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Johannesburg - Following the submission of public comment on the draft Tax Laws Amendment Bills 2010, there have been a few amendments to the draft which could bring some relief to high net worth individuals (people who earn more than R500 000 per year).
Hennie van Deventer, head of tax in the Cape office of BoE Private Clients, which provides financial services exclusively to high net worth individuals, says the most significant effect on this category is a drop in the tax on company cars. This has fallen from the 4% of the value of the vehicle per annum proposed in the original draft to 3.5% in the final version.
"High net worth individuals are obviously more likely to enjoy the benefit of a company car and, more importantly, the increase to 3.5% (previously 2.5%) as the basis for determining the tax value brings the tax in line with the tax on car allowances," he says.
The draft bill's stipulation that only interest from authorised financial institutions would in future qualify for the interest exemption has also been removed from the final version.
Van Deventer cautions, however, that the relief granted in terms of interest exemption is likely to be temporary.
"It is common for high net worth individuals to grant loans to the likes of friends and family, or to a trust, often at a lower interest rate than what a financial institution might charge.
"Following submission on the draft bills, the interest on such loans will, for the time being, still qualify for the interest exemption. The National Treasury has, however, indicated that it will be looking very closely at this provision."
The commissioner also retains some discretion in terms of the act on interest payable on outstanding tax. Previously, the commissioner could deduct the interest charged where the taxpayer reasonably believed that it was not subject to tax, or that it qualified as a deduction.
The first draft of the amendment bill removed this discretion entirely. In the final version, the commissioner does once again have discretion on interest payments on these amounts, but may only apply it in very limited, exceptional circumstances.
"It brings the discretionary powers of the commissioner into line with that contained in the administrative penalty provisions," says Van Deventer.
Finally, the final bill sets out the "voluntary disclosure programme", but emphasises that this does not amount to an amnesty.
Says van Deventer: "In terms of the voluntary disclosure programme, qualifying taxpayers will still be liable for payment of the taxes but penalty, interest or additional taxes might not necessarily come into play.
"The South African Revenue Service (Sars) may consider relief but only where a full disclosure has been made, Sars was not aware of the default and a penalty or additional tax would have been levied had Sars discovered the default. Voluntary disclosure does, however, protect the taxpayer against any criminal prosecution."
If you are a high net worth individual and confused about any aspect of the Tax Laws Amendment Bills, it makes sense to consult a qualified tax adviser.
- Fin24.com
Hennie van Deventer, head of tax in the Cape office of BoE Private Clients, which provides financial services exclusively to high net worth individuals, says the most significant effect on this category is a drop in the tax on company cars. This has fallen from the 4% of the value of the vehicle per annum proposed in the original draft to 3.5% in the final version.
"High net worth individuals are obviously more likely to enjoy the benefit of a company car and, more importantly, the increase to 3.5% (previously 2.5%) as the basis for determining the tax value brings the tax in line with the tax on car allowances," he says.
The draft bill's stipulation that only interest from authorised financial institutions would in future qualify for the interest exemption has also been removed from the final version.
Van Deventer cautions, however, that the relief granted in terms of interest exemption is likely to be temporary.
"It is common for high net worth individuals to grant loans to the likes of friends and family, or to a trust, often at a lower interest rate than what a financial institution might charge.
"Following submission on the draft bills, the interest on such loans will, for the time being, still qualify for the interest exemption. The National Treasury has, however, indicated that it will be looking very closely at this provision."
The commissioner also retains some discretion in terms of the act on interest payable on outstanding tax. Previously, the commissioner could deduct the interest charged where the taxpayer reasonably believed that it was not subject to tax, or that it qualified as a deduction.
The first draft of the amendment bill removed this discretion entirely. In the final version, the commissioner does once again have discretion on interest payments on these amounts, but may only apply it in very limited, exceptional circumstances.
"It brings the discretionary powers of the commissioner into line with that contained in the administrative penalty provisions," says Van Deventer.
Finally, the final bill sets out the "voluntary disclosure programme", but emphasises that this does not amount to an amnesty.
Says van Deventer: "In terms of the voluntary disclosure programme, qualifying taxpayers will still be liable for payment of the taxes but penalty, interest or additional taxes might not necessarily come into play.
"The South African Revenue Service (Sars) may consider relief but only where a full disclosure has been made, Sars was not aware of the default and a penalty or additional tax would have been levied had Sars discovered the default. Voluntary disclosure does, however, protect the taxpayer against any criminal prosecution."
If you are a high net worth individual and confused about any aspect of the Tax Laws Amendment Bills, it makes sense to consult a qualified tax adviser.
- Fin24.com
