Minor delay in the introduction of the interest withholding tax

However, in terms of the revised draft Taxation Laws Amendment Bill, 2014 (TLAB), which was tabled in parliament on 15 October 2014 and is likely to be promulgated in its current form, a subtle amendment has been made to the effective date such that the interest withholding tax will only be effective from 1 March 2015.

Taxpayers are unlikely to be too concerned that the interest withholding tax has been delayed by three months. What may be concerning to taxpayers is that in the draft legislation released for public comment and other correspondence with the public there was no mention of the intention to delay the interest withholding tax. Furthermore, the amendment has been made towards the end of the TLAB which can easily be overlooked.

This is not the first time where subtle amendments have been made to the tax legislation, which have not previously been presented to the public. It is recalled that when the new anti-avoidance provisions in s24BA of the Income Tax Act, No 58 of 1962 (Act) were introduced in terms of the Taxation Laws Amendment Act, No 22 of 2012 (TLA 2012), the “value shifting arrangement” definition was to be amended such that it would no longer be applicable to companies and only apply to trusts and partnerships. The amendment was only to be effective from 1 January 2014 as National Treasury required further time to ensure that the change did not give rise to anti-avoidance.

In the initial Draft Taxation Laws Amendment Bill, 2013 no mention was made of the potential repeal of s102 of the TLA 2012, which provision was to exclude companies from the “value shifting arrangement” provisions as part of the introduction of s24BA of the Act. However, in the final Taxation Laws Amendment Act, 2013, it was announced that the proposed amendment to the value shifting arrangements would be repealed and has been repealed with effect from 1 February 2013. As a result of this late amendment to the Act potential anomalies arose in the interpretation and application of the applicable legislation.

When the TLAB is promulgated into law it is therefore important that taxpayers and consultants carefully consider the amendments that have been made to the Act and other applicable tax legislation. There may be other subtle amendments that have been made in the TLAB, which have not previously been presented to the public.