The South African Revenue Service (SARS) and the National Treasury have announced
an accelerated consultation process on proposed anti-avoidance measures to be
inserted into the 2011 Taxation Laws Amendment Bill, intended to ensure the
free movement of tax-neutral assets between members of a corporate group.
The National Treasury and SARS wish to notify key stakeholders about an accelerated
process to eliminate the current uncertainty about restructurings and acquisitions,
under Section 45 of the tax code, that do not pose a significant risk to the
tax base. Flexibility has, however, been promised if key stakeholders come forward
with a detailed presentation of facts, provide full disclosure, and constructively
engage with SARS.
Firstly, it is confirmed that the government remains committed to allowing
the use of Section 45 to facilitate the tax neutral movement of assets between
members of a group of companies, which do not give rise to artificial structuring
to avoid paying taxes.
Nevertheless, the government is concerned about the use of section 45 to facilitate,
for example, leveraged buyouts and other restructuring where the tax
base is at risk, and will take appropriate steps to reduce such risk. The National
Treasury and SARS will close “unacceptable avoidance schemes”.
The National Treasury and SARS have reiterated their commitment to the rollover
relief provisions and the need to ensure that “non-cash out” mergers
and acquisitions should ideally be free from an immediate tax charge. On the
other hand, “seemingly neutral transactions cannot be condoned if these
transactions set the stage for future tax losses (or other tax benefits) via
excessive leverage or other means so as to partially or wholly eliminate on-going
operational income for many years to come,” the government said.
It is confirmed that the final proposals will accordingly safeguard this certainty
for non-tax motivated transactions that are commercially driven, but “taxpayers
engaged in aggressive tax transactions should not view the concept of ‘certainty’
as an automatic safe haven so as to deprive wrongly the tax authorities (even
if these tax transactions reach closure before a set legislative date).”
In view of the above, the National Treasury and SARS have announced that interested
parties can take the opportunity to meet on an urgent basis from June 30 until
July 8, 2011. It is foreseen that these consultations will determine the characteristics
of transactions that do not represent a potential threat to the tax base, so
that underlying principles or rules can be refined for a more targeted approach
to be effective as soon as possible.
Further opportunities will be provided to engage with the proposed rules and
the National Treasury and SARS after mid-July, when they may be published for
further comment. Following this, a final response document which will be published
in mid-August, followed by a revised set of Taxation Laws Amendment Bills to
be introduced in Parliament in September 2011. Parliament is expected to pass
the bills by 30 November, 2011.
LAWANDTAX-NEWS.COM
