The South African National Treasury has published Draft Explanatory Memorandum on the initial batch of the 2019 draft Taxation Laws Amendment Bill (TLAB) on 10 June 2019 to cover specific provisions that require additional consultation, and is asking for public comment.

This initial batch of the 2019 draft Taxation Laws Amendment Bill is intended to solicit comments on two specific amendments that are more urgent and require further consultation. It also serves as notice to taxpayers of proposals for earlier effective dates for some of the proposed amendments. The specific amendments in the first batch are:

Addressing abusive arrangements aimed at avoiding the anti-dividend stripping provisions

This implies that the changes to the tax legislation addressing abusive arrangements aimed at avoiding the anti-dividend stripping provisions will come into effect from 20 February 2019 and apply to dividend stripping arrangements entered into on or after the date of that announcement (i.e. 20 February 2019). These legislative interventions will not apply in respect of dividend stripping arrangements entered into before 20 February 2019. The proposed amendments are aimed at structures that certain taxpayers have embarked on that aim at circumventing the current dividend stripping rules that were amended during the 2017 and 2018 legislative cycles.

Aligning the effective date of tax neutral transfers between retirement funds with the effective date of retirement reforms, which is 1 March 2021

The main objective of these amendments was to enhance preservation of retirement fund interests during retirement and to have uniform tax treatment across the various retirement funds, thus resulting in provident funds being treated similarly to pension and retirement annuity funds with regard to the requirement to annuitize retirement benefits. These retirement fund reform amendments were originally intended to come into effect on 1 March 2015. In order to correct this, it is proposed that urgent changes be made to the Income Tax Act to align the effective date of the tax neutral transfers from pension to provident or provident preservation funds with the effective date of the retirement reform amendments, which is 1 March 2021.

Treasury will be publishing the full text of the 2019 draft Taxation Laws Amendment Bill for public comment in the mid July 2019. Written comments on the initial batch of the 2019 draft Taxation Laws Amendment Bill are due on 25 June 2019.