If South African businesses were in the dark about what lies ahead financially, Finance Minister Tito Mboweni made things very clear in his 2019/2020 Budget Speech and important changes affecting payroll.

This budget will affect the pockets of employees and employers, and businesses need to pay close attention to several aspects that will impact on Payroll – that is if they want to cut costs, remain agile and continue to be competitive.

Of course as your trusted HCM, HR and Payroll partner, we’ve highlighted these points, those that will impact either directly or indirectly on corporate fiscal management going forward.

  • The budget proposes tax increases of R15 billion in 2019/20 and R10 billion in 2020/21 relative to the 2018 MTBPS estimates. The additional revenue in 2019/20 will be raised primarily from limiting relief for the effects of inflation on personal income tax
  • Carbon Tax will be implemented on 1 June 2019
  • Fuel levy increases by 29c per litre
  • The government has allocated R567 billion for social grant payments. In 2019, the grant values will increase as follows:
  • R80 increase for old age, disability, war veterans and care dependency grants
  • R40 increase for the foster care grant to R1 000

The child support grant will increase to R420 in April and to R430 in October.

It is important to note that there are no changes to personal income tax brackets, while the tax-free threshold increases from R78 150 to R79 000. This is a way for the government to generate revenue – by not adjusting the income tax brackets for inflation the government will raise R12.8 billion.

Medical tax credits have not changed.

The ETI will be increased from 1 March 2019. From this date employers may now claim R1 000 for employees earning R4 500 monthly and the incentive will reduce to zero when an employee earns  a monthly income of R6 500.

South African citizens who spend more than 183 days in employment outside South Africa will have to pay income tax on foreign employment income that exceeds R1-million.

Click through to www.crs.co.za or email info@crs.co.za or for more information on tax rates from 1 March 2019 to 28 February 2020,

As always CRS has the expertise and resources to guide all our clients.

BOTSWANA BUDGET SPEECH HIGHLIGHTS

The Minister of Finance and Economic Development, Hon. Kenneth Matambo, presented the 2019 Budget Speech to Parliament in February 2019.

The 2019/2020 budget proposals emphasize the need for Botswana to consolidate development gains for further economic development.

Key highlights:

  • Growth rates forecast are 4.5%, 4.2% and 4.8% in 2018, 2019 and 2020, respectively
  • The projected 2019/20 budget deficit is estimated at P7.34 billion representing minus 3.5% of GDP
  • The revised budget forecast for 2018/2019 is a deficit of P6.96 billion compared to the initial estimated deficit of P3.59 billion
  • The government has reviewed the Botswana International Financial Services Centre tax regime which led to the amendment of the Income Tax Act by Parliament in December last year
  • The Minister confirmed the publication of the Income Tax (Amendment) Act, 2018 – Act No.38 of 2018 amending the anti-avoidance provisions and introducing Transfer Pricing (TP) legislation. The effective date of the legislation is 1 July 2019
  • A Bill to amend the Transfer Duty Act will be presented to Parliament in March 2019
  • The Capital Transfer Tax Act will be amended to align it to the Transfer Duty Act

No changes to PAYE rates proposed.

Contact our legislation team at info@crs.co.za if you require any additional information.
© 2019 CRS Technologies (Pty)Ltd. All Rights Reserved.

Date set for 2019 General Elections

Government Gazette 42250, Proclamation No. 8 of 2019 has been published on 26 February 2019, setting the date for the election of the National Assembly as 8 May 2019.

Employers making use of leave calendars on their payroll systems should update the calendar by adding 8 May 2019 as a public holiday.

Contact our legislation team at info@crs.co.za if you require any additional information.
© 2019 CRS Technologies (Pty)Ltd. All Rights Reserved.

VIEW THE CRS DIGITAL TAX GUIDE HERE

Please notify us if you wish to receive a printed Tax Guide and the quantity you require.

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

© 2019 CRS Technologies (Pty)Ltd. All Rights Reserved.

Along with all the other responsibilities associated with tax management in South Africa, businesses are reminded of their PAYE (Pay as you Earn) obligations towards SARS – including the onus to issue IRP5 tax certificates to employees.

