Tax Season 2017 is Open

The tax season opened on the 1st of July for individuals to submit their Income Tax returns.

The deadline dates differ according to the method of submission and is as follows:

  • 2 September 2017 for manually submitted returns;
  • 24 November 2017 for returns submitted electronically at a SARS branch or via e-filling; or
  • 31 January 2018 for returns submitted by provisional taxpayers via e-filling.

Who must Submit Income Tax Returns for 2017 Year of Assessment

Both resident and non-resident companies, trusts or other juristic persons, who carried on a trade through a permanent establishment in the Republic, derived income from a source in the Republic, derived any capital gain or capital loss from the disposal of an asset to which the Eighth Schedule to the Income Tax Act applies, every company incorporated, established or formed in the Republic, but which is not a resident as a result of the application of any agreement entered into with the Government of any other country for the avoidance of double taxation, are liable to submit income tax returns for 2017 year of assessment.

All resident and non-resident natural persons, who:

  • Carried on any trade (other than solely in his or her capacity as an employee);
  • Was paid or granted an allowance or advance as described in section 8(1)(a)(i) of the Income Tax Act (other than an amount reimbursed or advanced as described in section 8(1)(a)(ii)) and whose gross income exceeded the thresholds set out in paragraph (4) below;
  • Was granted a taxable benefit described in paragraph 7 of the Seventh Schedule to the Income Tax Act and whose gross income exceeded the thresholds set out in paragraph (4) below;
  • Are residents and had capital gains or capital losses exceeding R40 000, and for non-residents who had capital gains or capital losses from the disposal of an asset to which the Eighth Schedule to the Income Tax Act applies;
  • Is a resident who held any funds in foreign currency or owned any assets outside the Republic, if the total value of those funds and assets exceeded R225 000 at any stage during the 2017 year of assessment;
  • Is a resident who had any income or capital gains from funds in foreign currency or assets outside the Republic;
  • Is issued an income tax return form or who is requested by the Commissioner in writing to furnish a return, irrespective of the amount of income of that person;
  • Is an estate of a deceased person that had gross income;
  • Is a non-resident whose gross income included interest from a source in the Republic and is not subject to the exemptions contained in Section 10 (1) (h) of the Income Tax Act
  • Is a representative taxpayer of any persons are all liable to submit and file income tax returns for 2017 year of assessment.

Who is Exempt from Submitting Income Tax Returns?

Natural persons and estates of deceased persons, if the gross income of that person consisted solely of gross income, such as remuneration paid or payable from one employer, which does not exceed R350 000 and employees’ tax has been deducted or withheld in terms of the deduction tables prescribed by the Commissioner, dividends received by, or accrued to natural persons who were non-residents throughout 2017 year of assessment; and amounts received or accrued from a tax-free investments, do not need to file income tax returns. In addition to this requirement, interest (other than interest from a tax-free investment) from a source in the Republic not exceeding:

  • R 23 800 for natural persons below the age of 65 years;
  • R 34 500 for natural persons aged 65 years, or older;
  • R 23 800 for the estates of deceased persons is not subject to income tax.

Natural persons, who have received income not exceeding R 75 000 per year for persons under the age of 65 years; R 116 150 per year for persons older than 65 years, but under the age of 75 years and R 129 850 per year for persons older than 75 years will not be liable to submit and file income tax returns for 2017 year of assessment.

What Supporting Documents May be Required?

When completing your return, have your supporting documents at hand. You may need to refer to some of the supporting documents listed below, while completing your return; however, you must not submit them to SARS. You must keep them safely in your possession for at least five years in case SARS needs access to them in future.

  • Your IRP5/IT3(a) certificate(s) which you will receive from your employer
  • Medical certificates as well as documents required for amounts claimed in addition to those covered by your medical aid.
  • Pension and retirement annuity certificates
  • Your banking details
  • Travel logbook (if you receive a travel allowance)
  • Tax certificates that you received in respect of investment income (IT3(b))
  • Completed confirmation of diagnosis of disability (ITR-DD), where applicable
  • Information relating to capital gain transactions, if applicable
  • The approved Voluntary Disclosure Programme (VDP) Agreement between yourself and SARS for years prior to 17 February 2010, where applicable
  • Financial statements, e.g. business income, where applicable
  • Any other documentation relating to income you received or deductions you want to claim.

