The 2015 South African Budget Speech was delivered on 25 February 2015. Set out below are a few relevant excerpts from a tax / finance perspective.
Securities lending arrangements – collateral transfers
- To the extent that a securities lending arrangement is collateralised with equities, the transfer of such collateral by the borrower to and from the lender currently results in a liability for securities transfer tax as well as income tax or capital gains tax implications for the borrower and the lender.
- It was indicated in the Budget Speech that the transfer of beneficial ownership of equities as collateral in the context of a securities lending arrangement will be reviewed to reduce negative side effects. This could, for example, materialise by way of relief from securities transfer tax and income tax / capital gains tax arising in respect of the abovementioned transfers of collateral.
- It was indicated in the Budget Speech that the review of the tax treatment of securities lending arrangements will extend to limit the use of collateral in possible tax avoidance arrangements. In addition, the current tax treatment of securities lending arrangements will be reviewed to account for corporate actions during the term of such arrangements.
Withholding tax on interest
- The lack of a definition of “interest” in the IWT legislation which came into effect on 1 March 2015 was acknowledged in the Budget Speech. It was indicated in the Budget Speech that the term “interest” as referred to in the IWT provisions will be defined to ensure there is no confusion with other definitions related to interest in the Income Tax Act.
- It was indicated in the Budget Speech that the IWT provisions will be aligned with the statutory source provisions contained in section 9(2)(b) of the Income Tax Act. In this regard, an exemption will apply to interest payments made between non-residents unless the payor was present in South Africa for a period exceeding 183 days or if the debt claim in terms of which the interest is paid is effectively connected to a permanent establishment of the payor in South Africa.
- The Budget Speech indicated that further refinements are needed to clarify the requirements or meaning of “qualifying purpose” in the context of the refinancing of third-party-backed shares for qualifying transactions and limited pledges.
- It was proposed in the Budget Speech that hedge funds be declared as collective investment schemes, subjecting them to similar tax rules as other collective investment schemes in terms of the Collective Investment Schemes Control Act (2002). Tax amendments will be considered to minimise any inadvertent tax consequences that may arise from the restructuring of regulated hedge funds.
Click here to be directed to the 2015 Budget page on the National Treasury website