... and other
Taxes in your
INDEX
Intro and GeneralAmounts Exempt from Employees Tax Allowances
Fringe Benefits Allowable Deductions Medical Tax Credits Special Income Independent Contractors Employment Tax Incentive Other Related Statutory Requirements Dividends Tax & Capital Gains Tax Legislative Calendar
Other Taxes: Trust Tax Directives Provisional Tax Interest and Dividends Company Tax Small Business Corporations Micro Businesses Learnership Allowance VAT Transfer Duty Estate Duty Donations Tax Securities Transfer Tax LabourNet Products & Services
1 8 10 13 18 21 21 23 24 25 26 26 27 27 28 28 28 29 29 30 30 31 31 31 32 33
Tax Revenue Only
This Year’s
Budget
Last Year’s
Actual
Tax on income, profits, capital gains 620 890 556 700
Tax on payroll & workforces (e.g. skills levies) 14 690 13 200
Tax on property (estate duty, transfers, etc.) 13 692 12 603
Tax on goods and services (VAT, levies, etc.) 389 427 355 718
Tax on international trade (import duties, etc.) 42 576 40 779
TOTAL 1 081 275 979 000
2015 Budget in a Nutshell
How it all came in!
Tax Revenue Last Year (2014 / 2015)
Tax on income, profits, capital gains Tax on payroll & workforces (e.g. skills levies) Tax on property (estate duty, transfers, etc.) Tax on goods and services (VAT, levies, etc.) Tax on international trade (import duties, etc.)
Tax Revenue Budget (2015 / 2016)
Tax on income, profits, capital gains Tax on payroll & workforces (e.g. skills levies) Tax on property (estate duty, transfers, etc.) Tax on goods and services (VAT, levies, etc.) Tax on international trade (import duties, etc.)
1
INTR
O AND
Some Commentary
Preparing and delivering the 2015 budget speech must have been a hugely daunting task for the Minister of Finance, Nhlanhla Nene.
Firstly, he had to calm the waters and do a pretty smart balancing act to keep taxpayers, the greater business community, and general market sentiment at bay, whilst still ensuring that all governments revenue collection requirements would somehow be met. This, off the back of what was a tough year, and with all indications being that the year ahead will be no different, was always going to present a challenge.
Secondly, this being his maiden budget speech, and with his highly popular and respected predecessors in the house scrutinising his every word, he certainly had some pretty serious expectations to live up to.
All this couldn’t have been easy for him, but by addressing those concerns we all have, aptly and soundly in the manner in which he did, and by spreading the load in terms of how the additional revenue would be collected, the general consensus was that he passed the test very well, so he and his team do need to be congratulated.
Needless to say some of the items in the Budget Speech did not sit well with taxpayers, unions and the opposition benches. For instance, this is the first time in 20 years that there has been a tax increase for individuals, an increase which mainly impacts the individuals at the upper end of the earning’s table. Hopefully this is not a sign of things to come. On the other hand though, and as has become customary over the years, those taxpayers at the lower end of the earnings table, again this year still managed to get some relief. Coupled with this we didn’t escape higher prices regarding electricity, fuel, cigarettes and alcohol, to mention a few, and as such it looks like most of us will need to tighten our belts somewhat this year.
In essence, it was a budget which was close to what most had predicted and thus expected, with a few little surprises thrown in here and there as well, but a budget that we all can live with for now.
INTR
O AND
How it’s all going out!
Expense Items
(in R Billion)
2014/15
Revised
Estimate
2015/16
Budget
Estimate
% Average
Growth
2014/15 - 2017/18General Public Services 64.7 64.4 2.6%
Defense Public Order and Safety 163.0 171.2 5.7%
Local Development and Social
Infrastructure 176.6 199.6 8.2%
Economic Affairs 189.4 206.2 6.0%
Social Protection 143.9 155.3 7.0%
Health 144.6 157.3 7.1%
Basic Education 189.5 203.5 6.3%
Post-School Education & Training 56.6 62.2 7.1%
Debt-Service Costs 115.0 126.4 10.1% Unallocated Reserves - 5.0 -Total expenditure 1 243.3 1 351.1 7.9% 3
INTR
O AND
GENERAL
Expenditure Last Year (2014 / 2015)
General public services Defense Public order and safety Economic infrastructure Economic services Social Protection
Housing and community amenities Health
Education, sport and culture Employment and social security Science & Technology State debt cost Contingency reserve
Expenditure This Year (2015 / 2016)
General public services Defense Public order and safety Local Development & Social Infrastructure Economic Affairs
Social Protection Health Basic Education
Post-School Education & Training Debt-Service Costs
Unallocated Reserves
INTR
O AND
Some Commentary
The Minister committed that the state would also be tightening it’s own belt this year with the announcement of initiatives to reduce expenditure on items such as catering, travel, venue hire and entertainment, so “feeling the pinch” would not just be exclusive to taxpayers out there. Further measures to reduce state expenditure included reprioritising of certain non-performing initiatives and projects, new and less expensive measures to assist in the funding of state owned companies, freezing the growth of public service positions, containing the state salary bill to 40% of non-interest spending, identifying and curbing wastage and introducing measures to improve efficiency, just to mention a few.
