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12 April 2019
In 2013 the government introduced the domestic treasury management company (DTMC) regime to enable South African companies which are registered with the Financial Surveillance Department (FSD) of the South African Reserve Bank (SARB) to expand into the rest of Africa and abroad. The DTMC regime allows South African companies to establish one subsidiary as a holding company to hold African and offshore operations, without being subject to exchange control restrictions.
When the DTMC regime came into effect on 27 February 2013, a 'DTMC' was defined in Section 1 of the Income Tax Act as a company that:
Several tax benefits apply to a DTMC, including the following:
The 2019 Budget explains that in 2017 the Income Tax Act was amended to remove the requirement that the company be incorporated in South Africa. However, the SARB's definition in Circular 5/2013 (also dealt with in Circular 7/2013) still includes the requirement that the company be incorporated in South Africa. As a result, the 2017 changes are not aligned with the SARB's requirements. It is proposed that the definition of a 'DTMC' be changed in Section 1 of the Income Tax Act to reintroduce the incorporation requirement.
As a result of the above and pursuant to the proposed amendment, in order for a company to qualify as a DTMC, it will once again have to be incorporated in South Africa and be effectively managed from South Africa.
For further information on this topic please contact Louis Botha at Cliffe Dekker Hofmeyr by telephone (+27 115 621 000) or email (email@example.com). The Cliffe Dekker Hofmeyr website can be accessed at www.cliffedekkerhofmeyr.com.
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