusts amendments will affect family trusts. The Taxation Laws Amendment Act has introduced a new section (section 7C). This aims to limit the ability of taxpayers to transfer wealth to their trusts without being subject to tax. As of 1 March 2017, a low-interest or an interest-free loan to a trust by a natural ‘connected person’ will be deemed a continuing donation by the trust. It will be subject to donations tax of 20%.
Share incentive schemes. Amounts received by the employees (whether in cash or shares), from the disposal or redemption of the underlying equity shares in a company, will be taxed as ordinary income. This up to a maximum marginal rate of 41%.
Hybrid instruments. Cridlan says that tax-free dividends received by a holder of a preference share will be re-characterised as income. They will then be taxed in the hands of the holder of the shares.
Employment Tax Incentive Act. The Employment Tax Incentive (ETI) Act encourages employers to hire young people by reducing the amount of Pay As You Earn tax payable to the South African Revenue Service (SARS). This reduces the cost of employment to the employer and leaves the employee's earnings unaffected.
Other notable implications that can be expected from the Taxation Laws Amendment Bill; the Tax Administration Laws Amendment Bill; and the Rates and Monetary Amounts and Amendment of Revenue Laws Bill, are as follows:
Increased tax deductions for businesses who’s employees receive qualifications from NQF (National Qualifications Framework) level 1 to NQF level 6, according to the Taxation Laws Amendment Bill.
No privacy settings on your bank accounts. From September 2017, a new international Common Reporting Standard (CRS) will allow governments to obtain detailed account information from financial institutions, to exchange automatically with other jurisdictions, annually.
Disclosure of your overseas assets. The Rates and Monetary Amounts and Amendment of Revenue Laws Amendment Act has provided a six month “grace period”. The period is called the Special Voluntary Disclosure Programme (SVDP). It will allow South African citizens to disclose previously undisclosed overseas assets (held by an individual between 1 March 2010 and 28 February 2015). This SVDP will run from 1 October 2016 to 31 March 2017. It also includes relief for penalties against criminal prosecution, provided the application is successful.
A new tyre levy of R2.30/kg of tyre has been introduced. This by the Rates and Monetary Amounts and Amendment of Revenue Laws Amendment Act. Tyres will, naturally, increase in price.