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Proposed Amendments to Income Tax Act
Following the 2012 Draft Taxation Laws Amendment Bill, which was made available for comment on 13 March 2012, the long-awaited proposed amendments to sections 8E and 8EA of the Income Tax Act were published. Both these sections will come into operation on 1 October 2012 and will apply in respect of dividends and foreign dividends received or accrued during years of assessment commencing on or after that date. Taxand South Africa discusses the significance of the proposed amendments for taxpayers residing in South Africa.
In terms of section 8E, any dividend or foreign dividend received by or accrued to a person during any year of assessment, in respect of a share which constituted a hybrid equity instrument at any time during that year of assessment, will be deemed in relation to the recipient thereof to be an amount of interest accrued to the recipient. This is not an unknown concept to South African taxpayers, as hybrid equity instruments have been in existence for a number of years.
Taxand South Africa discusses proposed amendments to the income tax act
Following various discussions on the interpretation of these sections, it has become evident that a number of share funding structures will fall within the provisions. It is therefore recommended that appropriate advice is sought to ensure that steps are taken to implement the necessary amendments prior to 1 October 2012.
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