Tax proposals in the South Africa Budget 2019 show a concerted effort to close loopholes, align the Income Tax Act provisions with the OECD Multilateral Instrument and remove hurdles inadvertently created when previous anti-avoidance provisions were introduced.
Tax proposals in the South Africa Budget 2019 include the review of controlled foreign company rules. Specifically, the comparable tax exemption threshold. In recognition of the current trend of reducing corporate tax rates globally, the exemption threshold will be reduced from the current percentage of 75%, while taking into account the sustainability of the tax base. This will avoid a situation where a CFC income is imputed and taxed where previously it was exempt under the high tax exemption.
The budget also proposes to introduce additional measures to curb the circumvention of anti-diversionary rules. These rules will specifically target structures where controlled foreign companies (that are part of a group) are interposed in the supply chain between South African connected parties and independent non-resident customers or suppliers.
