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| 101 - Value extraction tax | 12 July 2010 | |
| Grant Thornton - www.BusinessDay.co.za | ||
| What is value extraction tax (Vet)? Vet is a new withholding tax due to come into effect in 2011 as part of dividends tax reform. It is to replace secondary tax on companies (STC) and is designed to bring SA tax law in line with international standards. How much will it be? Vet is payable by the company at the rate of 10%. How does it differ from STC? Vet is not a new concept as it replaces the deemed dividend anti-avoidance rules found in the STC law — commonly the debit shareholders’ loan. Who will it affect? Mostly investors who receive dividends from companies. Four types of transactions will be affected: financial assistance: any loan or advance by a company to a connected person at an interest rate below a market rate; the release or waiver of loans owing by a connected person to the company; the settlement of debt by a company where the debt is owed by a connected party to a third party; and where a company ceases to be an SA tax resident, Vet is based on the difference between the market value of all assets and liabilities plus all classes of issued share capital, including share premium. Who is exempt? Government, public benefit organisations and pension and medical aid funds. | ||
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