Tax relief proposed to encourage South African MNC trade across continent

rand_Heather_DowdTax experts believe the drafters have recognised commercial realities in South Africa while drawing up the bill. (Image source: Heather Dowd/Flickr)Experts have welcomed proposals on double taxation in the Taxation Laws Amendment Bill released by the South African National Treasury to aid the country's multinational companies do business across the African continent

The proposal provides details on the planned changes announced by South African finance minister Pravin Gordhan in his budget in February.

Tax experts said the drafters had recognised commercial realities and proposed measures to ensure economic relief.

“South Africa is grappling with the realities of doing business in Africa and the treasury is working hard to assist taxpayers,” tax director at Deloitte Billy Joubert said.

Joubert added that foreign companies wanting to use South Africa as their gateway into Africa could expect relief from the “effective management” test in respect of a highly-taxed controlled foreign company.

The bill proposes changes to potential transfer pricing adjustments with regard to interest-free loans on meeting of certain requirements.

The drafters had kept in mind several difficulties that many companies faced and proposed certain debt-relief measures to prevent them from incurring capital gains triggered by debt cancellations or debt reductions.

“Relief for these companies is essential if economic recovery is to be achieved. The tax system unfortunately acts as an added impediment to the recovery of companies and other parties in financial distress,” said Joubert.

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