In July 2017, the first draft of the Taxation Laws Amendment Bill (TLAB) was released by National Treasury for public comment. It will give effect to the majority of the proposed tax legislation changes which were announced by the Minister of Finance in his annual budget speech in February.
The TLAB contains a number of controversial provisions which have far-reaching implications for some current structures and pending transactions. Unsurprisingly, taxpayers are questioning what action they should be taking, and when.
The legislative process
Following introduction in parliament, the first draft of a Bill is released for public comment. After taking public comment into account, the second draft of the Bill will be released. The second draft, which is passed by the National Assembly and the National Council of Provinces, contains revisions and the Act is eventually ratified and signed into law by the President. Only then is it final legislation.
For example, the provisions of the TLAB 2017 were in draft form and open for public comment until mid-August 2017 and the second draft of the TLAB was released by National Treasury in late October 2017. The Taxation Laws Amendment Act will most likely be signed into law in December 2017 or January 2018.
Based on prior experience, some of the amending provisions in the Act are likely to be vastly different to what was proposed in the first draft of the TLAB.
What you can do now
Taxpayers that are potentially affected by the proposed amendments in the TLAB should consider the potential tax implications carefully, but should avoid hasty actions. To the extent possible, pending transactions which may be affected by the proposed amendments in the TLAB should be deferred to a completion date after the Act is signed in to law. Any current structures that would be affected by the proposed amendments should be identified and potential restructuring should be considered. However, no restructuring should be performed based on the draft legislation.
Affected taxpayers should begin considering how they would restructure any pending transactions or current structures in light of the TLAB 2017 and keep vigilant watch for the publication of the Act. Only the final legislation should be the basis relied on for finalising any pending transactions and implementing any restructuring in light of the changes to the tax legislation.