Local companies have to understand and appreciate that there are serious repercussions for companies that don’t adhere to South Africa’s tax regulations.

In order for SARS to assess the total tax liability due from an individual, they need to be informed of the accumulated income which the individual has received during a particular period, as well as the amount of the allowable deductions for this same period.

Generally employees are not informed of whether employers actually pay over the PAYE deducted from their remuneration to SARS. The reconciliation process is a way of determining that the PAYE deducted was actually paid to SARS.

The fourth schedule of the Income Tax Act obliges an employer to deduct or withhold PAYE from remuneration and then to pay the amounts deducted over to SARS within seven days after month end.

The process is quite complex and there is pressure on payroll practitioners to apply their skills, knowledge and experience to enforce PAYE regulations to employees’ earnings and deductions.

The company says that PAYE regulations and specifications are set up according to the Income Tax Act and is extremely complex.

It is a challenge to interpret correctly. The safest way to handle this is to entrust the tax year end obligations to a competent and professional payroll solutions & services company.

South Africa’s detailed and complex tax legislation system demands a proactive approach by businesses.

As is the case with all tax and labour related regulation, we are available to help and we have the resources and expertise to guide our clients.

Contact us at info@crs.co.za today!

TAX RATES remains unchanged (Tax Year Ending 29 February 2020)

Individuals and Special Trusts

Tax Rebates

Tax Thresholds

Retirement fund lump sum withdrawal benefits (remains unchanged)

Retirement fund lump sum benefits or severance benefits (remains unchanged)

Subsistence Allowances and Advances

Where the employee is obliged to spend at least one night away from his or her usual place of residence on business and the accommodation to which that allowance, or advance relates is in the Republic of South Africa and the allowance or advance is granted to pay for: –

Where the accommodation to which that allowance or advance relates is outside the Republic of South Africa, a specific amount per country is deemed to have been expended.

Details of these amounts are published on the SARS website under Legal & Policy / Secondary Legislation / Income Tax Notices / 2019.

Travelling Allowance (remains unchanged)

Rates per kilometre, which may be used in determining the allowable deduction for business travel against an allowance or advance where actual costs are not claimed, are determined by using the following table:

Note:

  • 80% of the travelling allowance must be included in the employee’s remuneration for the purposes of calculating PAYE.
  • The percentage is reduced to 20% if the employer is satisfied that at least 80% of the use of the motor vehicle for the tax year will be for business purposes.
  • No fuel cost may be claimed if the employee has not borne the full cost of fuel used in the vehicle and no maintenance cost may be claimed if the employee has not borne the full cost of maintaining the vehicle (e.g. if the vehicle is covered by a maintenance plan).
  • The fixed cost must be reduced on a pro-rata basis if the vehicle is used for business purposes for less than a full year.
  • The actual distance travelled during a tax year and the distance travelled for business purposes substantiated by a log book are used to determine the costs which may be claimed against a travelling allowance.

The actual distance travelled during a tax year and the distance travelled for business purposes substantiated by a log book are used to determine the costs which may be claimed against a travelling allowance.

Where an allowance or advance is based on the actual distance travelled by the employee for business purposes, no tax is payable on an allowance paid by an employer to an employee up to the rate of R3.61 cents per kilometre, regardless of the value of the vehicle. However, this alternative is not available if other compensation in the form of an allowance or reimbursement (other than for parking or toll fees) is received from the employer in respect of the vehicle.

AA Rate per kilometre (remains unchanged)

Where the reimbursed rate exceeds the prescribed rate of R3.61 cents per kilometre, irrespective of the business kilometers travelled, there is an inclusion in remuneration for PAYE purposes. The full inclusion amount is subject to PAYE, unlike the fixed travel allowance where only 80% of the amount is subject to PAYE.

