Tanzania Budget Speech for 2019/2020

The 2019/2020 Budget speech was delivered on 13 June 2019 by the Minister for Finance and Planning, Hon Dr Philip Mpango.

The budget focuses on the National Five Years Development Plan 2016/17-2020/21 to build an industrial economy and improve the citizens’ welfare.

Highlights:

  • Tanzania’s GDP in quarter 3 2018 grew by 6.8%, compared to 5% during the same period in 2017.
  • The economic activities that showed the fastest growth were health (13.2%), transportation and cargo storage (12.4%), water (10.7%), construction (7.4%), information and communication (7.3%), manufacturing (7.3%), and business and maintenance (7.3%).
  • The inflation rate is stable. Inflation fell from an average of 4% in January 2018 to reach 3.4% in June 2018 and continued to decline further to 3%.
  • Budget deficit is estimated at 2.3% of GDP in 2019/20 from the likely outturn of 2% of 2018/19.
  • Tax revenue is estimated at 13.1% of GDP in 2019/20 from the likely outturn 12.1% in 2018/19.
  • The Tanzanian government intends to increase and strengthen domestic resource mobilisation aiming at financing government operations, including infrastructure projects and social services.
  • To attain the estimated domestic revenue targets, the government has prepared specific administrative strategies that will be implemented in the medium term.

Proposed income tax measures

  • Amend the Income Tax Act to increase the minimum amount of turnover required for taxpayers to start filling the accounts to Tanzania Revenue Authority from twenty million shillings (20,000,000) to one hundred million shillings (100,000,000).
  • Amend the First Schedule of the Income Tax Act to introduce a presumptive tax regime to taxpayers with an annual turnover from four million shillings (4,000,000) and one hundred million shillings (100,000,000), who will not be obliged to submit financial accounts to the Tanzania Revenue Authority for determining income tax. The objective of this measure is to reduce the tax compliance burden on small businesses and align the tax rates with the minimum amount of turnover required for businesses to use the electronic fiscal device (EFD) machine, where the current amount is fourteen million shillings (14,000,000).
  • Amend Section 70(2) of the Tax Administration Act, CAP 438 to extend the period given for 100% tax amnesty on interest and penalties, for six months up to December 2019. The extension is granted to taxpayers who had already applied for amnesty. This measure follows the positive response from taxpayers after the tax amnesty was announced in July 2018.
  • No changes to personal income tax rates were proposed.

 

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

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Kenya Budget Speech for 2019/2020

On 13 June 2019 the Kenya Cabinet Secretary delivered the budget speech themed “Creating Jobs, Transforming Lives – Harnessing the ‘Big Four’ Plan”, i.e. universal health, affordable housing, increasing manufacturing to the economy, and improving food and nutrition security.

Highlights:

  • The Finance Bill 2019, which contains the taxation measures announced in the Cabinet Secretary’s Budget speech, as well as other measures not announced in the speech, was tabled. The Finance Bill 2019 illustrates the government’s priorities to increase revenue mobilisation and focus on the digital marketplace.
  • The Kenyan economy grew by 6.3% in 2018 compared with 4.9% in 2017, and is forecast to grow at 7% in 2019/2020 when the Big 4 Agenda gains momentum.
  • Expenditures and net lending are projected at Ksh 2.8 trillion (25.7% of GDP), leaving a fiscal deficit, including grants, of Ksh 607.8 billion. In relation to GDP, this deficit translates to 5.6%, a decline from 6.8% in FY 2018/19 and 7.4% in FY 2017/18.
  • Kenya’s public debt stands at Ksh 5.4 trillion.

