1. Revenue Laws Amendment Bill, 2004
Representations and comments to the Portfolio Committee on Finance
Tuesday, 19 October 2004

2. PricewaterhouseCoopers representations Overall impressions
Positives
Very well put together Bill;
Themed sections as per last year very helpful;
Majority of measures introduced understandable, justified and welcomed;
Regarded as a welcome consolidation after last few years of introducing new concepts

3. PricewaterhouseCoopers representations Overall impressions
Areas of remaining concern
Some instances where anti-avoidance considered to go too far;
Need for early inclusion of suggested effective dates;
Timing remains an issue;
Draft bill issued late Thursday 30 September (themed sections)
Responses required by Tuesday 12 October (8 business days)
PCoF presentation Friday 15 October (2 intervening business days)
PCoF hearings Tuesday/ Wednesday 19/20 October (1 ½ intervening business days)
SARS/ Treasury feedback to PCoF and final bill to printers Friday 22 October
Status as a money bill and committee’s role.

4. PricewaterhouseCoopers representations Key sections to be covered
Broad based employee share incentive;
Extent of anti-avoidance measures;
Advance rulings;
STC credits
Other issues noted; and
Other issues not addressed in legislation.

5. PricewaterhouseCoopers representations Broad based employee share incentive
Perceived issues;
Groups utilising a single employment company
Reporting requirement on employees
Absence of related stamp duty exemptions (especially where involves transfer of existing shares as opposed to issue of new shares)

6. PricewaterhouseCoopers representations Extent of anti-avoidance measures
Taxation of executive equity schemes (s8A)
Considered can result in double taxation in some instances
Can result in inappropriate taxation in other instances
Hybrid instruments
True fees may be tainted

7. PricewaterhouseCoopers representations Extent of anti-avoidance measures
Deferred instalment sales (s24M)
Wholesale exclusion of connected party transactions not considered justified
Elsewhere (e.g. para 39) provides carve outs for connected party transactions done at arms length.
Similar concept required here

8. PricewaterhouseCoopers representations Extent of anti-avoidance measures
Share for property transfers (s24B)
Not all cross issues are effected for avoidance purposes.
Need exclusions for bona fide commercial transactions and/ or time limits such as adopted elsewhere
Simple example of capitalising a company then 10 years later effecting a reorganisation
Degrouping charges (s45(4))
Previously (correctly) didn’t trigger any gain/ loss in transferee company – now does so

9. PricewaterhouseCoopers representations Extent of anti-avoidance measures
Foreign trusts (s25B(2A))
Converts capital amounts and exempt amounts into normal income

10. PricewaterhouseCoopers representations Advance rulings
Anti-avoidance
Key function of system (i.e. SARS acceptance of bona fide business reasons and not SA tax driven)
Time frames
Certain transactions likely to require at least “in principle” agreement on tight deadlines
Retrospective revocation
Creates uncertainty and casts doubt in value of system

11. PricewaterhouseCoopers representations Advance rulings
Scope
Need to cater for transfer taxes (UST, SD, TD)
Excluded circumstances (s76G(1))
Seriously contemplated
Vexatious
Draft legislation

12. PricewaterhouseCoopers representations Advance rulings
Rejected circumstances (s76G(2) & (3))
Similar rulings
Time consuming
Circumstances to be determined by the Commissioner
Publication
Issues with adoption of this approach
Absence of either requirement on Commissioner to take cognisance of taxpayer comments or sanction if Commissioner fails to meet own obligations

13. PricewaterhouseCoopers representations STC credits – s64B(3A)
Starting point is stated intent not to levy STC on same profits twice
Branches;
Instances where 10% equity holding requirement is not met

14. PricewaterhouseCoopers representations Other issues
Administration and encouragement of foreign investment (s66)
Requirement for non-residents to register and file returns, even where earning only exempt income (e.g. s10(1)(h) interest) at odds to encouraging portfolio investment
Unnecessary burden on investor and SARS with no benefit for either
Share for property transfers
Dispute as to position under current law leads to uncertainty
Previously pressed for clarity now proposed
Issue of effective date

15. PricewaterhouseCoopers representations Other issues
Open transaction method for sales
Related issue of stamp duty/ UST not addressed
Withholding of sales proceeds re non-resident property sales
Administrative issues
How will payment be allocated to non-residents who aren’t registered?
What if foreign estate agents (not subject to FICA) are used
How to police a transaction totally outside SA

16. PricewaterhouseCoopers representations Other issues – not in legislation
Foreign provisions
Business establishment exemption where employment companies are utilised
Imputation of passive income where overall losses arise
Active royalty income
Extent of exemption on foreign dividends
Group matters
RSC double taxation