Example: If an employee is reimbursed for 20 000 business kilometers travelled at R4.20 cents per kilometer and the prescribed rate is R3.61 cents per kilometer, the amount that will be included in remuneration for purposes of calculating the PAYE is calculated as (R4.20 cents – R3.61 cents) x 20 000. Based on this calculation an amount of R10 556 will be included in remuneration when PAYE is calculated. PAYE will therefore be withheld, on a payment basis, on the amount exceeding the prescribed rate of R3.61 cents per kilometer, irrespective of the total amount of business kilometers travelled.

Employer-owned vehicles (remains unchanged)

The taxable value is 3.5% of the determined value (the cash cost including VAT) per month of each vehicle.

Where the vehicle is–

  • The subject of a maintenance plan when the employer acquired the vehicle the taxable value is 25% of the determined value; or
  • Acquired by the employer under an operating lease the taxable value is the cost incurred by the employer under the operating lease plus the cost of fuel

80% of the fringe benefit must be included in the employee’s remuneration for the purposes of calculating PAYE. The percentage is reduced to 20% if the employer is satisfied that at least 80% of the use of the motor vehicle for the tax year will be for business purposes.

On assessment the fringe benefit for the tax year is reduced by the ratio of the distance travelled for business purposes substantiated by a log book divided by the actual distance travelled during the tax year.

A further relief is available on assessment for the cost of license, insurance, maintenance and fuel for private travel if the full cost thereof has been borne by the employee and if the distance travelled for private purposes is substantiated by a log book.

Interest-free or low-interest loans (remains unchanged)

The difference between interest charged at the official rate (currently 7.75% p.a.) and the actual amount of interest charged is to be included in gross income.

Medical Tax Credits (remains unchanged)

The medical credit which members of medical aid funds can claim against their tax liability has increased.

In determining tax payable, individuals are allowed to deduct medical scheme fees tax credit of:

  • R310 each for the individual who paid the contributions and the first dependent on the medical scheme; and
  • R209 for each additional dependent.

In the case of: –

  • an individual who is 65 and older, or if an individual, his or her spouse, or his or her child is a person with a disability, 33.3% of the sum of qualifying medical expenses paid and borne by the individual, and an amount by which medical scheme contributions paid by the individual exceed 3 times the medical scheme fees tax credits for the tax year; or
  • any other individual, 25% of an amount equal to the sum of qualifying medical expenses paid and borne by the individual and an amount by which medical scheme contributions paid by the individual exceed 4 times the medical scheme fees tax credits for the tax year, limited to the amount which exceeds 7.5% of taxable income (excluding retirement fund lump sums and severance benefits).

Residential accommodation (remains unchanged)

The value of the fringe benefit to be included in gross income is the lower of the benefit calculated by applying a prescribed formula or the cost to the employer if the employer does not have full ownership of the accommodation. The formula will apply if the accommodation is owned by the employee, but it does not apply to holiday accommodation hired by the employer from non-associated Institutions.

Dividends (remains unchanged)

Dividends received by individuals from South African companies are generally exempt from income tax, but dividends tax at a rate of 20% is withheld by the entities paying the dividends to the individuals.

Foreign Dividends (remains unchanged)

Most foreign dividends received by individuals from foreign companies (shareholding of less than 10% in the foreign company) are taxable at a maximum effective rate of 20%. No deductions are allowed for expenditure to produce foreign dividends.

Interest Exemptions (remains unchanged)

  • Interest from a South African source earned by any natural person under 65 years of age, up to R23 800 per annum, and persons 65 and older, up to R34 500 per annum, is exempt from income tax.
  • Interest earned by non-residents who are physically absent from South Africa for at least 181 days during the 12 month period before the interest accrues and the debt from which the interest arises is not effectively connected to a fixed place of business in South Africa, is exempt from income tax.

Companies Tax (remains unchanged)

Value Added Tax (VAT) (remains unchanged)

VAT is levied at the standard rate of 15% on the supply of goods and services by registered vendors.

A vendor making taxable supplies of more than R1 million per annum must register for VAT. A vendor making taxable supplies of more than R50 000, but not more than R1 million per annum, may apply for voluntary registration. Certain supplies are subject to a zero rate or are exempt from VAT.

