A summary of the key business related highlights is as follows:
- Interest deduction for re-organisation and acquisition transactions: the last few years have seen a number of different measures aimed at limiting the interest deductibility arising from such transactions. We are moving from a discretionary to a formula-based system. Certain proposals were made to revise the formula which will be used to calculate the allowable interest deduction.
- Dividends tax: an apparent anomaly concerning the refund mechanism for non-cash dividends will be addressed.
- Real estate investment trusts: a technical change will be made to deal with the determination of whether a company is a property company where foreign companies are involved.
- Oil and gas companies will be permitted to make part assignments of their fiscal stability rights, for example if they enter into a joint venture.
- In the case of transfer pricing contraventions, the nature of the secondary adjustment is to be revisited so that it ceases to take the form of a deemed loan and instead will be deemed to be a dividend or capital contribution depending on the circumstances.
- The tax rate of a resident individual's controlled foreign company will be adjusted in relation to the receipt of a taxable dividend.
- High tax exemption for controlled foreign companies will be revised to allow an option to deem the net income of a controlled foreign company to be nil if either the high tax or the foreign business establishment test, when applied to the aggregate taxable amounts, is met.
- Cessation of South African residence gives rise to a deemed disposal and reacquisition of shares in a SA property owning company. A change will be introduced to deal with the currency of such deemed disposal.
- Debt reduction rules are under consideration in the case of companies undergoing business rescue and other forms of debt compromise. The current rules are seen as undermining the purpose of business rescue.
- Public-private partnerships: the current requirement of ownership of land to allow depreciation or capital allowances will be re-examined to improve the financial viability of projects. The requirement of land ownership also limits the incentive for improvements in UDZ and industrial policy projects. Consideration will be given to allowing deductions where the taxpayer is not the owner of the land.
- Tax treatment of insurers: it is proposed that the profits from the risk business of an insurer be taxed in the corporate fund similar to the manner in which short term insurers are taxed. This is to ensure that the corporate fund rather than one of the policy holder funds will be taxed on the risk policy business and profits. A review will also be undertaken of the fairness of taxation of the IPF where a 30% tax rate is applied irrespective of the actual income level of policy holder.
- Foreign re-insurance: it is proposed that the net returns from foreign re-insurance will be included in the tax calculation of the insurer.