Proposed Tax Measures (The Finance Bill 2019):

  • Capital gains tax increases from 5% to 12.5% on gains from transfer of property.
  • Introduction of withholding tax at 5% for residents and 20% for non-residents, on fees paid for services offered on commercial basis that are not subject to the withholding tax.
  • Housing Fund income exempt from tax to promote affordable housing.
  • Reduce corporation tax to 15% for the first five years of operation for companies operating plastic recycling plants.
  • Amend Section 3 of the Income Tax Act by introducing a new paragraph under the charging section, which emphasises that income accruing through a digital marketplace (entities generating income through a digital marketplace/e-commerce) is chargeable to tax.
  • Amend Section 7A of the Income Tax Act by substituting the current tax provision to ensure the distribution of dividends arising from exempt income does not trigger compensating tax.
  • The Finance Bill proposes to delete Section 72D of the Income Tax Act that provides for a late payment penalty of 20% of any unpaid tax, applicable to all taxpayers.
  • Exempt the income of the National Housing Development Fund from income tax by inclusion in the First Schedule to the Income Tax Act, effective 1 January 2020.
  • Amend the affordable housing relief under the ITA to be computed at 15% of the employee’s contribution and not the gross emoluments as is currently provided, effective 1 October 2019.
  • Amend the Taxation Procedures Act in relation to the penalty on tax payable under a return by adding a provision that tax already paid and withholding tax credits shall be considered in calculating the late submission penalties.
  • Amend the Taxation Procedures Act to allow the Commissioner additional time to issue an objection where further information is requested from a taxpayer after filing an objection.
  • Amend the Employment Act by deleting the definition of employee earnings and introducing a definition of basic salary, which is defined to mean an employee’s gross salary, excluding allowances and other benefits, effective 1 January 2020. This is aimed at providing clarity on the base amount for computing the levy payable under the National Housing Development Fund.
  • No changes to income tax bands are proposed.

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

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Mauritius 2019/2020 Budget Speech

On Monday, 10 June 2019, the Prime Minister and Minister of Finance and Economic Development, Pravind Jugnauth, delivered the last Budget Speech of the present Government.

Key Highlights of the Budget Speech

  • The budget deficit is estimated to maintain course at 3.2% of GDP for financial year 2019/2020.
  • Public Sector Debt to GDP has increased to 63% in 2018, and Government plans to reduce the debt to 60% before 2021 by using part of the undistributed surplus of the Bank of Mauritius.
  • Real GDP has been increasing at an annual average rate of 3.7% since 2015 and is forecast to rise further to 3.9% in 2019 and 4.1% 2020.
  • The inflation rate and unemployment have decreased over the last years.
  • The tax legislation will be amended to introduce rules on controlled foreign companies (CFC).

Personal Income Tax Measures

  • Income exemption thresholds for all categories of taxpayers for the income year 2019-2020 are being increased as follows:
    • For a taxpayer who has no dependent or one dependent, the threshold will increase by MUR5,000;
    • For a taxpayer with two dependents, the threshold will increase by MUR20,000;
    • For a taxpayer with three dependents, the threshold will increase by MUR25,000; and
    • For a taxpayer who has four dependents, the threshold will increase by MUR45,000.
  • The additional deduction for a child pursuing tertiary studies and relief for medical insurance premium will now be available for a maximum of 4 dependents instead of 3 dependents.
  • The additional income tax exemption of MUR50,000 will be granted to a retired or disabled person having more than one dependent, instead of being restricted to those having one dependent only.
  • The annual net income subject to tax at a lower rate of 10% has been increased from MUR650,000 to MUR700,000.
  • In addition, an individual deriving a basic salary including compensation not exceeding MUR50,000 in his first month, will benefit from a tax credit of 5% of his chargeable income, provided that his annual net income does not exceed MUR700,000.
  • Solidarity levy not applicable to lump sum income received by a person as pension or death gratuity, effective retrospectively as from 1st July 2017. However, the levy will now apply on an individual’s share of dividend in a société (partnership) or succession.

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

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The draft Taxation Laws Amendment Bill 2019 published for comments

On 10 June 2019 National Treasury published the initial batch of the draft Taxation Laws Amendment Bill 2019 for public comments. The full text of the 2019 draft Taxation Laws Amendment Bill will be published for public comment in mid-July 2019.