On the flip side more money would be spent on infrastructure maintenance, fuel for police vehicles, medicine and school books - all good and noble as long as the expenditure is justified and managed properly.
As usual the SARS “collection machines” again stood up to expectations and assisted in greater compliance amongst taxpayers, brought many new entrants into the tax “net” and ensured that taxes due were collected accurately and on time. This area will receive even more attention this coming year, particularly when the improved and more automated AA88 collection processes are released. Finally, government’s eyes are still firmly on the National Development Plan which was crafted some time back, as this has been positioned as the vehicle that will, amongst other things, lead to more job creation and thus enabling many citizens to come out of the poverty cycle. Much in the budget speech was aligned to this plan, so hopefully this year will bring us another step closer to seeing this plan become a reality.
5
INTR
O AND
Payroll Taxes... in your Pocket!
Payroll Taxes: 2015/2016 Tax Rates
Rebates
This Year
Last Year
Primary (All Taxpayers) R13 257 R12 726
Secondary (65 years and over) R7 407 R7 110
Tertiary (75 years and over) R 2 466 R2 367
Tax Threshold
This Year
Last Year
Below 65 years R73 650 R70 700
65 years and over R114 800 R110 200
75 years and over R128 500 R123 350
Taxable Income
Rates of Tax
R0 - R181 900 18% of each R1
R181 901 - R284 100 R32 742 + 26% of the amount above R181 900
R284 101 - R393 200 R59 314 + 31% of the amount above R284 100
R393 201 - R550 100 R93 135 + 36% of the amount above R393 200
R550 101 – R701 300 R149 619 + 39% of the amount above R550 100
R701 301 + R208 587 + 41% of the amount above R701 300
INTR
O AND
Lump Sum Severance Benets
Taxable Income Rates
R0 – R500 000 0%
R500 001 – R700 000 18% of taxable income above R500 000
R700 001 – R1 050 000 R36 000 + 27% of taxable income above R700 000
R1 050 001 + R130 5000 + 36% of taxable income above R1 050 000
Lump Sum Withdrawal Benets
Taxable Income Rates
R0 - R25 000 0%
R25 001 - R660 000 18% of taxable income above R25 000
R660 001 - R990 000 R114 300 + 27% of taxable income above R660 000
R990 001 + R203 400 + 36% of taxable income above R990 000
SARS Ofcial Interest Rate (for low/interest free loans)
The SARS official Interest Rate is determined by the current Repo Rate set by the Reserve Bank of South Africa. This rate is the Repo Rate plus 1 percentage point. The current interest rate set as from 1 August 2014 is:
6.75%
7
INTR
O AND
Amounts Exempt from Employee
’s Tax
The following value of items received by an Employee from their Employer are exempt from tax (provided certain conditions are met):
• Uniforms
• Transfer/Relocation Costs
• Share Schemes
• Bursaries/Scholarships
• Income Received by Expatriates
The above listed items are exempt under the following conditions:
Uniforms
• It is an employment condition that the Employee wears a uniform while on duty
• The uniform is clearly distinguishable from their ordinary clothing
Transfer/Relocation Costs
• If costs were incurred in relation to the transportation of the Employee/their household/their
personal goods from their previous residence to their new residence, if relocated by Employer
• Costs, allowed by the Commissioner, incurred by the Employee with respect to the sale of their
previous residence as well as those incurred when settling into their new residence
• Costs incurred with respect to the rental of temporary accommodation occupied while the
Employee is in search of permanent accommodation (these expenses are exempt for a maximum
period of 183 days after the Employee’s transfer)
Share Schemes
• Employers can issue qualifying shares to Employees up to a cumulative value of R50 000 per
Employee in respect to the current year and the immediate preceding 4 years
• Employers may claim the shares as a deduction up to R10 000 per Employee
• An amount received or accrued by an Employee derived from either:
- the cancellation of a transaction under which the Employee purchased the shares under the scheme
