SOUTH AFRICA MEDIUM TERM BUDGET POLICY STATEMENT 2018

The Minister of Finance, Minister Tito Mboweni, has delivered the Medium-Term Budget Policy Statement on Wednesday 24 October 2018.

HIGHLIGHTS SUMMARISED

  • Economic growth has been revised down from 1.5% to 0.7% in the current year, and the global environment remains challenging for emerging market economies.
  • Inflation is expected to remain within the 3-6% target band over the medium term, despite pressure from a weaker exchange rate and higher oil prices.
  • Revenue collections up to the end of September 2018 have grown by 10.7% compared to the same period last year.
  • It is estimated that the revenue collection for the year 2018/19 will show a shortfall of R27.4 billion. An underestimation of Value Added Tax (VAT) refunds due has led to an overly optimistic view of revenue growth.
  • The slow pace of VAT refunds has hurt the cash flow of several companies, including small businesses. The Acting SARS Commissioner has committed to processing the outstanding VAT refunds as quickly as possible.
  • The consolidated budget deficit is estimated at 4% in 2018/19, compared with the 2018 Budget projection of 3.6% of GDP.
  • Government debt is now expected to increase to 55.8% of GDP for this year, rising to 58.5% of GDP by 2021/22 to service the budget deficit. This is well up from February’s estimates of 55.1% for this year, rising to the previously estimated 56.2% for 2021/22.
  • Gross debt is projected to stabilize at 59.6% of GDP in 2023/24. Government remains committed to ensuring fiscal sustainability.
  • Over the next three years, government will spend R5.9 trillion, including R1.9 trillion on health and education, and R911 billion on social development.
  • Increases in the major tax instruments will be avoided unless the economic environment requires it.
  • Revenue projections assume no changes to tax rates but provide for annual adjustments to personal income tax brackets, levies and excise duties in line with inflation.
  • National departments’ compensation ceilings to be retained, which implies continued restrictions on personnel budgets and public employment.
  • Government is working with Development Finance Institutions (DFI’s) and private-sector partners on an infrastructure project preparation facility.
  • The 2018 public-service wage agreement exceeds budgeted baselines by about R30.2 billion through 2020/21. No additional funding is available, National and Provincial departments are expected to fund shortfalls by adjusting within their compensation baselines.
  • State institutions are being repaired and renewed, however, serious governance problems exist across the public sector. State-owned companies need to be reconfigured in several ways.

 

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

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

The Compensation for Occupational Injuries and Diseases Amendment Bill 2018

On 18 October 2018, the Minister of Labour, Mildred Nelisiwe Oliphant, published the proposed amendments in the Compensation for Occupational Injuries and Diseases Bill, 2018 (The COIDA Amendment Bill) for public comment.

Proposed changes that will be of importance to employers are the following:

  • The definition of an employee.
  • The definition of an employer.
  • The meaning of the Financial Year to be changed to the first day of April in any year and the last day of March in the following year (currently March to February).
  • The insertion of a definition for remuneration.
  • The provision for rehabilitation, re-integration and return to work of occupationally injured employees.
  • The provision for the regulation of the use of health care services.
  • The provision for the re-opening of claims.
  • Provision of criminal and administrative penalties.
  • The regulation of compliance and enforcement, and the provision for a no-fault based compensation system and matters connected therewith.
  • The replacement of the concept mandators to contractors and sub-contractors.
  • The inclusion of domestic workers.

To view the Government Notice, please follow the link:
https://www.gov.za/sites/default/files/41985_gon1133.pdf

At the same time, the Draft changes to the Regulations on the Compensation Fund New Assessment Model under the COID Act has also been published for public comment.

The main proposals are:

  • To reduce the existing 102 assessment subclasses to 5 main assessment classes to simplify the process of dealing with the Compensation Fund.
    The reason for this change is because the Compensation Fund assesses employers based on the industry they operate in and are assigned to a specific assessment class for the basis of determining their liability to the Fund. However, due to the different number of classes, employers often are registered in incorrect classes resulting in inaccurate collection and recording of the Compensation Fund’s financial performance. The current classes also contribute fraudulent conduct by different stakeholders who may not want to pay the assessment fees related to the industry in which the employer operates.
  • A new assessment class for Households has been introduced.

To view these Regulations, please follow this link:
https://www.gov.za/sites/default/files/41984_gon1132.pdf

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

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

HR and HCM market leader CRS Technologies offers insight.

Outsourcing IT? services is by no means a silver bullet to address business challenges. However, if strategically handled, it can be a straightforward and effective way to leverage important skill sets and market experience – especially when it comes to payroll administration.

The introduction of South Africa’s Protection of Personal Information (POPI) Act is a reminder that market regulators in Africa are paying closer attention to the realities of modern data management and international labour best practices.

Good governance is no longer a box to be ticked on the checklist of business management functions, it is now a top priority because of the need for all industries to automate systems, reinvest human capital and digitally transform – all the while maintain above-board and legitimate business practices. Those that don’t, will be out of business because of the level of competition that exists today.

