· Well put together bill, with majority of measures introduced understandable, justified and welcomed;

· As with last year's, regarded as a welcome consolidation after recent years' introducing new concepts;

· Timing less strained than in previous years;

· Remains a, not unexpected, different emphasis from taxpayer side

· Effective dates

· Effective date for reduction in 70% common ownership requirement in "group of companies" definition [clause 8];

· The DFIHC and FFIHC rules;

- Break even assets [clause 41(c) & (d)]

- FFIHC - companies dealing in multiple territories [clause 41(d)]

· Double capture of capital distributions in group transactions [clause 41(h)];

· Permitted transfers of shares within a group [clause 45(d)];

· Multiple application of FIHC tests in unbundling transactions [clause 46(g)];

· Criteria for unbundling relief.

PricewaterhouseCoopers representations International issues

· Recognition (partial) re IP as "not bad" [clause 16(m)]

· Extension of definition of CFC [clause 16(1 )(a) & (e)] and retrospectivity [clause 16(2)];

· Undesirable CFC exit charges [clauses 78 and 89];

- Illustrative example

- Conflict within legislation

- Policy not notified

- Tax at greater than effective rates

- Double taxation

- Internationally uncompetitive (see comparative table)

- Interpretative position and need for certainty

• Gain on CFC1 proceeds potentially exempt (para. 64B); but

Following gains also sought to be taxed;

• CFCs 4 & 7 - in respect of all underlying assets

• CFCs 3 & 6 - in respect of shares in CFCs 4 & 7 and any other underlying assets

• CFCs 2 & 5 - in respect of shares in CFCs 3 & 6 and any other underlying assets

• CFC 1 - in respect of shares in CFCs 2 & 5 and any other underlying assets

· Non-residents subject to SA CGT on disposals of SA immovable property or interests therein;

· Interests include companies where >80% of value is attributable to SA immovable property

· Exclusion of assets held as trading stock for these purposes;

· Request that mining rights (though capital assets) be treated as trading for purposes of this test;

· Limited to connected parties

· Move to "directly or indirectly"

- Administrative and tracking issues

• Effective taxpayer unfriendly "retrospective" legislation

· Change in terminology - "earned" to "arose"

In

PricewaterhouseCoopers

3;A

· Apparent anomaly between income tax exemption and CGT pick-up

ii

PricewaterhouseCoopers