Tax Return Services has a team of Consultants on hand and ready to handle any queries you may have regarding your Income Tax return.

Please feel free to contact them on the following number:

(011) 467 0810 or e-mail contact@taxreturn.co.za

Who should Complete a Tax Return? Government Gazette, 9 June 2017

In terms of section 25 of the Tax Administration Act, 2011, Commissioner for SARS Tom Moyane promulgated Public Notice 547, which sets out the requirements for which persons how to submit income tax returns for 2017 year of assessment. In terms of section 25 of the Tax Administration Act, read with section 66(1) of the Income Tax Act, persons specified in terms of paragraph 2 of the Public Notice 547 are required to submit an income tax return within the prescribed period in paragraph 4 of the said Public Notice.

As the tax season of 2017 opens in just under two weeks, we shall examine the various categories of persons who are compelled by the Public Notice to submit income tax returns for 2017, as well as other important matters referring to the 2017 filing season.

Who must Submit Income Tax Returns for 2017 Year of Assessment

Both resident and non-resident companies, trusts or other juristic persons, who carried on a trade through a permanent establishment in the Republic, derived income from a source in the Republic, derived any capital gain or capital loss from the disposal of an asset to which the Eighth Schedule to the Income Tax Act applies, every company incorporated, established or formed in the Republic, but which is not a resident as a result of the application of any agreement entered into with the Government of any other country for the avoidance of double taxation, are liable to submit income tax returns for 2017 year of assessment..

All resident and non-resident natural persons, who:

Carried on any trade (other than solely in his or her capacity as an employee);

  • Was paid or granted an allowance or advance as described in section 8(1)(a)(i) of the Income Tax Act (other than an amount reimbursed or advanced as described in section 8(1)(a)(ii)) and whose gross income exceeded the thresholds set out in paragraph (4) below;
  • Was granted a taxable benefit described in paragraph 7 of the Seventh Schedule to the Income Tax Act and whose gross income exceeded the thresholds set out in paragraph (4) below;
  • Are residents and had capital gains or capital losses exceeding R40 000, and for non-residents who had capital gains or capital losses from the disposal of an asset to which the Eighth Schedule to the Income Tax Act applies;
  • Is a resident who held any funds in foreign currency or owned any assets outside the Republic, if the total value of those funds and assets exceeded R225 000 at any stage during the 2017 year of assessment;
  • Is a resident who had any income or capital gains from funds in foreign currency or assets outside the Republic;
  • Is issued an income tax return form or who is requested by the Commissioner in writing to furnish a return, irrespective of the amount of income of that person;
  • Is an estate of a deceased person that had gross income;
  • Is a non-resident whose gross income included interest from a source in the Republic and is not subject to the exemptions contained in Section 10 (1) (h) of the Income Tax Act
  • Is a representative taxpayer of any persons are all liable to submit and file income tax returns for 2017 year of assessment.

Who is Exempt from Submitting Income Tax Returns

Natural persons and estates of deceased persons, if the gross income of that person consisted solely of gross income, such as remuneration paid or payable from one employer, which does not exceed R350 000 and employees’ tax has been deducted or withheld in terms of the deduction tables prescribed by the Commissioner, dividends received by, or accrued to natural persons who were non-residents throughout 2017 year of assessment; and amounts received or accrued from a tax-free investments, do not need to file income tax returns. In addition to this requirement, interest (other than interest from a tax-free investment) from a source in the Republic not exceeding:

  • R 23 800 for natural persons below the age of 65 years;
  • R 34 500 for natural persons aged 65 years, or older;
  • R 23 800 for the estates of deceased persons is not subject to income tax.