Skills Development Levy (remains unchanged)

Skills development levy is payable by employers at a rate of 1% of the total remuneration paid to employees. Employers paying annual remuneration of less than R500 000 are exempt from the payment of Skills Development Levies.

Unemployment Insurance Contributions (remains unchanged)

Unemployment insurance contributions are payable monthly by employers on the basis of a contribution of 1% by employers and 1% by employees, based on employees’ remuneration below a certain amount.

Employers not registered for PAYE or SDL purposes must pay the contributions to the Unemployment Insurance Commissioner.

SARS Interest Rates

Employment Tax Incentive (ETI)

In 2018, government extended the employment tax incentive by 10 years.

In addition, the eligible income bands will be adjusted upwards to partially cater for inflation. From 1 March 2019, employers will be able to claim the maximum value of R1 000 per month for employees earning up to R4 500 monthly, up from R4 000 previously. The incentive value will taper to zero at the maximum monthly income of R6 500.

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

© 2019 CRS Technologies (Pty)Ltd. All Rights Reserved.

Companies should use the end of financial tax year that is around the corner as an opportunity to re-evaluate their existing payroll solutions. And while it might very well be time to adopt the mantra ‘new year, new solution’, decision-makers must closely scrutinise what their strategic objectives are when it comes to Payroll. This is according to Ian McAlister, General Manager of CRS Technologies South Africa.

Payroll and Human Resource (HR) departments have evolved over the years and are a far cry from the number-punching silos of old. Today, the digital workforce requires a vastly different approach to how employees are managed. This is essential if the business is to remain competitive, retain its employees, and have them work efficiently while ensuring customer satisfaction.

Too often, traditional Payroll solutions do not have the level of integration with the rest of the organisation required to provide a comprehensive view of what is required. These stand-alone systems were designed to do just that – manage the Payroll. However, human capital management (as HR is referred to today), needs solutions that encompass all aspects of HR. Furthermore, they need to provide organisations with the ability to implement them in modular fashion or using a phased approach.

The ideal solution should provide the business with a platform to manage the entire employer-employee lifecycle in one place. Of course, given the rapidly changing regulatory environment, any Payroll solution must be compliant with legislative requirements. Payroll should also integrate real-time business intelligence that can provide insights to things like remuneration and employee costs, attendance and sick leave, expenses, overtime, and even manager feedback on the value of the employee.

Companies should not forget that a digital environment requires cloud-based capabilities as well. This extends to the Payroll function that needs to be accessible from anywhere in the world. This also enables employees to benefit from self-service functionality, for example checking leave days remaining, tracking performance, and so on.

An integrated Payroll system ensures that management can focus on delivering on their strategic mandate while the solution takes care of much of the traditional administration-heavy tasks. This automated approach improves turn-around time on queries and provides a more transparent way of reporting any HR-related concerns and issues.

But perhaps even more important than all these elements, is the need to have a completely configurable Payroll solution. This means that it is not the organisation that need to fit in to the solution but the other way around. Every business is unique and has its own set of challenges. Why then should a Payroll solution attempt to ignore this and offer a one-size-fits-all approach? Instead, being configurable means that companies have all the benefits of customisability without the exorbitant costs typically associated with it.

So, when it comes time to review how your Payroll system is structured, give careful consideration to these points. Please feel free to contact us or visit our Website for more information on taking your Payroll into the digital future.

South Africa 2019/2020 Budget Speech and important changes affecting payroll

The Minister of Finance, Tito Mboweni, has delivered the Budget Speech for the fiscal year 2019/2020 on 20 February 2019.

