TAX RATES remains unchanged (Tax Year Ending 29 February 2020)
Individuals and Special Trusts
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:
- 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.
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