Natural persons, who have received income not exceeding R 75 000 per year for persons under the age of 65 years; R 116 150 per year for persons older than 65 years, but under the age of 75 years and R 129 850 per year for persons older than 75 years will not be liable to submit and file income tax returns for 2017 year of assessment.

Deadlines for Income Tax Returns Submissions

The periods within which income tax returns must be furnished are for companies within 12 months after the end of the financial year end and for all other persons, which includes natural persons and trusts:

  • On, or before 22 September 2017 for all manually submitted income tax returns;
  • On, or before 24 November 2017 for all income tax returns submitted by using the SARS eFiling platform or electronically through the assistance of a SARS official at an office of SARS;
  • On, or before 31 January 2018 if the return relates to a provisional taxpayer and is submitted by using the SARS eFiling platform.

Forms of Income Tax Returns

The forms prescribed by the Commissioner for the submission of income tax returns are obtainable on request via the internet at www.sarsefiling.co.za or from any office of SARS, other than an office which deals solely with matters relating to customs and excise.

Good luck with the submissions of your income tax returns! We are here to assist you if you need any advice and guidance for the completion and submission of your income tax return, or if you are aggrieved by the assessment received from SARS.

Herewith a link for ease of reference:

Public Notice from SARS in terms of section 25 for submission of 2017 income tax returns, released on 9th June 2017

contact@taxreturn.co.za

SARS to Exchange Tax Information with over 50 Jurisdictions

The South African Revenue Service (SARS) has committed to the automatic exchange of tax information with the revenue authorities of over 50 other jurisdictions under the Organisation for Economic Co-operation & Development (OECD) Common Reporting Standard (CRS) by September 2017.

This international initiative goes hand-in-hand with SARS’ proposal to close the tax net on South African expats, many of whom have simply stopped starting submitting tax returns, completed zero tax filings and / or otherwise not complied with income tax and capital gains tax rules.

Banks will be required to provide to SARS financial information which includes: interest, dividends, account balances, income from certain insurance products, sales proceeds from financial assets and other income generated with respect to assets held in the account or payments made with respect to the account. This links back to South African passports, which create the reporting obligation.

Tax Residence in South Africa or in another jurisdiction will also form part of the CRS disclosure. This may include providing proof of foreign tax residency and, according to Marius Engelbrecht, our lead tax partner on personal tax compliance, we have seen a number of accounts being closed where the taxpayer appears to have been non-compliant.

He recommends the initial step is always to establish your current SARS compliance and according to latest statistics, only between about 25% of expatriates that ask us to check their status are fully up to date and compliant.

Increase of the Scale of Benefits

The Unemployment Insurance Amendment Act, No. 10 of 2016 (“the Act”), is aimed at having a positive effect on the country’s labour force. Furthermore, there are likely to be positive effects on the economy as well.

The Act will see those who lose their jobs receive money for a longer period when they apply for unemployment benefits. The UIF benefits have been increased from 238 days to 365 days. A further change here is that employees will be able to apply for benefits over twelve (12) months as opposed to six (6) months as was the situation prior to the amendment.

Some further amendments relate to maternity leave. Expectant mothers were not able to claim maternity benefits because they could not claim until the child was born. This meant that only once the child was born, the benefits could be claimed for and were received upon the mother returning to work. Expectant mothers may now claim eight weeks before estimated due date, which should grant the benefits to the mother when necessary and not post-fact. The maternity benefit has also been increased from 45% of normal pay to 66%.

On 17 March 2017, the Minister of Labour, Mildred Nelisiwe Oliphant amended the Unemployment Insurance Fund scale of benefits contained within Government Gazette notice No. 588. The value of the benefit pay-out by the Fund has been amended. The changes in the amounts are an increase in the per annum rates, from R 178 464 to R 212 539 and an increase in the monthly amount to R 17 712 and an increased weekly amount of R 4 087.

The UIF thresholds were last adjusted in 2012. As a result of the new threshold values that will come into effect on 01 April 2017, these contributions will now increase to up to R 177.12 per month for employees who earn above the previous threshold value of R 14 872 and were capped at a maximum contribution of R147.82.