This initial batch is intended to ask for comments on two specific amendments that are more urgent and require further consultation. Written comments on the initial batch of the 2019 draft Taxation Laws Amendment Bill are due on 25 June 2019.

The two amendments referred to, are:

Aligning the effective date of tax neutral transfers between retirement funds with the effective date of retirement reforms, which is

1 March 2021.

  • In 2013, retirement fund reform amendments were effected to the Income Tax Act regarding the annuitisation requirements for provident funds. The main purpose of these amendments was to improve the protection of retirement fund interests during retirement, resulting in provident funds being treated similarly to pension and retirement annuity funds with regard to the requirement to annuitise retirement benefits.
  • These amendments were originally intended to come into effect on 1 March 2015, however, further negotiations within NEDLAC have not been finalised, resulting in the effective date for the annuitisation requirements for provident funds being postponed to 1 March 2021.
  • Each postponed requires several amendments to various provisions of the Income Tax Act. One change was accidentally left out in paragraph 6(1)(a) of the Second Schedule to the Income Tax Act, which makes provision for tax neutral transfers between retirement funds.
  • To correct this, it is proposed that urgent changes be made to the Income Tax Act to align the effective date.

Addressing abusive arrangements aimed at avoiding the anti-dividend stripping provisions.

  • This amendment is not applicable to Employers/Employees.

Click  here to view the media statement
Click  here to view the initial batch of the draft Taxation Laws Amendment Bill 2019
Click  here to view the Explanatory Memorandum

 

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

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Tax Return Threshold increased from R350 000 to R500 000

On Tuesday, 4 June, the SARS Commissioner, Edward Kieswetter announced that SARS has increased the tax return threshold from R350,000 per annum to R500,000 per annum.

This means that only people whose total employment income before tax is more than R500,000 per year will need to file their tax returns.

However, there are other elements to consider meeting the criteria. For this threshold to apply, ALL of the following criteria must be met:

  • The total employment income for the year before tax is not more than R500 000.
  • You only receive employment income from ONE EMPLOYER for the full tax year.
  • You have no other form of income, e.g. car allowance, business income, and rental income, taxable interest or income from another job.
  • You don’t have any additional allowable tax-related deductions to claim, e.g. medical expenses, retirement annuity contributions and travel expenses.

Taxpayers who file their income tax returns at a SARS branch, can do so from 1 August 2019.

Taxpayers who are registered for eFiling or have access to the MobiApp can file their income tax returns from 1 July 2019.

The closing dates for Tax Season are as follows:

  • 31 October 2019 for branch filing.
  • 4 December 2019 for non-provisional taxpayers who use eFiling and the MobiApp.
  • 31 January 2020 for provisional taxpayers who use eFiling.

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

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Unemployment Insurance Fund (UIF) in the process of finalizing the development of systems to implement Parental and Commissioning Parental benefits

On 23 November 2018 President Cyril Ramaphosa signed the Labour Laws Amendment Bill into Act, thus effecting amendments to the Basic Conditions of Employment Act and the Unemployment Insurance Act of 2001.

Although the Labour Laws Amended Act 2018 is now law, the benefits will only take effect once the president has promulgated the implementation date.

The UIF Commissioner said as Parental and Commissioning Parental benefits are new, the UIF has started to upgrade their systems, develop regulations, and design new forms for the processing of applications.

The UIF should be ready to implement these benefits by September 2019.

Some companies have started to implement parental leave in line with the Labour Laws Amendment Act; however, UIF will only start accepting applications and process payments once the president has promulgated the implementation date.

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

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The Kenya National Housing Development Fund (NHDF) implementation delayed

On Monday, 27 May 2019, the implementation of the NHDF levy has been extended by the Employment and Labour Relations Court, barring the government from implementing the disputed 1.5% housing levy.

The housing levy was to take effect in May following a public notice by the government in April ordering employers to deduct and remit the levy by the 9th of every succeeding month.

The case was initially filed by Central Organisations of Trade Unions (Cotu). The case was also filed by various other parties that include, Central Organization of Trade Unions (COTU), Trade Union Congress of Kenya, Consumers Federation of Kenya (CoFeK) and the Federation of Kenyan Employers (FKE) challenging the levy.

