Comments on key announcements made at the 2012 National Budget Speech.

22 February 2012

On the increase in the dividends tax rate

“This has come as quite a shock given that all previous announcements and the law as it stands at present indicate a 10% rate. The proposed 50% increase in the dividends tax rate to 15% so late in the day will no doubt cause considerable administration burdens on those companies and regulated intermediaries that have to account for the tax.

“More importantly, the rate of tax is part of the law that can only be changed by an Act of Parliament. One hopes that this too will be possible before the implementation date. In essence, given that domestic companies are exempt from the withholding tax on dividends, it is only individuals and non-residents who will be affected by the increased rate. Then again, given that most double taxation agreements (DTA) entered into between SA and foreign jurisdictions reduce the rate, usually to 5%, non-residents too should not be unduly affected by the proposed increase.”

Increase in inclusion capital gains tax (CGT) rates

“This announcement was an obvious means of generating additional revenue, notwithstanding the stated reason being to reduce tax arbitrage and broaden the tax base. While a few foreign countries tax capital gains on the same basis as ordinary income, most either provide for inflation indexation or reduced inclusion rates (like SA).

“In effect, the effective tax rate payable by an individual (at top marginal rates) will increase from 10% to 13.32% (an increase of 33.2%), while the effective CGT rate for companies and trusts will increase from 14% to 18.65% (a 33% increase).

“Foreigners owning property in SA will be adversely affected by the increase because non-residents are required to pay CGT on the disposal of any immovable property owned by them in SA.

“The rate increase is due to come in on 1 March 2012 - so there are at least a few days left to benefit from the old rate.”

Interest incurred on share purchases

“The proposal to allow a deduction for interest incurred on the acquisition of shares to be deductible in certain circumstance is VERY welcome.”

Ends

ISSUED BY: FTI Consulting
Lianne Osterberger 011 214 2414/ 083 272 7313/ lianne.osterberger@fticonsulting.com
Senzi Dlamini 011 214 2407 / 073 494 0030 / senzi.dlamini@ftionsulting.com

ON BEHALF OF: Webber Wentzel
For further information please contact:

Candice de Bruin, Corporate Affairs Head at Webber Wentzel
Tel: 011 530 5755 / 083 268 5042 / Candice.deBruin@webberwentzel.com

About Webber Wentzel

Webber Wentzel is one of the leading corporate law firms in Africa. Webber Wentzel provides clients with legal support for their operations across Africa having advised clients in Angola, Botswana and Nigeria, amongst others. Work in Africa represents a significant and growing part of the firm’s practice.

Recently the International Bar Association’s official research partner, Who’s Who Legal, named Webber Wentzel as South African Law Firm of the Year 2011. The South African offices are situated in Johannesburg, Cape Town and Rustenburg.

The firm is now part of ALN, an established group of Africa’s foremost law firms, the largest and only one of its kind on the African continent. Founded nine years ago, ALN’s African coverage currently extends to 12 African countries.

With the inclusion of Webber Wentzel, ALN consists of over 580 lawyers on the ground in Africa. The size of the group and its multi-lateral nature distinguish it from any network, association or international law firm with offices in African countries. More importantly the alignment creates a pan-African platform for ALN members to work together on an integrated basis on multi-jurisdictional projects.

Webber Wentzel has a staff complement of 750 people. More than 100 of the professional staff are black. The firm holds a Level Four B-BBEE rating.

The professional staff provide high-quality service to meet the multiple and varying needs of a powerful client base that includes many of the South Africa’s Top 100 companies in mining, banking, insurance, media, property and telecommunications.

Webber Wentzel has 21 practice groups covering virtually the entire spectrum of legal endeavour.