Financial intermediaries and Securities transfer tax
As only brokers can be members of the Johannesburg Stock Exchange and are exempt from the securities transfer tax (STT), other financial intermediaries, such as banks, do not receive similar relief. The purpose of this exemption is to facilitate the broker’s role as a market-maker in shares, thereby promoting liquidity. The STT exemption for brokers is currently not designed with the derivative market in mind. This lack of relief for financial intermediaries unintentionally disrupts intermediary transactions where profits are small, as the STT potentially eradicate all intermediary profits. Consequently, it is proposed that certain intermediaries (such as banks) be exempt from STT so that transacting on the JSE remains internationally competitive.
Unlisted real estate investments
Specific and codified tax legislation relating to the taxation of Real Estate Investment Trusts (REITs) was introduced under the 2012 Taxation Laws Amendment Act. Under this legislation, only listed REITs that invest in immovable property and receive income from rental which is distributed to investors could claim a deduction for such distributions if it resides in South Africa. In addition, at least 75% of its gross income of the REIT needed to relate to rental income. It is proposed that this regime be extended to unlisted REITs once they are subject to similar regulation as listed REITs. This form of regulation will firstly be extended to wholly owned entities of private and government pension funds, as well as long-term insurers. Property syndication legislation is also proposed to shield investors from Ponzi schemes (i.e.a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation). REITs tax relief will likewise be extended to cover other real estate entities if they become subject to property syndication regulation.