Taxation Bills signed into law
On 17 January 2019, the President has signed three bills into law, namely the Taxation Laws Amendment Act, 2018 (Act No 23 of 2018) (2018 TLAA), the Tax Administration Laws Amendment Act, 2018 (Act No 22 of 2018) (2018 TALAA) and the Rates and Monetary Amounts and Amendment of Revenue Laws Act, 2018 (Act No. 21 of 2018) (2018 Rates Act).
These Acts give legislative effect to the tax proposals as outlined by the Minister of Finance in his annual National Budget Speech delivered on 21 February 2018.
The main changes applicable to employers and payroll are in the 2018 TLAA, namely
- Clarifying the tax treatment and obligations of Funds managed by Bargaining Councils.
In 2017, changes were made to the Taxation Laws Amendment Act No.17 of 2017 in order to afford Bargaining Councils an opportunity to regularize their tax affairs to become tax compliant with the provisions of the Act.The relief formally referred to as “Bargaining Council tax relief” covers non-compliant Bargaining Councils in respect of employees’ tax that should have been deducted from all payments made by the Bargaining Councils to their members between 1 March 2012 and 28 February 2017. However, going forward, Bargaining Councils will not be afforded any legislative relief.
Employer contributions to funds administered by Bargaining Councils for the benefit of employees should constitute a taxable fringe benefit in the employee’s hands and be subject to PAYE withheld by employers. The value of the taxable fringe benefit should be the contribution made by the employer on behalf of the employee.
The amendments come into effect 1 March 2019.
- Addressing anomalies in respect of Medical Tax Credits.Section 6A of the Income Tax Act makes provision for a prescribed amount of monthly medical scheme contributions that will qualify as a medical tax credit, which gradually increases depending on the number of dependents covered under a medical scheme plan.
Amendments were made to the Act so that, where taxpayers carry a share of the medical scheme contributions in respect of dependants (for example, children jointly contributing towards their parent’s medical expenses), medical scheme fees tax credits should be proportionally allocated between taxpayers who made the payment of medical scheme contributions.
The amendment is deemed to have come into operation on 1 March 2018 and applies in respect of years of assessment commencing on or after that date.
SARS to provide clarification regarding the administrative requirement.
- Removing taxable benefit on low or interest-free loans granted to low-income employees for low-cost housing.
The proposal that the market value of the immovable property acquired does not exceed R450 000 should be removed as the other monetary limit (remuneration proxy of R250 000) should suffice, together with the requirement that the employee actually occupies the property, has not been accepted.Therefore, no fringe benefit will arise if an employee acquires a house from their employers at a discount where all of the following requirements are met:
the market value of the property does not exceed R450 000
the employee’s remuneration does not exceed R250 000
the employee is not a connected person in relation to the employer
The amendments come into operation on 1 March 2019.
- Extension of the Employment Tax Incentive.The Employment Tax Incentive (ETI) scheme has been extended for another 10 years until 28 February 2029.
Issues, including the administration of the incentive, will be considered as a separate policy proposal for the upcoming Budget.
The amendments came into effect on 17 January 2019.
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