These changes will take effect from 01 April 2017.

Herewith a link to the Government Gazette notice:

http://www.gov.za/sites/www.gov.za/files/40691_gon231.pdf

Update: Expatriate Tax Exemption and Rebutting the Fake News Spreaders

We have noted with concern the comments made on various posts about fake news. Some comments include listening to the whole budget speech and not finding any reference. Our only intention is to share the correct tax position, to allow proactive planning (as various legitimate planning opportunities will remain viable, through using international tax law, which SARS cannot legislate against) for affected South African expatriates abroad.
The budget speech contains various tax technical proposals. These are obviously not verbally announced, but they are still published with the speech. If you deal with tax, you will know they are the pre-cursor to law, and whilst not promulgated yet, the law process logically follow, as a policy decision has been made. For those who wish to validate as authentic. See http://www.treasury.gov.za/. Go to Budget 2017.
When you click thereon, select you will see the following and click on Tax Matters and Revenue Laws
Click on Annexure C – Additional Tax Policy and Administrative Adjustments
Go to page 8 (of 16) and see –
Please note the actual law amendment has not been drafted. Also, there is very good international tax planning which can be done to minimize your tax position, whilst remaining fully tax complaint. We will do additional updates as the law is published and to recommend tax planning and compliance considerations.

Budget 2017: Tax Changes

BUDGET 2017: TAX CHANGES

The 2017 budget lived up to the expectation created by the Finance Minister with the medium term budget policy statement late last year in which it was made clear that R28bn in additional tax revenue must be generated.

Tax increases were announced as follows:

  • Introduction of top marginal tax rate of 45% on personal taxable income above R1 500 000;
  • Increase in tax rate applicable to trusts (excluding special trusts) from 41% to 45%;
  • In consequence of increased top marginal rate for individuals, effective CGT rate for natural persons increased from 16.4% to 18% and in the case of trusts other than special trusts from 32.8% to 36%. The effective CGT rate applicable to companies remains the same at 22.4%;
  • Increase in dividends tax rate from 15% to 20%. Effective corporate tax rate is 42.4% from 1 March 2017. Foreign dividends that don’t qualify for exemption will also now have an effective tax rate of 20%; and
  • Withholding tax on non-residents disposing of immovable property is increased from 5% to 7.5% for foreign individuals, from 7.5% to 10% for foreign companies and from 10% to 15% for foreign trusts.

SARS’ tax pocket guide, which you can access here, contains a summary of the latest rates for the upcoming fiscal year.

Other tax changes proposed in the budget include:

