PAYE BRS for Employer Reconciliation version 17.0.2 was published

SARS has made a change to the PAYE BRS for Employer Reconciliation (August 2018 release). The
new version was published on 10 July 2018.

The changes in the official document, noted under July 2018 of the section Revision History, amends
the validation for Monthly Calculated ETI to make provision for the designated Special Economic
Zones (SEZ). A list of the Special Economic Zones for ETI Purposes has been added as Appendix E in
the BRS.

The SEZ’s under discussion are:

  • COE COEGA SEZ
  • DTP DUBE TRADE PORT SEZ
  • EAL EAST LONDON SEZ
  • MAP MALUTI-A-PHOFUNG SEZ
  • SLB SALDANHA BAY SEZ
  • RIB RICHARDS BAY SEZ

For employees who are employed by an employer in a fixed place of business within the special
economic zones listed, and where the person renders services to that employer mainly within that
SEZ, the age limit to determine if the employee qualifies for ETI, does not apply, which means
employees of any age can qualify to generate the tax incentive for an employer.

To access the new BRS, follow the link below:

SARS PAYE BRS for Employer Reconciliation (August 2018 Release) Version 17.0.2.

 

Contact our legislation team at info@crs.co.za if you require any additional information.

© 2018 CRS Technologies (Pty)Ltd. All Rights Reserved.

2018/19 Budget Speech Highlights and Tax Changes
Following the Budget Speech of May 2018, delivered by the Minister of Finance, Economic Planning and
Development, Goodall Gondwe, the following Income Tax measures will be effective 1 July 2018:

  • The tax-free income bracket under Pay-As-You-Earn (PAYE) will be increased from MK30,000 to
    MK35,000 per month.

Other Highlights of the Budget Speech:

  • A real GDP growth rate of 4.1% in 2018 and 6.0 % in 2019.
  • An average inflation of around 7%
  • The budget (total Expenditure and Net Lending) has been set at K1,504 billion which is 28.2% of GDP
  • The budgetary deficit is expected to amount to K242 billion which is 4.5% of GDP.
  • The 2018/19 budget includes ambitious youth programmes that are primarily intended to reduce Youth
    unemployment. It is for college graduates and non-graduates and has included projects which are
    targeting the youth.
  • In the 2015/2016 Budget, the Taxation Act was amended to introduce a provision on “Deemed Interest”
    where no interest is charged on a loan, and subject such deemed interest income to taxation. However,
    due to implementation challenges, Section 27 of Part III of the Taxation Act will be amended to provide
    clarity on the targeted taxpayers under this provision and bring fairness on the treatment of domestic
    and foreign loans which attract no interest.
  • The Taxation Act will be amended to introduce a requirement for the registration of salaried employees
    and issuance of Taxpayer Identification Number (TPIN) by MRA.
  • Section 39 (e) and (d) of the Taxation Act will be amended to introduce a MK5 million cap on the
    allowable deductions for individuals’ donations made to Charitable Organisations and Non-Profit
    Institutions approved by the Minister.

Contact our legislation team at info@crs.co.za if you require any additional information.

© 2018 CRS Technologies (Pty)Ltd. All Rights Reserved.

MAURITIUS 2018/19 BUDGET SPEECH

The Prime Minister and Minister of Finance and Economic Development, Hon. Pravind K Jugnauth presented the National Budget on 14th June 2018.

The Budget identified seven key action areas which include: innovation and accelerating the adoption of digitisation, creating a strategic and modern infrastructure, focusing on sustainable development and creating an inclusive and caring society.