According to leading HR and HCM services provider CRS Technologies the main benefit when partnering with an experienced and reputable service provider is access to knowledge of the environment.

“Payroll legislation can be complex and African payrolls can be vastly diverse in their legal requirements. These requirements are constantly changing and access to these changes are imperative. The skills and knowledge to run these different payrolls are not easily available,” says Ian McAlister, GM of CRS Technologies.

In addition to having access to these much-needed skills, business owners are well aware of the need for systems and technology that is automated, integrated and can deal with the dynamics of a modern payroll environment – including compliance with regulation and data management.

A reputable partner has in-depth understanding of the core technology that make up these systems. This infrastructure is designed to remove the inherent risk of manual calculation, which is inevitably required because not all payroll systems are able to accommodate the different requirements of diverse African payrolls.

This understanding of systems and also ability to roll out or deliver these systems to a client, if required, is what sets service providers apart.

Indeed any prospective service provider that is on the lookout for business and wants to be the outsource partner of choice for African payrolls has to invest in ongoing training and understand the evolving payroll environment, not least changes to legislation and what they mean in practice.

“Without a system that can cater for different country requirements, and access to updated legislation, a provider cannot give accurate and speedy service that clients demand,” McAlister adds.

CRS Technologies emphasises that outsourced payroll service and technology providers primarily have to help clients with compliance with legislation – otherwise businesses run the risk of non-compliance and the likelihood of heavy penalties that could break the business.

The Employer Interim Reconciliation submission season is now open and South African employers are required to comply with the Employer Reconciliation Process and send monthly employer declarations (EMP501) forms that reconcile the taxes collected from employees.

This is in accordance with the SARS modernisation process to enhance the reconciliation tax systems.

Essentially this means to leverage an automated system so that reconciliation submitted in real-time will validate the reconciliation submitted against both your IRP5/IT3(a) certificates and EMP201 submitted.

According to SARS the basic Employer Reconciliation Process has remained constant, but has been enhanced since 2008.

For example, employers can complete and send the reconciliation declarations online via eFiliing, or using e@syFile™ Employer.

Reconciliation involves matching all tax due (liabilities) with all tax paid and checking these against the total value of all tax certificates issued. These three (3) amounts should all be equal. The reconciliation process only relates to the tax paid and not additional tax, penalties or interest.

SARS advises that in instances where a credit is due that was used in settling a liability, the consumer should add this to the payment field for that particular month when finalising the reconciliation.

Despite the automated, enhanced Employer Reconciliation Process, there are instances where the recalculated monthly liabilities differ from the original declared liability amount on the EMP201s.

5 instances where differences can occur:

  • A delay in implementing the correct tax tables – possibly having resulted in and over/under-deduction of tax in the months prior to the tax tables being introduced.
  • Out of fluctuations in monthly remuneration when performing final tax liability calculation for employees.
  • When an employer spreads an employees’ tax on their 13th cheque over a tax year and the employee resigns before the bonus is due, there might be an over/under-deduction.
  • Any administrative timing difference in updating payroll records (e.g. resignation or death of an employee which is only updated after running the payroll, resulting in an over-payment to SARS).
  • If you change any data in respect of any reconciliation that has already been submitted to SARS, the certificate(s) can be amended and the EMP501 adjusted accordingly. The revised EMP501, and any revised certificates, must then be submitted to SARS.

CRS Technologies is an experienced specialist in HR, Payroll and HCM processes, procedures and technology.

It continues to keep close track of developments with regards to labour legislation and tax, and is a respected advisor and technology partner to businesses.

South African employers are reminded of the need to comply with SARS’ Employer Reconciliation Process and submit an employer reconciliation declaration and an interim Employee Income Tax Certificate for the six-month period 1 March to 31 August 2018.

For some businesses, the task is substantial – overwhelming even – because they are aware of the numerous steps involved that have to be taken to ensure full compliance and accuracy. These are non-negotiable for SARS and make all the difference to the end result.

Employers must submit reconciliation declarations (EMP501) in respect of the EMP201 submitted, payments made and the IRP5/IT3(a)certificates for 1 March to 31 August (interim period) and 1 March to 28/29 February (annual full tax year period).

HR and HCM services and solutions specialist CRS Technologies says for SARS, the Employer Reconciliation Process is part of its modernisation and alignment process with international best practice.

Fortunately for the market, CRS is a highly experienced services provider and outsource partner, and has devised a guide to reconciliation.

The company says according to SARS reconciliation involves matching all tax due with all tax paid and cross-checking these against the total value of all tax certificates used.

“These three amounts should be equal,” says SARS, and the process only relates to the tax paid.

8 steps to reconciliation: –

Step 1: First determine the total income of each employee for the period in question and recalculate the tax based on that amount.  IRP5 certificates will reflect all relevant details.

Step 2: Determine if there are any differences between recalculated liability (according to tax certificates) and that which was previously declared in EMP201 forms.  Also determine which months these differences occurred.

Step 3: All relevant demographic information must be captured/ recorded in the Business Information and Contact Details sections.

Step 4: Make sure to answer the question related to ETI (Employment Tax Incentive) – if yes, the ETI containers will be populated on the EMP501 form.

