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VIDEO: Dissecting new tax implications contained in Budget 2017 with KPMG’s Tanette Nell

By Tai Chishakwe - Mar 1, 2017
VIDEO: Dissecting new tax implications contained in Budget 2017 with KPMG’s Tanette Nell

During his 2017 National Budget Speech, Finance Minister, Pravin Gordhan, announced various tax increases, some tax relief and some new taxes – all which will have an impact on everyone’s pocket.

Without a doubt, taxpayers and corporates need to start thinking differently in order to navigate through this changing landscape.

Business Link chatted to Tanette Nell, Associate Director (Tax) at the global advisory firm, KPMG, about the tax implications contained in Minister Gordhan’s 2017 National Budget Speech.

With branches in 146 countries across the world, KPMG is a network of professional services firms providing audit, tax and advisory services. To date, they have around 140 000 exceptional professionals working together to deliver value to their numerous clients.

“The default rate, at which dividends tax is to be withheld, has increased to 20%, with effect from 22 February 2017,” described Nell.

She said that a new top personal income tax bracket of 45% has been introduced with effect from 1 March 2017 for taxable income above R1.5 million while Trusts, other than special trusts, will also be subject to income tax at the rate of 45%.

On general corporate tax proposals for the relaxation of debt, Nell said that; “To date, there have been varying views as to whether the conversion of debt into equity (i.e. settlement of the debt through the issue of shares) constitutes full settlement of the debt or potentially contains a debt reduction amount.

“It is proposed that such conversion be allowed, with the limitation that any capitalised interest on the debt in respect of which a tax deduction had been claimed, be treated as a taxable recoupment.”

Commenting on Base Erosion and Profit Shifting (BEPS) - including Transfer Pricing, Nell said that South Africa has committed to adopt the Automatic Exchange of Financial Account Information with global revenue authorities as from 1 September 2017.

She added; “The current transfer pricing guidance will also be updated to align with the OECD Transfer Pricing Guidelines and to incorporate new guidance on the arm’s length principle and an agreed upon approach to the pricing of hard to value intangibles.”

Nell said that government intends expanding the VAT base in 2018/19. It has proposed removing the zero-rating on fuel.

“However, this could be combined with either a freeze or decrease in the fuel levy. In addition, government is considering a VAT rate increase in the future but this will be balanced with measures aimed at providing relief to the poor,” she adds.

She said that a revised Carbon Tax bill and revised carbon offset regulation will be published by mid-2017.

“There is no impact expected on electricity prices until the first phase (2020) and more clarity is expected from Government on aligning the Carbon Tax and carbon budgets after the first phase,” Nell also said.

For more on what she had to say, please watch the video below:

For more information or assistance with your taxes and audit, visit KPMG Port Elizabeth at KPMG House, Norvic Drive, in Greenacres, Port Elizabeth. Alternatively, call 041 395 1500 or visit kpmg.com/za/en/home/about/offices/port-elizabeth today.