The Draft Revenue Laws Amendment Bill 2005 and Draft Explanatory Memorandum are now available online. It introduces amendments to the Transfer Duty Act, 1949, the Estate Duty Act, 1955, the Income Tax Act, 1962, the Customs and Excise Act, 1991, the Stamp Duties Act, 1968, the Value-Added Tax Act, 1991, the Tax on Retirement Funds Act, 1996, the Road Accident Fund Act, 1996, the Uncertificated Securities Tax Act, 1998, the Revenue Laws Amendment Act, 2003, and the Second Revenue Laws Amendment Act, 2004.
I have highlighted a couple of clauses below which might be of interest to conveyancers and property professionals.
Transfer Duty: Amendment of section 2 of the Transfer Duty Act, 1949
It often occurs that changes are announced in the Budget Review with regard to the rates of transaction taxes with effect from a date (e.g. 1 March) preceding the date on which the legislation introducing that rate change is promulgated. It becomes problematic to implement these changes before the legislation is in place as there is no legislation on which a deeds registrar can rely when registering the transfer of property, if the amount of transfer duty paid in respect of the property differs from the amount required to be paid in terms of the Act.
It is, therefore, proposed that a provision be inserted in the Transfer Duty Act, 1949, to address this issue. This will ensure that the proposed changes to the rates apply with effect from the date determined by the Minister in the Budget Review and that the changes lapse at the earlier of the date on which the legislation giving effect thereto is promulgated or, if no such legislation is passed, after 6 months from the date so determined.
Transfer Duty: Amendment of section 9 of the Transfer Duty Act, 1949
Subclause (a): To exempt from transfer duty the transfer of properties owned by Government superannuation funds of the former TBVC states or other similar funds to the Government Employees' Pension Fund Subclause (b): The proposed amendment provides for an exemption of transfer duty where fixed property is acquired as a result of a company formation transaction as contemplated in section 42 of the Income Tax Act, 1962. The exemption is limited to fixed property where the supplier and the recipient of that property are deemed to be one and the same person in terms of section 8(25) of the Value-Added Tax Act, 1991. The public officer of the company is required to submit a sworn affidavit or solemn declaration that the acquisition of the property complies with the provisions of this subsection.
Subclause (c): This clause deletes provisions which have become obsolete.
Transfer Duty: Amendment of section 20 of the Transfer Duty Act, 1949
The proposed amendment will allow excess duty, additional duty and/or interest paid to be refunded to the person who paid that amount. The period in which the claim for a refund may be made is limited to 5 years from the date of acquisition of the property. Alternatively, a refund will not be made where the Commissioner is satisfied that the payment of the duty, additional duty and/or interest was made in accordance with the practice general prevailing and no objection was lodged in respect of the payment in terms of section 18 of the Transfer Duty Act.
Estate Duty: Amendment of section 1 of the Estate Duty Act, 1955
In terms of the definition of "fair market value" in the Estate Duty Act and the Income Tax Act as far as it relates to donations tax and capital gains tax, persons carrying on bona fide farming operations can elect to value their immovable property at its fair market value or fair agricultural or pastoral value.
The Land Bank Act read with the Estate Duty Act provided for the appointment of land bank valuators, the method of determining the agricultural or pastoral value and an appeal process for taxpayers dissatisfied with the valuation to the Land Bank Board. Applications for valuations were made to the magistrate of the district in which a property was situated. The Land Bank Act was replaced by the Land and Agricultural Development Bank Act, 2002, which no longer provides for the applications to magistrates and does not provide for the appeal process to the Land Bank Board. From an administrative point of view it has, therefore, become impossible to administer these provisions.
It is proposed that the so called land bank valuation be replaced with the valuation applicable to all other property, namely, the price that could be obtained between a willing buyer and willing seller dealing at arm's length in an open market but must be reduced by 30 per cent in recognition of the fact that land bank valuations were lower than the fair market value. The reason for this reduction is that the land bank value represented the fair agricultural or pastoral value of the property and not the open market value.
Estate Duty: Amendment of section 8 of the Estate Duty Act, 1955
This amendment is consequential upon the amendments made to the definition of "fair market value" and the introduction of the definition of "farming value" in section 1 of the Estate Duty Act.
Stamp Duties: Amendment of item 14 of Schedule 1 to the Stamp Duties Act,1968
Subclause (a): The proposed amendment is consequential upon the deletion of the graduated scale (R0,25, R0,40, R0,55 and R0,70 depending on the period of the lease) and the substitution thereof with a flat rate of 0.5% last year, irrespective of the period of a renewal lease agreement.
Subclause (b): Where the total consideration payable in respect of a lease or agreement of lease is not quantifiable at the time of execution of that lease, no stamp duty will be payable where the aggregate duty payable on that lease or agreement of lease is R200 or less during a financial year of the lessor. This proposal will give relief on the administrative burden on lessors and to persons who cannot make use of electronic stamping. The proposed amendment will apply in respect of any lease or agreement of lease where that lease or agreement of lease is executed in the year of assessment, as defined in section 1 of the Income Tax Act 1962 (Act No. 58 of 1962), of any lessor who is a taxpayer, as defined in section 1 of the Income Tax Act, 1962, commencing on or after the proclamation of the Act in the Gazette, or in the case of any other lessor, on or after 1 March 2006.
Subclause (c): A further proposed amendment introduces a limit on the amount of stamp duty that will be payable in terms of a long-term lease. The limit is calculated as the amount of transfer duty which a company is liable to pay upon the acquisition of that property. The reason for the 10 per cent limit is that 10 per cent is the highest rate applicable for transfer duty purposes. The stamp duty payable will, therefore, not be more than the maximum transfer duty obligation, were the property itself to be disposed of and be subject to transfer duty. The proposed amendment will apply in respect of any lease or agreement of lease where that lease or agreement of lease is excuted on or after 1 January 2006.
Explanatory memorandum and the Revenue Laws Amendment Bill itself.