Budget 2013: Grant Thornton’s instant tax matters interpretations

 Willem Oberholzer, Tax partner, Grant Thornton Pretoria says:

“Tax payers can breathe a sigh of relief because overall the status quo remains. Government seems to be consolidating.  We’ve seen tax reforms for at least three years that were very big and this year is different.”

Willem Oberholzer, Tax partner, Grant Thornton Pretoria says:

“This year’s Budget Speech seemed to be very forward looking at future changes, in that deadlines announced are for changes to come in the future. Focus for this Budget Speech seemed to be on consolidating and collections – a more compliance-themed Budget for 2013.  The effect of the proposed changes is that they will seek to collect 11% more from individuals compared to only 8.6% more from corporates.”

 AJ Jansen van Nieuwenhuizen, director and head of Tax, Grant Thornton Johannesburg says:

“There are a lot of minor changes to pay attention to, but in general nothing major has been updated and the tax payer should be relieved.”

 Willem Oberholzer, Tax partner, Grant Thornton Pretoria says:

“The Minister advised that discretionary trusts will no longer act as a flow-through vehicle and all income will be fully taxed at a trust level.  We view this as a big concern for all beneficiaries of trusts and for estate planning in general.  We would like to caution beneficiaries to take a close look at the cash flow implications as a result of this proposed change.”

Barry Visser, Associate Director: Tax, Grant Thornton Johannesburg says:

“We welcome the Minister’s announcement regarding the automation of tax clearance certificates because there are definite frustrations currently with obtaining these certificates.”

Neville Sweidan, head of Forensic Services, Grant Thornton Johannesburg

“The Minister gave a long discourse on the government’s determination to fight corruption with particular reference to procurement.  Particularly through the mechanism of the receiver of revenue SARS has started to target businesses that have supply contracts with the payment of taxes in respect of their receipts for such contracts.  As a result a substantial tax had already been assessed.  They were intending to broaden the process.  However, this is closing the stable door after the horse has bolted because there is a lack of seriousness in the enforcement through the mechanisms that already exist such as the whistleblower act and the public protector.  There appears to be up to now a lack of political will to utilise these mechanisms to their best advantage.”

 

On e-Tolls, SANRAL and Graduate Tax

Warren Corporate Tax Director, Grant Thornton Pretoria says:

“E-tolls and graduate tax was not mentioned at all, which was very surprising after all that excitement and hype.”

Warren Corporate Tax Director, Grant Thornton Pretoria says:

“The amount of R1.4bn which was allocated to SANRAL is certainly not enough to cover national projects, Western Cape expansions and e-Toll plans, to name a few. It appears to be for future expansion projects.”

 

On VAT

 Cliff Watson, Associate Director: Indirect Tax, Grant Thornton Johannesburg says:

“The streamlining of VAT Registration processes is especially welcomed – it will facilitate VAT processing significantly.”

Cliff Watson, Associate Director: Indirect Tax, Grant Thornton Johannesburg says:

“The Minister advised that foreign companies that provide e-Books, music and other digital goods and services are liable now to register for VAT in SA.  While the consumer will pick up the increased cost, this VAT change will increase the national income quite significantly. In addition, it’s in line with the EU VAT legislation.  However, it is going to be quite difficult for SARS to police this and track the VAT payments here because downloading digital goods is from a multitude of channels.  It was previously mentioned that SARS would be allowed to go to actual download sites (e.g. Amazon) to request downloaded information and track it there – it is questionable if this will be legally possible.”

Cliff Watson, Associate Director: Indirect Tax, Grant Thornton Johannesburg says:

“It is encouraging that SARS will be researching the VAT treatment of financial services and the apportionment of input taxes within the financial services sector, during 2013.  This has been an ambiguous area for quite some time. There is a specific VAT ruling in the Banking Services sector and there was talk it would be withdrawn in April this year.  We wonder if this research will form part of this.  In addition the apportionment method of input taxes relating to non-financial sectors will be re-evaluated looking ahead. This is perhaps as a result of consistent pressure from tax payers and their advisors.  This move is most certainly welcomed.”

 

On NHI

 AJ Jansen van Nieuwenhuizen, director and head of Tax, Grant Thornton Johannesburg says:

“The Minister’s mention that the proposed funding for the NHI will be published this year, i.e. during 2013, at least provides a deadline to advise as to how this Health Insurance will indeed be funded.  We were hoping for more clarity, though, during this Budget and yet another delay is frustrating.”

