Tags: Tax
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income tax

What To Know About The 2023 Draft Tax Law Amendments

The National Treasury unveiled its annual draft income tax amendments on July 31, 2023, opening it up for public feedback. It is anticipated that most of the suggested changes by the Treasury are likely to become law. Many of the changes proposed are aligned with the national strategy to fight against money laundering and terrorist financing, and to improve South Africa’s standing, which is currently on the grey list.

Unpacking The Amendments

Broadly speaking, the suggested amendments aim to fortify our tax system and make non-compliance more difficult and expensive. As these changes are likely to reshape our tax system in the near future, here are the changes taxpayers should heed:

The obligation for South African employers to register and withhold Pay-As-You-Earn will now also apply to foreign employers.

A method is being suggested to facilitate the calculation of the Rand value of low-interest foreign currency loans given by associated individuals to trusts.

Income distributions from South African trusts to non-resident beneficiaries must be taxed in the trust’s hands, unlike local beneficiaries who can receive the distribution and pay tax at their personal rate.

The “foreign business establishment” exclusion has been clarified in relation to Group companies after the recent Coronation judgment.

The Commissioner now has the discretion to extend the 40-day period for taxpayers to request a revised tax return if an auto-assessment was issued by SARS.

The term “beneficial owner” will be defined in the Tax Administration Act, covering its meaning in relation to a company, trust, and partnership.

Information-sharing between organisations has been expanded to include entities such as the CIPC, the Directorate of Non-Profit Organisations, and the Master of the High Court.

What Are the Ramifications?

The National Treasury has emphasised the importance of these proposed rules to ensure transparency and accountability in all financial transactions, particularly those involving cross-border money movements. This will enable organisations to determine tax liabilities while preventing evasion and profit shifting.

The proposed changes will also promote international cooperation through the newly regulated Beneficial Ownership reporting, the standardisation of interest rates on foreign currency loans, and the requirements for applying the “foreign business establishment” exclusion to controlled foreign companies. This will further support the exchange of tax-related information between jurisdictions, effectively closing the wide net of compliance already cast.

What Taxpayers Should Do Next

We hold a deep understanding of the complexities of income tax and strive to stay updated with the latest regulations to ensure our clients receive accurate advice. If you or your company are unsure about your responsibilities under the suggested legislative changes, the professional tax consultants at MMS Group can assist in ensuring your legal obligations are met. Contact our team today.

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