LEGISLATION AMENDMENTS CHAIN OF EVENTS 1 AMENDMENTS PROPOSED

LEGISLATION AMENDMENTS

CHAIN OF EVENTS 1. AMENDMENTS PROPOSED 2. JUNE TO AUGUST 2011 – COMMENTS MADE 3. 20 DECEMBER 2011 - LEGISLATION SIGNED BY THE PRESIDENT 4. 22 FEBRUARY 2012 – PROPOSAL ANNOUNCED BY THE HONOURABLE MINISTER OF FINANCE 5. 13 MARCH 2012 – TECHNICAL AMENDMENTS PROPOSED BY NATIONAL TREASURY

RATES APPROVED BY PRESIDENT 1. DIVIDEND TAX AT 10% - SEE SECTION 64 E, 64 G AND 64 H 2. INCLUSION RATE FOR CGT REMAINS AT 50% 3. STC CREDITS ARE VALID FOR 5 YEARS AFTER 1 APRIL 2012 – SEE SECTION 64 J

2012/2013 BUDGET PROPOSALS 1. CGT INCLUSION RATE FOR INDIVIDUALS AND SPECIAL TRUSTS 33, 3%. FOR OTHER TRUSTS AND COMPANIES 66, 6% WEF 1 MARCH 2012. 2. DIVIDENDS TAX NOW WILL BE 15% AND NOT 10%. SECTION 64 E. WHAT ABOUT OTHER SECTIONS?

CONFUSION 1. CURRENTLY THE LAW REMAINS WHAT WAS SIGNED IN DECEMBER 2011 2. HOWEVER, THE PROPOSED CHANGES HAVE APRIL 2012 EFFECTIVE DATE BUT THESE ARE NOT LAW 3. THE QUESTION IS WHAT SHOULD BE FOLLOWED BY TAXPAYERS NOW?

EXAMPLE 1. MRS MDLALOSE OWNS A COMPANY AND IT SELLS ITS ASSET AND MAKE CAPITAL GAIN OF R 300 000 2. THE COMPANY WANTS TO DECLARE THE PROFIT ON SALE AS A DIVIDEND

EXAMPLE CONT’D 3. IF THE COMPANY APPLIES THE LAW, IT WILL PAY TAX ON 14% OF R 300 000. THE TAX WILL BE R 42 000 4. AFTER PAYING TAX THE COMPANY WILL DISTRIBUTE TO MRS MDLALOSE R 258 000 AND WITHHOLD DIVIDEND TAX OF R 25 800 5. THEREFORE, MRS MDLALOSE WILL POCKET R 232 200

EXAMPLE CONT’D 6. WITH PROPOSED CHANGES MRS MDLALOSE WILL POCKET R 207 443 7. THE RETURN FOR MRS MDLOSE HAS DECREASED BY MORE THAN 10% 8. THOSE WHO APPLY THE LAW ARE PAYING LESS AND THOSE WHO DO NOT ARE PAYING MORE. WHAT SHOULD TAXPAYERS DO?

RECOMMENDATION 1. CHANGE EFFECTIVE DATE TO A FUTURE DATE SUCH AS 1 NOVEMBER 2012

QUESTIONS Q&A Thank you