Key Highlights of the Budget Speech:

  • The GDP growth rate for the year 2017/18, would be 3.2 %
  • GDP is expected to grow by 4.1 % in fiscal year 2018/19 compared to 3.9 % in 2017/18
  • The inflation rate, estimated at 4.3 % for fiscal year 2017/18, is forecasted to fall to around 3.5 % in 2018/19
  • Revision to the taxation of Category 1 Global Business Licence (GBC 1) companies. The budget proposes a new harmonised fiscal regime for domestic and Global Business companies. The Deemed Foreign Tax Credit regime currently available to companies holding a GBC 1 Licence will be abolished from 31 December 2018. Consequently, GBC 1 companies will cease to benefit from an automatic effective tax rate of 3% on their foreign sourced income.
  • On the productivity side, a Work@Home scheme with tax incentives for employers is being introduced. increased by MUR 5,000, effective as from 1st July 2018.
  • A double deduction for tax will be granted on the wage and salary costs of employees operating under the Scheme for the first two years of operation.
  • Employers under the Scheme will be granted an annual tax credit of 5% for the first three years in respect of the investment made in the required IT system.

Income Tax Changes:

  • Income exemption threshold of all employees are increased by MUR 5,000, effective as from 1st July 2018
  • An individual having an annual net income of up to Rs 650,000, will be taxed at the rate of 10% instead of 15%.
  • The exemption threshold on the lump sum received as severance allowance, pension or retiring allowance will be raised from Rs 2 million to Rs 2.5 million
  • The Insurance Industry Compensation Fund will be exempted from income tax
  • A retired person will now be eligible to the enhanced income exemption threshold granted to retirees even if he derives emoluments provided that such income does not exceed Rs 50,000 in an income year
  • The deduction in respect of a dependent child pursuing tertiary education abroad has been increased from MUR135,000 to MUR200,000. Similarly, if the dependent is pursuing tertiary education locally, the relief has been raised from MUR135,000 to MUR 175,000

TANZANIA 2018/19 BUDGET SPEECH

Tanzania’s Minister for Finance and Planning, Hon. Dr. Philip I. Mpango has presented to the National assembly the Estimates of Government Revenue and Expenditure (the Budget) for 2018/19.

The budget aims to expand the tax base, formalize the informal sector and foster a conducive investment environment through simplification of the tax collection process.

Key Highlights of the Budget Speech:

  • Performance of the economy in the past five years (2012-2016) remained buoyant with real GDP growing at an annual average rate of 6.7%.
  • The Tanzanian economy grew by 7%, marginally missing the set target of 7.2% mainly on account of underperformance in the agriculture sector, which accounts for 28.9% of the GDP.
  • To improve tax compliance, the Minister has proposed to amend the Act by giving 100% amnesty on interest and penalties for six months starting from 1 July 2018 through 31 December 2018.
  • The Minister has proposed to reduce the corporate income tax rate from 30% to 20% for new investors in the pharmaceutical and leather industries for five years from 2018/19 to 2022/23.
  • In order to increase and strengthen domestic resources mobilization, revenue policies for the year 2018/19 will focus on widening the tax base, strengthen management of existing sources especially by intensifying the use of electronic collection systems and other administrative measures.
  • In widening the tax base, there are two main measures that the Government will undertake, namely formalization of the informal sector and improve investment environment in order to foster new sources of revenue from such investments.
  • Introduction of a “Treasury Single Account” which will be used for collection and payment of government funds.
  • Occupational Safety and Health Administration (OSHA) fees and levies – The following will be abolished in order to improve general business environment:
    Feesthe and levies imposed on application for working places
    Fines related to fire and rescue equipment
    OSHA compliance licence of Tshs 500,000
    OSHA consultancy fees of Tshs 450,000
  • No changes to the taxation of Individual Income or Employment Income.

 

Contact our legislation team at info@crs.co.za if you require any additional information.

© 2018 CRS Technologies (Pty)Ltd. All Rights Reserved.

INCOME TAX RATES, 2018

Law No. 97 of 2018, amending Income Tax Law No. 91 of 2005, was approved on 23 June 2018 by Egypt’s President Abdel Fattah al-Sisi.

The amendment to the income tax rates on the income of natural persons has been amended to reduce the tax burden on low-income taxpayers.