 

On International Tax

 Barry Visser, Associate Director: Tax, Grant Thornton Johannesburg says:

“While there are currently withholding taxes on royalties of 12%, it looks like cross-border service fees will be included in the withholding tax framework.  This is a new inclusion – in a way it’s a bit of a surprise which we weren’t expecting.  This is something which people will consider when international companies are looking to invest in SA.  Normally the double tax agreements provide for relief but still this is another withholding tax which foreign companies will need to consider when investing.

“Although there is currently a withholding tax of 12% for royalties this would have increased to 15% on 1 July 2013.  However, the Minister has delayed this increase until 1 March 2014.  Effectively royalties carries on at 10% and withholding tax on interest as well as the new cross border service fees will also only come into effect on next year on 1 March 2014. This brings some relief but foreign companies should prepare themselves for the added cross-border service fees, which is onerous.”

 

On the Property Sector

Lee-Anne Bac, Director, Grant Thornton Advisory Services

“The Minister’s mention in terms of housing was beneficial.  The fact that there is pressure on banks to increase the levels of mortgage loans provided is a positive aspect and it is certainly welcomed in terms of expanding property ownership.”

 Lee-Anne Bac, Director, Grant Thornton Advisory Services

“The Minister spoke specifically about creating simpler rules in terms of reducing the time and cost for investing and operating in Africa.  Many SA property companies are looking to expand into Africa and this announcement is particularly positive for these organisations.

AJ Jansen van Nieuwenhuizen, director and head of Tax, Grant Thornton Johannesburg says:

“Real Estate Investment Trusts (REIT) tax benefits will be extended to unlisted REITs and this is certainly welcomed although it is not likely to come into effect in the near future.”

 

On Public Sector announcements made including budget allocations

Christelle Grohmann, director Grant Thornton Advisory Services

“The NDP’s plans are based on achieving a growth rate of 5% per year.  Yet actual growth is less than half – according to the Minister (2.3%) over the next three years.  Also the Minister mentions revenue shortfall.  The question is why don’t we see more involvement of the private sector in infrastructure projects as we would assume that, with a decrease in revenue and a decrease in growth there will naturally be a revenue gap to fund the NDP.  We are still concerned that we see very little activity called for from the Private Sector to take part and actually fund this gap that is obviously increasing and which is expected to increase even further.  We note no new Public-Private-Partnerships in recent months – and this is one method of creating Private Sector involvement.”

 Christelle Grohmann, director Grant Thornton Advisory Services

“It is encouraging to see renewed activity in respect of the Special Economic Zones and the specific tax incentive which was mentioned by the Minister is certainly encouraging.  However, profits need to be earned before tax incentives can come into play and there are concerns that many of these industrial parks are developing far too slowly due to service delivery issues at local government level and problems in electricity capacity.”

 Terry Ramabulana, head of Grant Thornton Public Sector Advisory says:

“In terms of the National Development Plan, the real focus from the Minister was on growth and development.  These are issues which we have raised long time ago.  Our question is that we haven’t seen enough change in the Government’s stance on this matter.  In terms of the Presidential Infrastructure Co-ordinating Commission and its purpose, again we see this as a unit that would drive growth and development as well, especially from an infrastructure point of view.  Going back to the NDP – what are the real differences here? Having said all this – there doesn’t seem to be a focused way of moving from equitable share to a point where revenue is distributed to where it is really needed – i.e. provincial and local government.  In this instance, equitable share is ‘as per formula’ and not ‘as per real need’.”

Terry Ramabulana, head of Grant Thornton Public Sector Advisory says:

“In terms of the allocation to the Provinces – R23.9 billion is available to provincial education departments for infrastructure over the next three years.  The Minister has not mentioned how these funds will be managed and as in the past, we fear that there is no real mechanism is in place to ensure this money is spent for the purpose for which it was intended.”

Terry Ramabulana, head of Grant Thornton Public Sector Advisory says:

“R4.3 billion has been allocated to a new grant to be administered by the Department of Water Affairs, providing water treatment, distribution, demand management and support for rural municipalities.  The question here is what would the role be of the current utilities services which are entrusted with managing water services under the Municipalities? There is no indication as to how revenue collected by agents to the municipalities would be monitored.  For instance taking into account ring-fencing revenue to monitor and track revenue collection and growth.”

 

Ends

 

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