Further development will be closely monitored, and you will be kept informed.

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

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Short-term work authorisation restricted to 180 days per year

The Department of Home Affairs (DHA) has issued a directive, restricting short-term work on a Visitor’s Visa in terms of Section 11(2) of the Immigration Act, to a maximum of 180 days per calendar year.

The visa may only be applied for once in a calendar year and only extended once for a period not exceeding three months. When applying for an extension, the DHA will calculate to ensure that the applicant does not exceed 180 days in South Africa in any given calendar year.

Foreign nationals who have already obtained a 90-day Section 11(2) work authorization followed by a three-month renewal should expect that they will not qualify for another renewal within the same calendar year.

It is important to know that a holiday/business visa may not be used to render employment services in South Africa. To render employment services in South Africa, an employee must be in possession of a valid short-term work visa.

Companies relying on short-term work visas for more than 180 days per year may need to find alternative visa categories, such as the intra-company transfer work visa or critical skills work visa.

The consequences of employees working on a holiday/business visa could result in the arrest and deportation for the foreign national and a fine and/or arrest for the employer.

The following documentation or statements are required for the authorization of a visa for short-term work:

  • Purpose or necessity of the work
  • Nature of the work
  • Qualifications and Skills required for the work
  • Duration of the work
  • Place of work
  • Duration of the visit
  • Proof of remuneration or stipend that the foreigner will receive from the employer
  • Identity and contact details of the prospective employer or relevant contact person from the workplace

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

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Online submission of PAYE returns through the Integrated Tax Administration System (ITAS) Portal Following the press release issued by the Ministry of Finance early January 2019 to notify taxpayers of the online submission requirements pertaining to the new Integrated Tax Administration System (ITAS), another press release was issued on 19 April 2019.

The submission of monthly employee tax (PAYE) returns is expected to be lodged online, through the ITAS portal as from March 2019. The online submission is done by completing an Excel spreadsheet with detailed payroll information of employees and upload it on ITAS.

The Ministry was informed that some employers are not ready to submit their PAYE returns electronically due to the need to adjust their payroll systems in order to be compliant with the ITAS requirements.

It was agreed that affected employers may submit their monthly PAYE returns manually until September 2019. Thereafter no manual submissions for PAYE will be accepted.

Employers opting to submit their returns manually must take note that they are obliged to update all manual submissions by uploading electronic versions on ITAS by September 2019.

The deadline for submission and payment remains the 20th of every month.

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

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NHDF Implementation

As part of the Finance Act 2018, assented by Kenya’s President on 21 September 2018, the Employment Act 2007, was amended to introduce contributions to the National Housing Development Fund (NHDF).

The NHDF contributions were meant to come into effect 1 January 2019, however, it was temporarily suspended by the Labour Court, pending discussions between workers and the government.

On 16 April 2019, a public notice was published on the Kenya Revenue Authority website informing employees and employers that the Housing Fund Levy has come into effect.

Both the employer and the employee must each contribute 1.5% of the employee’s monthly basic salary.  The combined contribution is capped at KES 5,000 per month.  Voluntary contributions may also be made to the scheme at a minimum of KES 200 per month.  The first contribution will be due by 9th May 2019. Information relating to the payment process still to be communicated.

Every employer must register with the Housing Fund as a contributing employer and must also register his/her employees as members of the Housing Fund.

Despite the notice, the Federation of Kenya Employers’ (FKE) asked employers not to implement the policy as directed by the Housing ministry and the Kenya Revenue Authority.  The FKE attended court on April 8, 2019, and obtained an order suspending the implementation of the levy until May 20, when the case will be mentioned.  The FKE said the Gazette is therefore unlawful.

It is our recommendation that employers register the company and their employees with the Housing Fund and make the necessary adjustments to their payroll systems as heavy penalties could be inflicted.  Should the Housing Fund Levy be suspended for a further period, an update will be distributed.

 

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

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