- upon repurchase (by the Employer) at a price not exceeding the selling price to them under the scheme is exempt from tax if the Employee does not receive compensation for consideration
in excess of the purchase price actually paid for the shares
• Gains from selling the shares by the Employee before 5 years are subject to income tax in the
hands of the Employee
• Gains from selling the shares by the Employee after 5 years are subject to Capital Gains Tax in
the hands of the Employee
• Please note that any dividends paid out from these schemes will be subject to the standard
dividend withholding tax applicable (discussed further on in this booklet)
Bursaries
• There must be an agreement for the Employee to reimburse the Employer in the event that
studies are not completed (excludes inability to conclude studies due to death, illness or disability)
• In the case where a scholarship or bursary is granted to enable or assist any relative of an
Employee to study
- The Employee’s remuneration for the year may not exceed R250 000
- The bursary is tax free to the extent that it does not exceed R10 000 for education up to NQF level 4 (matric or grade 12) during the tax year; or R30 000 for education over NQF level 5 and upwards
• In the event that none of the above-mentioned conditions are met, the amount so received
will result in a taxable fringe benefit. Expenditure in connection with internal or on-the-job training or courses presented by other institutions on behalf of the Employer, does not represent a taxable benefit in the hands of the Employees, provided that the training is job-related and
ultimately for the Employer’s benefit
Income Received by Expatriates
• Income received by an Outbound expatriate (SA tax resident working abroad) is exempt if the
Employee meets the following conditions:
- Employee is physically outside SA for more than 183 full days (the 183 day period is to fall within any 12 month period starting or ending during the tax year)
- Employee is physically outside SA for a period exceeding 60 consecutive full days during the 12 month period mentioned above
• Income received by an Inbound expatriate (individual who is not a SA tax resident) is exempt
from SA tax provided it is not received from a source within SA
9
Allowances
An Employer can grant Employees any of the below allowances, these allowances are granted in
addition to the Employee’s normal income:
• Subsistence Allowances
• Travel Allowances
• Allowances for a Holder of a Public Office
• Other Specific Allowances
Subsistence Allowances
• Granted if the Employee spends at least 1 night away from their normal residence for business
purposes
• If the Employee was away from their usual residency but still within SA, the deemed daily
amounts are as follows: - R109 for incidental costs only - R353 for meals and incidental costs
• If the Employee was away from their usual residency and is outside SA, the deemed daily
amounts are based on the rates prescribed per the specific country (see SARS country table)
Travel Allowances
These allowances are granted in the form of regular travel allowances or reimbursive allowances:
• 80% of the travel allowance is to be included in taxable remuneration
• If the Employer is satisfied that at least 80% of the travel allowance will be used for business
purposes, they may reduce taxable portion of the allowance to only include 20% of the allowance in taxable remuneration
• Reimbursive allowances are based on actual km’s travelled by the Employee
(calculated by multiplying actual business km’s by the prescribed rate)
• Prescribed rate determined by the Minister (based on either of the below)
- R3,18 per km
- Determined rate (based on vehicle value as well as the fixed, fuel and maintenance costs)
• Travel to and from an Employee’s home and place of business is deemed to be private travel
• Where a travel allowance is paid in addition to a reimbursive allowance or vice versa, both
amounts will be combined on assessment. This combined allowance will be treated as a travel allowance
ALLO
W
Travel Allowance Taxation Table
Scenario Must PAYE be deducted Code
A fixed allowance is paid Yes 3701
Fuel and expenses paid by the Employer (e.g. petrol, garage and maintenance cards).
