Presented by: Piet Nel: Project director: Tax Wessel Smit Member of SAICA’s tax committee

1. The South African Institute of Chartered Accountants (SAICA) presentation to the Standing Committee on Finance Presented by: Piet Nel: Project director: Tax Wessel Smit Member of SAICA’s tax committee Presentation Footer

2. Presentation to ScoF 22 August 2012 Retrospective effective dates Additional medical expenses tax credit Fringe benefits Employer provided motor vehicle Debt reductions for less than full consideration Fair value and market-to-market International tax Sundry and other issues SAICA presentation to ScoF – August 2012

3. Retrospective proposed dates of commencement The effective date of the increase in the dividends tax rate and other related amendments Rates and Monetary Amounts and Amendment of Revenue Laws Bill Amendments to the dividends tax legislation – 1 April 2012 Draft Taxation Laws Amendment Bill, 2012 Hybrid equity – 1 April 2012 Draft Taxation Laws Amendment Bill, 2012 Dividends declared by listed companies (dividends tax) Draft Tax Administration Amendment Bill, 2012, SAICA presentation to ScoF – August 2012

4. Additional medical expenses tax credit Pages 2 – 4 of the SAICA submission It does not recognise the expected increase in cost of medical care For taxpayers under 65 (25% and 7,5%) limited instances where deduction will be available Not clear how it will apply where the individual turns 65 during a year of assessment in cases of superannuation, ill-health or other infirmity Impact on payroll systems (PAYE) SAICA presentation to ScoF – August 2012

5. Employer provided motor vehicle Pages 6 – 12 of the SAICA submission ‘operating lease’ The definition of an operating lease (as defined in section 23A of the Income Tax Act) is too narrow. ‘the actual cost to the employer incurred under that operating lease’ Not clear what this must include The treatment of the cost of fuel SAICA presentation to ScoF – August 2012

6. Debt reductions for less than full consideration Page 27 of the SAICA submission Reduction in base cost of assets The link with the capital gain provisions must be made (paragraph 20(3)(b)) The interaction between section 19 and section 24J(4A) where the debt reduction relates to a financial instrument The capital gain legislation provided relief for liquidating companies in certain instances The debt reduction regime should provide similar relief SAICA presentation to ScoF – August 2012

7. Fair value and market-to-market Page 30 - 42 of the SAICA submission Complex legislation Proposed effective date of 31 December 2012 to be reconsidered Impact of fair value accounting on previous global financial crisis IFRS might change – could effect tax legislation A definition of ‘hedge’ or ‘hedging‘ needs to be included in the legislation Expanded definition of ‘covered persons’ SAICA presentation to ScoF – August 2012

8. International tax Page 45 – 52 of the SAICA submission Definition of resident: Effective management – 75% rule The post-transaction requirement for cross-border asset-for-share transactions – the law does not give effect to the intention as expressed in the Memorandum SAICA presentation to ScoF – August 2012

9. Sundry issues Clarification of date of registration for value-added tax purposes Mentioned in budget – not addressed in the draft legislation Provisional tax Addressed in the Draft Tax Administration Amendment Bill Introduction of compulsory (automatic) penalty questioned Regulation of tax practitioners Addressed in the Draft Tax Administration Amendment Bill Introduction of controlling bodies and the regulatory body SAICA presentation to ScoF – August 2012

10. Other matters raised in the SAICA submission The final dividend cycle and the STC credits Corporate rules Interest incurred in acquisition transactions Fringe benefits Residential – stand alone submission SAICA presentation to ScoF – August 2012

11. We thank you for your time pietn@saica.co.za