Step 5: Capture and record all fields related to PAYE, SDL and UIF, using revised figures in the Financial Particulars section on the EMP501.

Step 6: Capture and record the actual monthly payments made in respect of PAYE, SDL and UIF – but excluding payments made in respect of interest and additional tax.

Step 7: Calculate totals and difference fields. It is calculated automatically and will indicate a difference (if any) while capturing the totals on the electronic declaration.

Step 8: SARS explains directly: “When settling any shortfall reflected in the reconciliation, the payment must be allocated to the period(s) in which the shortfall occurred. If the relevant period cannot be determined, the payment should be allocated to the last active period within the transaction, which is August (interim) and February (annual).”

South Africa’s Income Tax Act. No. 58 of 1962 prescribes that employers must deduct the correct amount of tax from employees, pay this amount to SARS on a monthly basis, reconcile these deductions and payments during the annual and interim reconciliation, and issue tax certificates to employees. But this can be a daunting process, and that is why leading HR and HCM services provider CRS Technologies is established to help.

As part of the process, employers are required to send monthly employer declarations to SARS – a so-called EMP201 payment declaration that serves as a breakdown of PAYE, SDL and UIF payment allocations and ETI (Employment Tax Incentive) amounts.

CRS Technologies explains that the SARS modernisation has enhanced the reconciliation tax system to the extent that reconciliations, submitted in realtime, will validate the reconciliation submitted against both the IRP5/IT3 (a) certificates and EMP201 submitted.

To assist businesses, the company has identified several channels that can be used to complete and send the declarations. These include eFiling, e@syFile™ Employer – via SARS eFiling using an eFiling username and password, and manually at a SARS branch (although only applicable for employers with a maximum of five employees)

“It is important to note that SARS no longer accepts EMP501 forms in a drop box at branches,” says Sandra Maritz, Legislation Business Consultant at CRS Technologies. “Also adjustments to reconciliation submissions be made by sending a revised EMP501.”

5 steps to straightforward reconciliation submissions, based on SARS directives: –

  1. Determine the total income of each employee for that year and recalculate the tax based on that amount.
  2. If there is a difference between the recalculated liability (according to the tax certificates) and the EMP201s previously declared – it will need to be determined when.
  3. Capture all the relevant demographic information in the Business Information and Contact Details sections.
  4. Ensure that the question is answered that relates to the reconciliation including ETI or not. If the answer is ‘yes’ to the question, the ETI (Employment Tax Incentive) containers will be populated on the EMP501 form.
  5. Capture all the monthly liabilities for PAYE, SDL and UIF using these revised figures in the Financial Particulars section on the EMP501.

“It is important to ensure that all information is accurately documented … this is the first basic step. From there, it can be fairly straightforward, but, as always, CRS Technologies has the expertise and experience to assist clients and guide them through regulation,” Maritz adds.

Kenya’s Finance Act, 2018 assented into Law on 21 September 2018

On 21 September 2018, Kenya’s President assented to the Finance Act, 2018.

The Act introduces amendments to existing provisions in the different tax laws. The Act also streamlines and clarifies various provisions as set forth in the Finance Bill, 2018.

The following sections are of importance to employers and employees:

Section 25 of the Finance Act, effective 1 July 2018:

  1. Amendment to the Tax Procedures Act, 2015 with the repeal of section 25 and replacement with a new section which provides for changes to the application for extension of time to submit a return.
  • Monthly returns: 15 days before the return is due
  • Annual returns: 30 days before the return is due.
  • The Commissioner will now be obliged to respond to applications within reasonable time and at least 5 days before the return is due. The current provisions do not provide timelines for the application and response by the Commissioner

Section 67 of the Finance Act, effective 1 October 2018:

  1. Amendment to the Retirement Benefits Act, 1997, with the insertion of a new section giving power to the Authority to act upon the non-remittance of contributions.
  • Employers who fail to remit an employee’s contributions to the respective schemes will be required to pay contributions and interest accrued to the scheme within a specified period.
  • Non-compliant employers will be liable to a penalty equivalent to the higher of 5% of the unremitted contributions or KES 20,000. This amount will be payable within 7 days from the receipt of the notice.
  • Non-compliant employers will also be required to cease deductions from employees’ emoluments and notify them of the cessation which will be applicable until the RBA lifts the cessation order.
  • The Retirement Benefits Act will also be able to take further action where an employer does not regularize non-compliance, including initiating the process of the winding up of the scheme and facilitating the members to join individual schemes where their contributions shall be remitted.

Section 68 of the Finance Act, effective 1 January 2019:

  1. Amendment of the Employment Act with the insertion of a new section in respect of Contributions of the National Housing Development Fund (NHDF).
  • Section 31 of the Employment Act has been amended to introduce contributions to the NHDF.
  • Under the new provision, all employers and employees will each be required to contribute 0.5% of the employee’s gross monthly earnings subject to a maximum limit of KES 5,000 to the NHDF.

Contact our legislation team at info@crs.co.za if you require any additional information.© 2018 CRS Technologies (Pty)Ltd. All Rights Reserved.