Highlights of the Budget Speech summarized:

  • The consolidated budget deficit is projected to narrow from 4.5% of GDP in 2019/20 to 4% in 2021/22
  • Gross debt is expected to stabilise at 60.2% of GDP in 2023/24
  • The economic and revenue outlook has deteriorated since the October 2018 Medium Term Budget Policy Statement and funding pressures from state-owned companies have increased
  • Baselines have been reduced by R50.3 billion, with about half of this amount relating to compensation. These reductions are offset by provisional allocations of R75.3 billion over the next three years, mainly for Eskom’s reconfiguration
  • The budget proposes tax increases of R15 billion in 2019/20 and R10 billion in 2020/21 relative to the 2018 Medium Term Budget Policy Statement (MTBPS) The additional revenue in 2019/20 will be raised primarily from limiting relief for the effects of inflation on personal income tax
  • From 1 April 2019, zero-rated VAT items will include white bread flour, cake flour and sanitary pads
  • Carbon Tax will be implemented on 1 June 2019
  • Excise duties on alcohol and tobacco products increase by between 7.4% and 9%
  • Fuel levy increases by 29c per litre
  • Visa requirements are being relaxed to make it easier for tourists to visit and invest in South Africa
  • The Government has allocated R567 billion for social grant payments. In 2019, the grant values will increase as follows:
    • R80 increase for old age, disability, war veterans and care dependency grants
    • R40 increase for the foster care grant to R1 000
    • The child support grant will increase to R420 in April and to R430 in October

 For Payroll:

  • No changes will be made to personal income tax brackets, while the tax-free threshold increases from R78 150 to R79 000. By not adjusting the income tax brackets for inflation, the government will raise R12.8 billion.
  • Medical tax credits have not changed
  • Employment Tax Incentive (ETI) eligible income bands increased
    • From 1 March 2019, employers will be able to claim the maximum value of R1 000 per month for employees earning up to R4 500 per month, up from R4 000 previously. The incentive value will taper to zero at the maximum monthly income of R6 500

Tax Rates from 1 March 2019 to 28 February 2020

Individuals and Special Trusts

Tax Rebates and Tax Thresholds

CRS Tax Pocket Guide for 2019-2020 with detailed information to follow,

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

© 2019 CRS Technologies (Pty)Ltd. All Rights Reserved.

Along with all the other responsibilities associated with tax management in South Africa, businesses are reminded of their PAYE (Pay as you Earn) obligations towards SARS – including the onus to issue IRP5 tax certificates to employees.

This is according to HR and tax legislation specialists at leading Human Capital Management and HR solutions services provider CRS Technologies.

Sandra Maritz, head of Legislation, says local companies have to understand and appreciate that there are serious repercussions for companies that don’t adhere to South Africa’s tax regulations.

“In order for SARS to assess the total tax liability due from an individual, they need to be informed of the accumulated income which the individual has received during a particular period, as well as the amount of the allowable deductions for this same period,” says Maritz.

“Generally employees are not informed of whether employers actually pay over the PAYE deducted from their remuneration to SARS. The reconciliation process is a way of determining that the PAYE deducted was actually paid to SARS,” she continues.

Maritz notes that the fourth schedule of the Income Tax Act obliges an employer to deduct or withhold PAYE from remuneration and then to pay the amounts so deducted over to SARS within seven days after month end.

CRS Technologies advises that the process is quite complex and there is pressure on payroll practitioners to apply their skills, knowledge and experience to enforce PAYE regulations to employees’ earnings and deductions.

The company says that PAYE regulations and specifications are set up according to the Income Tax Act and is extremely complex.

“…. (it) is a challenge to interpret correctly. The safest way to handle this is to entrust the tax year end obligations to a competent and professional payroll solutions & services company,” says Maritz.

South Africa’s detailed and complex tax legislation system demands a proactive approach by businesses.

CRS Technologies urges local businesses to contact the company, find out more information about their tax position and how CRS can help…

Contact the company at info@crs.co.za today!

By Kabelo Ngwane, Customer Success Manager at CRS Technologies.

Internet of Things (IoT) continues to make inroads into South African industries, and it is not difficult to see why.  The fact is that with IoT, businesses will always know where everything is, they will be able to keep track of even more data, everything will be faster and remote work will be even more feasible.  Another fact is that challenges associated with this technology, like security, connectivity and a sound business plan, are largely being addressed.

And so we have created a commercial environment where key sectors such as wearables, motoring, manufacturing, supply chain, agriculture and healthcare stand to score from the adoption of IoT.

