South Africa: 2013 budget

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South Africa: 2013 budget

dachs.jpg

Peter Dachs

The 2013 budget which was released on February 27 2013 included various interesting proposals in relation to cross border transactions. It is proposed that the taxation relating to trusts in South Africa will be amended. As part of this process it is proposed that distributions from offshore foundations will be treated as ordinary revenue in the hands of South African residents. It is stated that "this amendment targets schemes designed to shield income from global taxation".

Furthermore it is proposed that a South African incorporated holding company may be set up by a listed entity to hold African and offshore operations. This entity will not be subject to any exchange control rules. The idea is to incentivise companies to manage their African and offshore operations from South Africa.

It is also proposed that further refinements will be made to the international headquarter company rules. The international headquarter company regime was introduced in 2010 to encourage international companies to invest in Africa using South Africa as a base. International headquarter company status will now be allowed for companies with shares and debt listed on the Johannesburg Stock Exchange. The participation threshold will also be reduced to 10%.

The Exchange Control Circular No 5/2013 released in conjunction with the budget states that during 2012, intellectual property transfers were deemed to be transfers of capital for exchange control purposes. The circular points out that this was a temporary measure and a joint National Treasury, Reserve Bank and South African Revenue Service panel will review this arrangement with a view to aligning intellectual property transfers with the relevant tax treatment.

Peter Dachs (pdachs@ens.co.za)
ENS Taxand

Tel: +27 21 410 2500

Fax: +27 21 410 2555

Website: www.ens.co.za

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