The updated annual tax brackets, effective 01 July 2018, are as follows:

In addition, the following measures will apply:

  1. Taxpayers in the second bracket: applying a discount of 85% if this is the highest income bracket, meaning those in the income tax bracket making between 8,000 – 30,000 pounds a year and who would normally pay a 10 percent income tax will get an 85 percent tax break, meaning they pay 15 percent of taxes they would normally pay.
  2. The 30,000 – 45,000 pound bracket: applying a 45 percent tax break, meaning they pay 55 percent of the taxes they would normally pay.
  3. The 45,000 – 200,000 pound a year bracket: applying a 7,5 percent tax break, meaning they pay 92,5 percent of the taxes they would normally pay.
  4. Egyptians making more than 200,000 pounds a year who get taxed at 22.5 percent will pay their full income tax.

Note:

It is important to note that the new tax update would be considered starting July 2018 until December 2018, accordingly tax year end, and should be divided to cover the first half (January to June) using old tax brackets and the second half (July to December) using the updated tax brackets and the related discounts.

 

Contact our legislation team at info@crs.co.za if you require any additional information.

© 2018 CRS Technologies (Pty)Ltd. All Rights Reserved.

In business and labour, sick notes are of utmost importance, they play a far bigger role in effective HR management than many realise. Misunderstanding of the basic function of the sick note can lead to problems in terms of people management.

According to South Africa’s labour law, the sick note entitles an employee to paid sick leave within the provisions of the Basic Conditions of Employment Act no. 77 of 1997 (BCEA), and provides an explanation for – and validation of the absence to the employer.

This is where the issue of proof of incapacity becomes relevant.

According to South African labour law:

(1) An Employer is not required to pay an employee in terms of section 22 if the employee has been absent from work for more than two consecutive days or on more than two occasions during an eight-week period and, on request by the employer, does not produce a medical certificate stating that the employee was unable to work for the duration of the employee’s absence on account of sickness or injury.

This indicates that the employee does not have to produce a sick note for each and every absence, but note that the Act specifies that this is required for paid sick leave. It is possible that an employer may still require an explanation of absence and may request a doctor’s note on that basis. In the event that a person is absent, claims sick leave and is outside the parameters, they are not entitled to paid sick leave.

The law also specifies who is certified to issue medical certificates and how these should be managed.

The persons entitled to issue sick notes are:

  1. Medical Practitioners (Doctor with MBCHB degree) that are registered with the Health Professionals Council of South Africa.
  2. Dentists that are registered with the Health Professionals Council of South Africa.
  3. Psychologists with a Masters degree in Educational, Counseling or Clinical Psychology that are registered with the Health Professional’s Council of South Africa.

The BCEA makes reference to the Allied Health Services Professions Act No. 63 of 1982.

Practitioners mentioned in this Act must be registered with the Allied Health Services Professions Council in order to issue certificates. Typically, this allows registration of ‘alternative’ or ‘other’ medical practitioners, including homeopaths, naturopaths, chiropractors, osteopaths and similar medical practitioners.

Certificates issued by clinics are usually not signed by registered medical practitioners, and as such these certificates are not acceptable as sick notes.

This means that an examination by an unregistered nurse or another person does not produce an acceptable sick note. Where they are signed by a registered Medical Professional they are acceptable.

S23 (2) of the BCEA allows for members of registered professional councils to issue sick notes.

This is as follows:

The medical certificate must be issued and signed by a medical practitioner or any other person who is certified to diagnose and treat patients and who is registered with a professional council established by an Act of Parliament.

Thus registered nurses are entitled to issue sick notes.

Take note

It is important that we highlight Rule 15 specifically… it requires that information be supplied, including name of the patient, data and time of the qualification, a description of the illness, disorder or malady in layman’s terminology with the informed consent of the patient, as well as the exact period of recommended sick leave.

So, if a medical certificate meets the criteria outlined above, the guidelines in the BCEA in respect of payment for sick leave will apply.

Sick notes are often tendered for medical issues where the employee is not sick – which CRS Technologies identifies as doctor’s appointments, routine checkups, examinations, tests, collecting medicine from the pharmacy, visits to specialists and going to the clinic.