  • Expanding the VAT base to include VAT on fuel. This is in addition to the fuel levy;
  • The section 10(1)(o)(ii) 183/60 day exemption for employment income to be amended to allow the exemption only where the employment income is taxed in the foreign country;
  • The definition of ‘resident’ to be amended for VAT purposes to address issues with VAT becoming a cost to certain non-resident companies effectively managed and controlled in South Africa;
  • The VAT zero rating associated with international travel is expected to be changed;
  • Currently VAT is imposed in South Africa upon the supply of certain electronic services and that cloud computing and services provided for by online applications also be subject to VAT;
  • Services supplied relating to securities or shares in a foreign incorporated company listed on the JSE should be subject to zero-rated VAT and accordingly changes to the VAT Act should occur to clarify the tax treatment of these services;
  • The section 7C amendment to prevent the use of low or non-interest bearing loans to trusts for the transfer of wealth is to include such loans as given to companies owed by a trust. Furthermore the provision will be extended to exclude trusts not used for estate planning and employee share trusts;
  • Income Tax Act to allow individuals to elect to retire, and the date on which the lump sum benefit accrued to the individual depended on the date on which the individual elected to retire and not on the normal retirement age. Currently, once the individual elects to retire, the Income Tax Act does not cater for the transfer of lump sum benefits from one retirement fund to another. It is proposed that transfers of retirement interests be allowed from a retirement fund to a retirement annuity fund, subject to fund rules;
  • The eligibility threshold for employer provided bursaries and scholarships is to increase from R400 000 per annum to R600 000. The monetary limits are proposed to increase from R15 000 to R20 000 for NQF7 and below and from R40 000 to R60 000 for NQF 7 and above;
  • Paragraph 12A of the Eighth Schedule (applicable on reduction of debt) does not currently apply to mining companies. This disparity will be addressed;
  • The relief provided in paragraph 12A for dormant group companies or companies under business rescue should be extended to section 19;
  • The practice of settling debt by a means other than cash, such as the conversion of debt into equity, is to be allowed. Provision will be made to recoup capitalised interest where an interest deduction was previously claimed;
  • Specific countermeasures will be introduced to address share sales disguised as share buy backs;
  • Short term shareholding structures aimed at circumventing debt reduction provisions are to be addressed;
  • With a REIT’s assets not qualifying as allowance assets in a reorganisation transaction, the legislation will be amended to provide for reorganisation transactions involving REITs;
  • Currently the qualifying purpose exemptions for third-party backed shares are too narrow. Provisions are to be further refined to cover all qualifying purposes;
  • Refinements to the venture capital company regime, more specifically to investment returns and the qualifying company test;
  • Large multinational companies will be required to submit country by country transfer pricing policies to SARS from 31 November 2017;
  • Amendments to the Tax Administration Act to curtail inconsistencies arising out of the transitional rules for the calculation of interest on tax debts;
  • Only the portion of travel expenses reimbursed by the employer exceeding the fixed distance or rate as determined, is to be regarded as remuneration for the purposes of determining employee’s tax;
  • The annual cap of R350 000 on contributions to pension, provident and retirement annuity funds be spread over the tax year for determining monthly employee’s tax;
  • Clarification will be made that the chairperson of the Tax Board has the final decision as to whether or not an accountant or commercial member must form part of the constitution of the Tax Board; and
  • All decisions by SARS not subject to objection and appeal are to be subject to the remedies under section 9 of the Tax Administration Act.

These and other proposed tax amendments will be discussed in more detail by Nico Theron and Jerry Botha at the SAIT Budget and Tax Update and the SARA Annual Tax Update respectively. For more details, see the links below.

http://www.sara.co.za/Events/EventsCalendar.aspx

http://www.thesait.org.za/events/event_list.asp

Objections and Appeals: The Helpless Taxpayer?

OBJECTIONS AND APPEALS:THE HELPLESS TAXPAYER?

Only assessments and certain prescribed decisions are subject to objection and appeal in terms of section 104 of the Tax Administration Act, No. 28 of 2011 (“the TAA”). There are a multitude of decisions that can be made by SARS and that are not subject to objection and appeal. These include but are not limited to:

  • A decision by SARS VDP unit not to accept a VDP application;
  • A decision by SARS not to issue a tax clearance certificate;
  • A decision by SARS not condone suspension of debt pending the outcome of an objection or appeal;
  • A decision by SARS not to issue a reduced assessment in terms of section 98 of the TAA;

In these cases, taxpayers are left with limited, often ineffective and costly options that may leave the taxpayer feeling helpless. These options include:

  • approaching SARS’ Complaints Management Office (“CMO”);
  • approaching the Tax Ombud (“TO”); or
  • instituting proceedings in the High Court under the Promotion of Administrative Justice Act, No. 3  of 2000 (“PAJA”).

An often overlooked remedy, however, is section 9 of the TAA, more specifically section 9(1)(b) which states that:

“A decision made by a SARS official and a notice to a specific person issued by SARS, excluding a decision given effect to in an assessment or a notice of assessment –

(a)…

(b) may in the discretion of a SARS official described in subparagraphs (i) to (iii) or at the request of the relevant person, be withdrawn or amended by—

  • the SARS official;
  • a SARS official to whom the SARS official reports; or
  • a senior SARS official.”

Accordingly taxpayers may request SARS to review a decision despite that decision not being specifically made subject to objection and appeal and without having to approach the CMO or TO or launch a PAJA application. The concern, however, lies in that where SARS refuses to entertain a request for review under section 9, taxpayer’s will find themselves faced with the same, ineffective and costly options listed above.

