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BDS TRAINING CENTRE (PTY) LTD

BOOKKEEPING DEVELOPING SKILLS

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New Companies Act 2008

Here are some of the important implications of certain clauses of the Act:

· Directors may become liable for losses suffered by the company as a result of that director having taken, or failed to act against certain unauthorised or unlawful actions and situations.

· One of the innovations of the law is the business rescue scheme. Instead of a company in financial distress going under financial judicial management, a rescue process can be initiated by the workers and management of the company. This means that creditors are held at bay while the company is put back on its feet.

· Registering a new company will become far easier because only a single registration document will be required. Companies will also be able to trade with a company number and no name while small and medium size companies will not be required to produce audited financial statements.

· The concept of a ‘close corporation’ will be ditched, but existing cc’s will continue to trade as before. No new cc’s will be registered.

· Minority shareholders will be able to call a meeting marshalling only 10% of shares in issue - a feature of the law aimed at promoting shareholder activism.

· An audit committee can be appointed by shareholders of a company with the aim of entrenching a role of shareholders and the level of independence that should be maintained between committees and board of companies.

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Date: 2012

New tax system for small firms

· In a bid to cut red tape and reduce the administrative burden on small businesses , the South African Revenue Services (SARS) has launched a new tax system that will dramatically lower the time and cost of submitting tax returns.

· Known as “Turnover Tax”. The innovative system is available to small businesses with a turnover up to 1 million rand a year, replacing income tax, capital gains tax, secondary tax on companies and value added tax (VAT).

· This initiative is in line with the governments broader mandate to encourage entrepreneurship and create an enabling environment for small businesses to survive and grow.

· The introduction of a new tax system coincided with an increase in the compulsory VAT registration, from R 300,000 to R 1 million rand.

Date: 11 January 2012

DIVIDEND WITHOLDING TAX - EFFECTIVE 01 APRIL 2012

Background

In 2007 the Minister of Finance announced that Secondary Tax on Companies (“STC”) will be replaced by a Dividend Withholding Tax (“DWT”). Subsequent to this announcement legislation has been enacted to provide for the implementation of DWT. In a recent government gazette the Minister of Finance has announced that DWT will come into operation on 1 April 2012 (“the Effective Date”).

Currently South African companies listed on the JSE Limited (the “JSE”) pay STC to the South African Revenue Services (“SARS”). The amount of STC is determined by reference to the dividends declared by the company after taking into account any STC credits applicable.

From the Effective Date DWT will be levied at a rate of 10% (ten percent) based on dividends declared and paid by companies. From an administrative perspective the Income Tax Act No 58 of 1962 (the “ITA” ) provides for DWT to be deducted by the authorised regulatory intermediary and a net amount (gross dividend less DWT) paid to the shareholder. A regulated intermediary will, inter alia, be responsible for making the DWT payments to SARS on behalf of beneficial shareholders, subject to certain exemptions.

Exemptions provided in the ITA

The ITA in Section 64F provides for various exemptions with regard to the imposition of DWT based on the nature or status of the beneficial shareholder. The current list of exemptions are as follows:

· A South African resident company or close corporation;

· The South African Government, provincial administration or a local municipality;

· A South African Public Benefit Organisation (“PBO”) approved by the Commissioner in terms of Section 30(3) of the ITA;

· A trust contemplated in section 37A of the ITA (i.e. a rehabilitation trust);

· An institution, board or body contemplated in section 10(1)(cA) of the ITA (examples: Water Board, tribal authorities);

· A fund contemplated in Section 10(1)(d)(i) (i.e. a South African pension, provident or retirement annuity fund ) or Section 10(1)(d)(ii) (i.e. a benefit fund, being a friendly society registered under the Friendly Societies Act, 1956 and any medical scheme registered under the provisions of the Medical Schemes Act, 1998);

· A person contemplated in section 10(1)(t) (examples: CSIR, SANRAL, Development Bank of South Africa);

· A shareholder in a registered micro business, as defined in the Sixth Schedule (limited to the first R200 000 of these dividends). Micro business is defined as “any person whose qualifying turnover for a year of assessment does not exceed R1 000 000”;

· A natural person who is a shareholder or member and the dividend received constitutes the Capital Gains Tax (“CGT”) free disposal of his/her primary residence (limited to the first R1 500 000 gain made on the disposal of the primary residence);

· A person who is a non-resident and the dividend is paid by a non-resident company.

· It is further noted that special provisions apply to dividends in specie which will result in companies being liable to pay the DWT.