Technically the employee is not sick and a sick note will not entitle them to paid sick leave.  Employers may if they so wish allow this to be offset against sick leave.

The Traditional Health Practitioners Act was signed into law on 30th April 2014. It brought into effect the requirement that from 1 May 2015 Traditional Health Practitioners must register with the Council, this being the Traditional Health Practitioners Council and thereafter the traditional healer must conform to the requirements for issuing sick notes as other medical practitioners must.

System open to abuse

The system is unfortunately open to abuse and the practice of selling and buying doctor’s notes is widespread and increasing.

Employees who have tendered false sick notes will be subject to discipline. This may occur where a sick note is signed by a medical practitioner’s receptionist or support staff. These persons are in a position of trust, and it may occur that a dishonest person may sell sick notes. Employees often pay for a certificate; the price is dependent on the number of days of sick leave that they want. Therefore, it is vital to check and see that the certificate is signed by the practitioner themselves and not by support staff.

Furthermore, the tendering of a fake sick note is fraudulent; it is an attempt to receive pay for days on which the employee has not worked. It is actionable in terms of criminal law.

KENYA 2018/2019 Budget Speech       

The Cabinet Secretary for National Treasury and Planning, Hon. Henry Rotich, presented the Budget Statement for the fiscal year 2018/2019 to Parliament on 14 June 2018.

The 2018/2019 budget focuses on the Government’s Big Four Agenda, whose key pillars are improving Manufacturing, Improving Food Security, Universal Health Coverage and Affordable housing.

The economy grew at a rate of 4.9%, falling below the 5.6% average growth rate achieved over the last 5 years. The drought and the lengthy electioneering period in 2017 were mentioned among the factors attributed to this.

The tax measures proposed in the Budget Statement mainly affect indirect taxes, as the Income Tax Act is set for an overhaul through the Income Tax Bill 2018, which is expected to be tabled Parliament in July. The draft Income Tax Bill was released to the public on 15 May 2018 with a call for comments prior to finalization and submission of the Bill to Parliament.

Key Highlights of the proposed Income Tax Measures:

  • Removal of proposed new tax bracket: the proposal in the Income Tax Bill 2018 to introduce a new tax rate of 35% bracket for persons with a monthly income of KES 750,000 or more has been revoked, therefore, the current PAYE bands will remain the same.
  • The proposal in the Income Tax Bill to increase the rate of capital gains tax (CGT) from 5% to 20% has been revoked.
  • Replaced turnover tax with a presumptive tax based on the business permit or trading license fees at a rate of 15%.
  • Withholding tax rate of 20% for payments for demurrage charges made to non-resident persons.
  • Introduced capital gains tax of 5% on transfer of property by general insurance companies
  • Withholding tax rate of 5% on insurance premium paid to non-residents excluding for insurance of aircraft.
  • Introduction of tax on untaxed distributed profits to replace compensating tax.
  • Expansion on the transactions giving rise to dividend subject to withholding tax.
  • VAT exemption on Parts Imported or purchased locally for the assembly of computers to encourage local manufacture, innovation and job creation
  • VAT exemption of equipment to be used in the construction of grain storage facilities to support safe storage of food.
  • VAT exemption for raw materials for animal feeds to make animal feeds affordable to farmers and attract investors.
  • Introduced an export levy of 20% on copper waste and scrap to protect local manufacturers.
  • Late payment interest increased from 1% of the principal tax due to 2%.
  • Late payment penalty for late payment of tax has been set at 20% of the tax due.
  • Amendment of the Banking Act to repeal section 33B of the Banking Act to remove the interest rate cap for lending by banks and financial institutions.
  • Introduction of a Financial Market Conduct Bill to deal with inadequacies in consumer protection and unregulated lending in the financial sector.

Amendment of the Employment Act to provide that an employer shall contribute to the National Housing Development Fund, in respect of each of their employees, 0.5% of the employee’s gross monthly emolument subject to a maximum of KES 5,000 while the employee will contribute 0.5% of their monthly gross earnings.

Contact our legislation team at info@crs.co.za if you require any additional information.