In the 2017 budget, it is proposed that “all decisions of SARS that are not subject to objection and appeal should be subject to the remedies under section 9 of the TAA.”

While it is not clear exactly what the proposed amendment will seek to achieve, it is a step in the right direction and a welcomed proposal. We can only hope that the proposal will find its way into the legislative amendment process to provide much needed relief for taxpayers who effectively find themselves completely at the mercy of SARS.

Serious Tax Consequences for Expatriate Employees

Pravin targets expatriate employees to Dubai

There is probably no-one more unhappy about the budget speech announcements than expatriate employees to Dubai.

 

Currently, if a South African resident works in a foreign country for more than 183 days a year, foreign

employment income earned is exempt from tax, subject to certain conditions. This exemption is for

employees of private-sector companies. In terms of the residence-based system of taxation, South African

residents are taxed on their worldwide income. However, this exemption on foreign employment income

appears excessively generous. If a resident works in a foreign country for more than 183 days with no tax

payable in the foreign country, that foreign employment income will benefit from double non-taxation. It

is proposed that this exemption be adjusted so that foreign employment income will only be exempt from

tax if it is subject to tax in the foreign country.

 

One will need to see the actual draft legislation, but it appears quite clear that where you do not pay tax in the country where you work, you will no longer qualify for exemption from South African taxes. Coupled with the newly pronounced 45% over R1,5m, this makes extra bad reading. Obviously this also impacts wider than and anyone who claims the exemption and does not pay taxes somewhere else, will now be impacted.

NON-EXECUTIVE, NON-RESIDENT NON-EXECUTIVE DIRECTORS, PAYE AND VAT: SARS GENERAL RULING – INTERPRETATION

The position for non-executive directors remain complex, despite the recent SARS General Rulings. The general rules confirmed in these Rulings are that non-executive director fees will, with effect 01 June 2017, not be subject to employees’ tax withholding and will be subject to VAT where the non-executive director is liable for VAT, either through voluntary or compulsory VAT registration. The following principles make the position on non-executive directors more complex –

  • The source of directors fees are considered to be where the head office of the business is located. Therefore, where the directorship is South Africa, the source is South Africa.  See for example ITC 77 (1927) 3 SATC 72; ITC106 (1927) 3 SATC 336; ITC235 (1932) 6 SATC 262; and ITC250 (1932) 7 SATC 46.
  • There is a specific Double Tax Agreement clause and which deals with directors’ fees. This clause is generally contained in Article 16 of the OECD model treaty and typical wording reads “Directors’ fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other State.” This means that the DTA does not override the source country taxing right and also that the “independent personal services” clause, with certain exemptions, does not find application.
  • The non-executive director will have to register for VAT on a compulsory basis, where the VAT Act requirements are achieved. This effectively means that where the expected fees are above R1m for a fiscal year, the registration is compulsory provided there are some meetings held in SA in compliance with the definition of ‘enterprise’ in section 1 of the VAT Act. The VAT vendor must the invoice for services through the issuance of valid VAT invoices and there is normally a bi-monthly VAT compliance requirement, even where no VAT invoices was issued.
  • There is still employees’ tax withholding on non-resident non-executive directors. The reason is that they do not fall within the exemption in the Fourth Schedule to the Act. This makes also sense logically, as SARS would have difficulty collecting from someone in a foreign jurisdiction and the tax laws are by its very design aimed at protecting our tax base.
  • The non-executive director is allowed to claim expenses against the production of income, which can be done on personal tax assessment. There is necessarily then a refund of PAYE and to the extent which expenses are allowed. We recommend that a basic set of AFS are prepared and to support the tax filing. Also, a South African bank account may be opened and is very useful to receive the tax refund and a prerequisite for receiving a VAT refund.

Many companies with non-executive directors who are non-resident outsource their compliance and planning to provider for an end-to-end solution, including on income tax, VAT, administration and opening of their foreign bank accounts.