Page 1114 - SAIT Compendium 2016 Volume2

EXPLANATORY MEMORANDUM ON THE TAXATION LAWS AMENDMENT BILL, 2015
4.2. EXTENDING THE WINDOW PERIOD AND INTRODUCING A COMPLIANCE PERIOD FOR THE INDUSTRIAL POLICY PROJECT TAX INCENTIVE REGIME
4.3. FURTHER ALIGNMENT OF THE TAX TREATMENT OF GOVERNMENT GRANTS
4.4. DEPRECIATION ALLOWANCE IN RESPECT OF TRANSMISSION LINES OR CABLES USED FOR
ELECTRONIC COMMUNICATIONS OUTSIDE SOUTH AFRICA
4.5. SPECIAL ECONOMIC ZONES ANTI-PROFIT SHIFTING PROVISION
4.6. ACCELERATED CAPITAL ALLOWANCES FOR MANUFACTURING ASSETS GOVERNED BY SUPPLY
AGREEMENTS
4.7. DEPRECIATION ALLOWANCES FOR RENEWABLE ENERGY MACHINERY
4.8. ADJUSTMENT OF ENERGY SAVINGS TAX INCENTIVE
5. INCOME TAX: INTERNATIONAL
5.1. RELAXING CAPITAL GAINS TAX RULES APPLICABLE TO CROSS ISSUE OF SHARES AND INTRODUCING COUNTER MEASURES FOR TAX-FREE CORPORATE MIGRATIONS
5.2. WITHDRAWAL OF SPECIAL FOREIGN TAX CREDITS FOR SERVICES FEES SOURCED IN SOUTH AFRICA
5.3. REINSTATEMENT OF THE CONTROLLED FOREIGN COMPANY DIVERSIONARY INCOME RULES
5.4. REVISION OF THE DEFINITION OF IMMOVABLE PROPERTY
5.5. DEFINITION OF INTEREST FOR WITHHOLDING TAX PURPOSES
5.6. REVISION OF THE DEFINITION OF FOREIGN PARTNERSHIP
6. VALUE ADDED TAX
6.1.ENTERPRISE SUPPLYING COMMERCIAL ACCOMMODATION: MONETARY THRESHOLD ADJUSTMENTS
6.2. ZERO RATING: GOODS DELIVERED BY A CARTAGE CONTRACTOR
6.3. ZERO RATING OF SERVICES: VOCATIONAL TRAINING
6.4. TIME OF SUPPLY: CONNECTED PERSONS (UNDETERMINED AMOUNTS)
6.5. SABC VAT ACCOUNTING METHOD
6.6. REPEALING THE ZERO RATING FOR THE NATIONAL HOUSING PROGRAMME
CLAUSE BY CLAUSE
1. INCOME TAX: INDIVIDUALS, SAVINGS AND EMPLOYMENT
1.1. CLOSING A LOOPHOLE TO ENSURE A CONSISTENT TAX TREATMENT ON ALL RETIREMENT FUNDS
[Applicable provision: Section 1 of the de nition of ‘pension fund’]
I. Background
The Taxation Laws Amendment Act, 2013 included amendments to the taxation of contributions to retirement funds and the requirements to purchase an annuity upon retirement for those retirement funds. Members of provident funds and provident preservation funds who are under the age of 55 on 1 March 2016 would be required to purchase an annuity with two-thirds of the value of their pension at retirement for contributions that were made after 1 March 2016, subject to the de-minimis threshold (however there would be no requirement to purchase an annuity on the amounts, and the growth on those amounts, that were in the provident or provident preservation fund as at 1 March 2016). Members over the age of 55 would not be required to purchase an annuity upon retirement.
II. Reasons for change
Extensive public consultations were held, including dedicated sessions with labour unions before the promulgation of the 2013 Taxation Laws Amendment Act. The retirement related reforms were initially scheduled to be implemented on 1 March 2015. At the request of some members of the Labour Constituency at NEDLAC during 2014, the retirement related reforms in the 2013 Taxation Laws Amendment Act were postponed by a year to 1 March 2016, to allow for further consultations between Government and NEDLAC. The process for consultation had not been concluded in time for the 2015 Taxation Laws Amendment Bill. As a result, after the 2015 Taxation Laws Amendment Bill was tabled in Parliament on 27 October 2015, the Minister of Finance requested that the Standing Committee of Finance consider amendments to the Bill on the retirement reforms.
III. Proposal
After consideration of the comments received, Government proposes to proceed with the broader objective of retirement reforms (as approved in the 2013 Taxation Laws Amendment Act) to ensure more equity across income groups. As a result, the following provisions are proposed with effect from 1 March 2016:
(a) Contributions by both employers and employees to pension, provident and retirement annuity funds will qualify
for a tax deduction, capped at a lesser of: 27.5% of the greater of taxable income or remuneration; or R350 000 per
annum.
(b) On the other hand, contributions by employers to pension, provident and retirement annuity funds on behalf of
employees will become a taxable fringe bene t in the hands of the employee.
(c) The requirement to purchase an annuity will apply to all members, including pension, provident and retirement
annuity funds. This implies that on retirement, members will be required to take one third of their retirement bene t as a lump sum and the two thirds of their retirement bene t will be paid to them every month as an annuity until they die.
1106 SAIT CompendIum oF TAx LegISLATIon VoLume 2