© 2018 CRS Technologies (Pty)Ltd. All Rights Reserved.

While some South Africans believe being a full-time contractor has benefits that surpass those enjoyed by full-time employees, the reality is that both scenarios have advantages and disadvantages, and which option to go for is down to whether it is preferable to have one’s own business or to work for someone.

This is according to Nicol Myburgh, Head of HR business unit at leading HR and HCM solutions provider CRS Technologies.

Myburgh says there are several factors that need to be considered when making this decision.

When it comes to independent contractors, they have registered businesses, are paid via invoices instead of a salary, and most certainly enjoy tax benefits.

An independent contractor has flexible working hours, the freedom to work for more than one client and thereby increase revenue, as well as the option to sub-contract work when the pressure is on.

“On the flip side, being an independent contractor, you won’t enjoy the same job security as an employee; a client can cancel a contract at any time; the costs of running a business are much higher than just being an employee; and the time requirement to maintain business administration can be a hassle. Income is not fixed, it will always be a variable,” says Myburgh.

When it comes to being an employee, there are also several factors to keep in mind.

There are definitely advantages: there is less risk, an employee is far more secure working for an employer; an employee doesn’t have to deal with business administration, or much overhead other than monthly transport costs to and from work; and an employee can be assured of earn a certain amount each month and can therefore plan accordingly.

“However, PAYE income tax must be paid, employees must adhere to fixed working hours and may not run any business in their private capacity. Also, an employee cannot subcontract work and must do the job he or she was employed for. When an employee develops a new product or a clever new way of doing things, the employer has the right to that intellectual property, not the employee,” Myburgh continues.

CRS Technologies’ view is that if one considers the question of whether to work for oneself or work for an employer, there are some legal factors to consider.

For instance, an employer is liable to pay PAYE (income tax) on behalf of employees and this is not the case for independent contractors. Many employers believe they have independent contractors doing work for them, but according to the Income Tax Act, these people are actually considered to be employees, and employers are liable for the tax.

Contentious feature

To resolve this, employers can apply the ‘dominant impression test’, which determines whether a person is an employee or a true independent contractor

“Basically, this test determines whether the onus of control lies with the contractor or the employer. There are several factors that need to be considered, including whether the worker can work for another person, if they are required to devote a specific amount of time to their work, if they are obliged to perform their duties personally, and if they provide their own tools, among others,” Myburgh adds.

Gerhard Linde, Senior Tax Advisor at Tax Debt Compliance on behalf of CRS Technologies, expounds on a number of issues that add to the complexity of this area of HR management.

Linde agrees with Myburgh’s assertions and adds the concept of an ‘independent contractor’ remains one of the more contentious features of the Fourth Schedule of the Income Tax Act No 58 of 1962.

“A decision in favour of either independent contractor or employee status impacts an employer’s liability to deduct employee’s tax,” says Linde.

He adds the liability of an employer to deduct an employee’s tax is dependent on whether ‘remuneration’ as defined in paragraph 1 of the Act is paid.

CRS Technologies emphasises that subject to certain conditions, amounts paid to an independent contractor for services rendered are excluded from “remuneration” as defined, in which case an employer has no obligation to deduct employee’s tax from the amounts paid.

It is the responsibility of the employer to determine whether the provisions of exclusionary subparagraph (ii) of the definition of “remuneration” are applicable and whether payments are subject to employee’s tax as set out by the provision of the Fourth Schedule of the Act.

The debate of how to treat independent contractors and full-time employees is based on how these individuals are verified.

Two sets of tools are available to determine if a person is an independent contractor for employee’s tax purposes: the first is referred to as the statutory test, and the second is common law tests.

“Common law tests are used to determine whether a person is an independent contractor or employee. Unfortunately, the common law tests as they apply South Africa do not permit a simple ‘checklist’ approached. There are no hard and fast rules in determining whether a person is an independent contractor. An ‘overall’ or ‘dominant impression’ of the employment relationship must be formed. In practice, the statutory tests are considered first,” says Linde.