Page 1150 - SAIT Compendium 2016 Volume2

EXPLANATORY MEMORANDUM ON THE TAXATION LAWS AMENDMENT BILL, 2015
CLAUSE 51
Income Tax: Amendment to section 27
Amendments to paragraph (g) of subsections (2) remove reference to Commissioner’s discretion.
CLAUSE 52
Income Tax: Amendment to section 28
Sub-clause (a): De nition of ‘short term insurance business’ in subsection (1) - See notes on INCLUDING MICRO-
INSURANCE BUSINESS IN TAXATION OF SHORT TERM INSURANCE BUSINESS
Sub-clause (b): De nition of ‘short term insurer’in subsection (1): See notes on INCLUDING MICRO-INSURANCE
BUSINESS IN THE TAXATION OF SHORT TERM INSURANCE BUSINESS
Sub-clause (c): De nition of ‘short term policy’in subsection (1): See notes on INCLUDING MICRO-INSURANCE
BUSINESS IN THE TAXATION OF SHORT TERM INSURANCE BUSINESS
Sub-clause (d): Amendment of subsection (3): See notes on TAX ISSUES RESULTING FROM INTRODUCTION
OF THE SAM BASIS FOR SHORT TERM INSURERS
Sub-clause (e): Deletion of subsections (7),(8),(9),(10) and (11): See notes on TAX ISSUES RESULTING FROM
INTRODUCTION OF THE SAM BASIS FOR SHORT TERM INSURERS
CLAUSE 53
Income Tax: Amendment to section 29A
Sub-clause (a): Negative liability means the amount by which the expected present value of future premiums exceeds
the expected present value of future bene ts and expenses.
Sub-clause (b): De nition of ‘risk policy’ in subsection (1) - See notes on REFINEMENT TO RISK INSURANCE
BUSINESS OF LONG TERM INSURERS
Sub-clause (c): It is also proposed to amend the de nition of ‘value of liabilities’. This de nition will apply to both policyholder funds and the risk policy fund. The de nition of ‘value of liabilities’ will mean the ‘adjusted IFRS value’ (as calculated per de nition depending on which fund is involved) plus expenditure allocated that has not been paid by that fund at the last day of that year of assessment and which has not been taken into account in determining adjusted IFRS value.
Sub-clause (d): Amendments to item (C) of the formula in subsection (11)(a)(ii)(bb) – The amendment clari es the referencing.
Sub-clause (e): Amendment to the proviso to subsection 11(g) – See notes on LIMITATION OF UNWARRANTED RELIEF FROM TAXATION IN RESPECT OF FOREIGN REINSURANCE BY LONG TERM INSURERS
Sub-clause (f): Insertion of new subparagraph (13B) - See notes on REFINEMENT TO RISK INSURANCE BUSINESS OF LONG TERM INSURERS
CLAUSE 54
Income Tax: Amendment to section 30
The amendment in subsection (5A)(b) corrects grammatical error and changes the word ‘become’ to ‘becomes’.
CLAUSE 55
Income Tax: Amendment to section 30C
The amendment in subsection 1 extends the de nition of ‘Small Business Funding Entity’ to include a non-pro t
company as de ned in section 1 of the Companies Act. The inclusion of a ‘non-pro t company’ in the de nition of Small Business Funding Entity is in line with other de nitions in section 30A (Recreational clubs) and section 30B (Associations).
CLAUSE 56
Income Tax: Amendment to section 31
The amendment in subparagraph (ii) of subsection (3)(b) corrects grammatical error and inserts the word ‘a’ before
the word donation in that sentence.
CLAUSE 57
Income Tax: Amendment to section 35A
The current wording is problematic in that it states that a purchaser does not need to withhold tax from a deposit
‘until the agreement for that disposal has been entered into’. The deferral should not be based on when the agreement is entered into since this could result in tax having to be withheld from deposits in respect of sales that are subject to suspensive conditions which may never be ful lled. It is proposed that the wording ‘been entered into’ be removed and be replaced with ‘become unconditional’.
CLAUSE 58
Income Tax: Amendment to section 38
Amendments remove reference to Commissioner’s discretion
CLAUSE 59
Income Tax: Amendment to section 40C
Amendment clari es that this provision only applies to the issue of shares and not distributions to shares.
CLAUSE 60
Income Tax: Insertion of section 40E
Amendment switches off the CGT exit charge when a CFC becomes a foreign partnership as a consequential
amendment to the de nition of ‘foreign partnership’ in section 1.
1142 SAIT CompendIum oF TAx LegISLATIon VoLume 2