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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.

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

 

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.

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

 

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.

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

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.

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

After declaring 8 May (the day of national and provincial elections) a public holiday, President Cyril Ramaphosa urged employers to encourage their staff to use the day to exercise their right to vote.

Employers who force their employees to work on 8 May without their consent and prevent them from voting are not only contravening the Basic Conditions of Employment Act, but are also violating their employees’ constitutional rights.

To prevent any misunderstandings and/or labour disputes, CRS recommends that employers enter into a written mutual agreement with their employees about working on public holidays. Ensure that they fully understand the requirements and implications of the agreement. Once signed, employees who then decide to vote rather than show up for work on Election Day will be guilty of unauthorised absence, which is a disciplinary offence.

COID ROE Deadline extended

The Department of Labour has announced that the 2018/2019 ROE deadline has been extended to 31 May 2019. Submissions will open 1 April 2019.

The Compensation for Occupational Injuries and Diseases Act No 130 of 1993 (COIDA) provides for compensation for disablement caused by occupational injuries or diseases sustained or contracted by employees during the course of their employment, or for death resulting from such injuries or diseases.

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.

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.

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.