How exactly? On one level the days of having to rely on barcode tracking systems for inventory management are well and truly gone. With IoT, we have in-depth metrics about customers and behaviour with the potential to exploit this information using data analysts and visualisation software.

Moreover businesses now operate with interconnected devices, cloud-hosted software and portable devices, and the ability to meet the consumer demand for immediate, guaranteed efficiency in service delivery.

As tech-focused media outlets like Biztech Africa, TechGenix and BDO South Africa have explained,  there are a few hurdles in the path to successful IoT adoption and utilisation, the most prominent being security, connectivity and a credible business plan.

Experts have criticised local businesses for being uninformed and lax when it comes to the issue of security and IoT, and for failing to devise and instil a comprehensive plan of action related to IoT.

So many new nodes being added to networks and the internet will provide malicious actors with innumerable attack vectors and possibilities to carry out evil deed, especially since a considerable number of them suffer from security holes. The more important shift in security will come from the fact that IoT will become more ingrained in our lives. Concerns will no longer be limited to the protection of sensitive information and assets. Our very lives and health can become the target of IoT hack attacks.

Connecting so many devices will be one of the biggest challenges of the future of IoT, and it will defy the very structure of current communication models and the underlying technologies.

At present we rely on the centralised, server/client paradigm to authenticate, authorise and connect different nodes in a network. The model is sufficient for current IoT ecosystems, where thousands of devices are involved.

And how will this likely play out in terms of HR in the workplace? One immediate impact is that the HR department will likely soak up and utilse IoT big data. Employees will embrace gadgets and mobile/ smart devices to help evaluate their performance on the job.  Data can extracted and used to measure people-centric trends, processes, where businesses are losing out, where there are definite strengths and potential weaknesses.

Companies are beginning to not only know how to extract data, but are now beginning to truly grasp the power that lies in that data and now extend the influence of IOT beyond internal and into partnerships, service delivery, customer experience and much more.

But when networks grow to join billions of devices, centralised systems will turn into a bottleneck. Such systems will require huge investments and spending in maintaining cloud servers that can handle such large amounts of information exchange, and entire systems can go down if the server becomes unavailable.

Bigdata-madesimple.com says easing security concerns, keeping IoT hardware updated and overcoming connectivity issues are main challenges that remain.

So how should businesses handle their quest towards IoT?

According to experts operating within the competitive enterprise software market and quoted in research, an effective strategy is for businesses to start on a modest scale and then settle on a core business objective related directly to customer service, that will impact the bottom line.

It also outlines the importance of a detailed plan, with careful consideration of the capacity of infrastructure to handle the pressure, an in-depth overview of where the security gaps are, and the need to bring scalability into the picture.

Overall the plan must be to avoid pain points such as the inability to link all the data and process it effectively, failure to establish technology standards to make connected devices ‘understand’ each other, and the inability to deal with security and data privacy threats.

Plan for massive volumes

Success in IoT will be bigger and more ‘real time’ than anything we’ve seen before. This means that IoT systems will have to scale painlessly to massive deployments. We’re not talking about compound annual growth of “only” 50% or even 100% – success could mean going from 1,000 deployed to 100,000,000 units over a couple of years.

A fundamental difference between conventional software and IoT systems is the lack of control you have over the environment in which your creation is deployed. The real world is a strange, confusing and erratic place, and this oddness will impose itself on your system. Bizarre, one-off events will happen frequently.

Assuming you have 100,000,000 devices deployed, an annual million-to-one event will be happening roughly twice a week. Coping with this requires a fundamental change of mindset for many developers. Software which is insufficiently paranoid will allow errors to enter the system and spread chaos. Chaos will lead to poor user experience, which will in turn lead to negative perceptions – or worse.

As your physical environment becomes more complicated, your software stack will follow it. What might have been a nice, clean deployment will become old and wrinkly over time, with chunks of obsolete code and increasingly convoluted data paths through the system as you try to cope with the unavoidable fact that you can never, ever stop supporting anything you’ve shipped.