Draft Taxation Laws Amendment Bills, 2009 Presented by Stiaan Klue

1. Draft Taxation Laws Amendment Bills, 2009 Presented by Stiaan Klue

2. Executive Summary • Clause 5:Section 4A of the Estate Duty Act • Clause 23:Amendment of section 12E of the Income Tax Act • Clause 44:Amendment of ss30A & 10(1)(cO) of the Income Tax Act • Clause 14: Amendment of section 88 of the Income Tax Act • Clause 22:Amendment of para 20, Fourth Schedule of the Income Tax Act • Clauses 33, 34 and 36:Sections 1, 6(6) and 23 of the VAT Act • Clause 37:Section 36 of the Value-Added Tax Act • Clause 38:Section 39 of the Value-Added Tax Act

3. Draft Taxation Laws • Amendment Bill, 2009

4. Draft Taxation Laws Amendment Bill, 2009 • Clause 5: Section 4A of the Estate Duty Act • Concern: • - Concession applies only in the very limited circumstances where “all assets” are bequeathed to the other spouse/s • In the majority of cases one or more assets may be bequeathed to a child / PBO / relative • Recommendation: • Remove the requirement of “all assets”; or • List specific assets to be excluded

5. Draft Taxation Laws Amendment Bill, 2009 • Clause 23: Amendment of section 12E of the Income Tax Act • Concern: • - Many small businesses are precluded from benefiting from the small business tax concessions because one or more of the shareholders / members has a share / interest in a property-holding company or other dormant company that may once have traded • Recommendation: • - The definition should be extended to allow the shareholding / interest in a property-holding company / dormant company

6. Draft Taxation Laws Amendment Bill, 2009 • Clause 44: Amendment of ss 30A & 10(1)(cO) of the ITA • Concern: • Extending the date for registration to 30 September 2010 and then allowing SARS the discretion to back-date the club’s registration only opens the clubs to uncertainty regarding their tax status • Recommendation: • Retain the previous legislation until the new date • Result would not be much (if any) loss of tax to the fiscus • Clubs would save huge additional administrative costs

7. Draft Taxation Laws Second • Amendment Bill, 2009

8. Draft Taxation Laws Second Amendment Bill, 2009 • Clause 14: Amendment of section 88 of the Income Tax Act • Concerns: • Extension of the “pay-now-argue-later” rule to assessment stage may infringe taxpayers’ right to access to court. • Discretionary powers in amended s 88 are not made subject to objection and appeal • Commissioner, a party to the dispute, is provided with the discretionary power to consider whether the taxpayer has an “arguable case” • No timeframes are provided

9. Draft Taxation Laws Second Amendment Bill, 2009 • Clause 14: Amendment of section 88 of the Income Tax Act • Recommendations: • “Pay-now-argue-later” rule only enforced once objection finalised. • Discretions expressly made subject to objection and appeal. • Provide timeframes which must be adhered to by the Commissioner and taxpayers.

10. Draft Taxation Laws Second Amendment Bill, 2009 • Clause 22:Amendment of par 20, 4thSch of the Income Tax Act • Concern: • - May result in the situation where taxpayer’s do not know what their potential liability is until shortly before the due date for payment. • Recommendation: • - Commissioner to announce in Gazette at least 1 year in advance.

11. Draft Taxation Laws Second Amendment Bill, 2009 • Clauses 33, 34 and 36:Sections 1, 6(6) and 23 of the VAT Act • Concern: • The new VAT registration verification procedures since November 2008 significant delays VAT registration, cost and other • Expected that the proposed additional biometrical information will exacerbate the situation. • Premature to introduce further verification procedures whilst SARS is still in discussion with stakeholders. • Foreign entities with no presence in South Africa will not be able to comply

12. Draft Taxation Laws Second Amendment Bill, 2009 • Clauses 33, 34 and 36:Sections 1, 6(6) and 23 of the VAT Act • Recommendations: • Apply proposed amendment to voluntary registrations only. • Finalise stakeholder discussions first and consider all alternatives first.

13. Draft Taxation Laws Second Amendment Bill, 2009 • Clause 37:Section 36 of the Value-Added Tax Act • Concern: • Proposed amendment is too subjective. • The mere fact that the case is under objection or appeal means in principle that the Commissioner believes that the vendor does not have an arguable case. • Recommendation: • - The amount of the tax under dispute should not influence the Commissioner’s decision whether or not to suspend payment. The proposed section 36(4)(b) should therefore be deleted.

14. Draft Taxation Laws Second Amendment Bill, 2009 • Clause 38:Section 39 of the Value-Added Tax Act • Concern: • Interest is not intended to be a penalty or additional tax payable by the vendor for non-compliance with the VAT Act, but payable to compensate the fiscus for a financial loss incurred, or a cash flow cost incurred by the fiscus. If the fiscus did not suffer any financial loss, there is in principle no reason to pay interest. • Recommendation: • Delayed until the regulations have been published and have been made subject to public comment.