Yes 3701
Reimbursed at not more than the prescribed rate per kilometre and travels not more than 8 000 kilometres. No other travel allowance is received
No 3703
Reimbursed at not more than the prescribed rate per kilometre and travels not more than 8 000 kilometres
Receives a travel allowance or certain expenses are paid for the Employer
No (Reimbursements) Yes (Fixed allowance)
3702 3701 Reimbursed at not more than the prescribed
rate per kilometre and travels more than 8 000 kilometres. No other travel allowance is received
No 3702
Reimbursed at not more than the prescribed rate per kilometre and travels more than 8 000 kilometres
Receives a travel allowance or certain expenses are paid for by the Employer
No (Reimbursements) Yes (Fixed allowance)
3702 3701 Reimbursed at a rate exceeding the prescribed
rate per kilometre
No 3702
11
ALLO
W
• Travel Reimbursements are taxed on assessment if any of the following criteria is met - The business kilometers reimbursed exceeds 8 000km for the year
- The business kilometers are reimbursed at a rate over R3.30/km
• Purchases of fuel via a company fuel, garage or maintenance card is added to the total travel
allowance value and is taxed as per above
Holder of a Public Office
• Granted to a holder of a public office to allow or enable them to defray expenses incurred in
performing their duties
• 50% of the allowance received is subject to Employee’s Tax
Other allowances
• Where the Employee receives an allowance from the Employer and that allowance does not fall
into any of the above discussed categories. Ordinarily any allowance that is not specified, the Employer should add 100% of the allowance value to the Employees taxable income
Vehicle Value
Fixed Cost (R)
Fuel Cost
Maintenance
Cost (c)
R0 – R80 000 26 105 78.7 29.3 R80 001 - R160 000 46 505 87.9 36.7 R160 001 - R240 000 66 976 95.5 40.4 R240 001 - R320 000 84 945 102.7 44.1 R320 001 - R400 000 102 974 109.9 51.8 R400 001 - R480 000 121 886 126.1 60.8 R480 001 - R560 000 140 797 130.4 75.6 R560 001 + 140 797 130.4 75.6
Determined Rates
ALLO
W
ANCES
Fringe Benets
An Employee can receive any of the below listed fringe benefits from their Employer. All fringe
benefits received are subject to Employee’s Tax:
• Acquisition of an asset at less than Market Value
• Right to Use a Motor Vehicle
• Right to Use an Asset (excluding motor vehicles)
• Right to Use Cellphones/Laptops/Equipment
• Provision of Meals/Refreshments
• Free/Cheap Accommodation
• Low/Interest-free Loans
• Subsidy for Loans/Capital
• Payment of Employee debt/release of Employee from debt
• Medical Aid Contributions by Employer on Employee’s behalf
• Medical costs settled by the Employer
• Employer Contributions to Insurance Policies (e.g. Income Protection and Disability)
• Long Service Awards
Acquisition of an asset
• Where an Employee has been granted an asset by their Employer, consisting of goods,
commodities or property (excluding money) for no compensation or for a compensation less than the value of the asset
• The Asset granted is valued at it’s Market Value at the time it is acquired by the Employee
• If asset is movable property acquired by the Employer so as to dispose to the Employee the
asset is valued at it’s cost to the Employer
• Trading stock is valued at the lower of cost or Market Value
• Relief for the provision low cost housing will have no value if:
- The remuneration proxy of the Employee in respect of the year of assessment of acquisition does not exceed R250 000 per annum;
- The Market Value of the immovable property to the Employee on the date of acquisition is not more than R450 000; and
- If the Employee is not a connected person in relation to the Employer
13
Right to Use an Asset
• Employee deemed to receive a taxable benefit if the Employer grants the employee the right to
use an asset for private or domestic purposes (excludes use of accommodation/vehicle)
• Value placed on the use is determined as follows:
- Employer leasing/hiring asset - amount payable by Employer while Employee is granted use of asset less any consideration given by the Employee
- Employer owned asset - 15% per annum on the lesser of cost to the Employer or Market value on the date Employee commences with use
- Sole right of use granted to Employee - cost to Employer if Employee granted use over a
period extending the asset’s life
Right to Use Cellphones/Laptops/Equipment
• In the event that an Employee is granted the right to use a cellphone /laptop or equipment by
their Employer, this use will constitute a fringe benefit unless the following is applicable: - Private use is incidental (Incidental means that if more than 50% of the total use of the asset is for business purposes)
- The asset is provided by the Employer as an amenity for recreational purposes for the use of his/her Employees in general at his/her place of work
- Equipment the Employer allows the Employees to use from time to time for a short period of time and the value of the private use is negligible
- The asset consists of a computer or telephone which is to be used mainly for business purposes
Right to Use a Motor Vehicle
• Employee granted right to use a vehicle for private or domestic purposes
• Private use includes travel to and from the Employee’s home and place of work
• The determined value of the vehicle is determined as follows:
- Acquired under a bona fide sale agreement - original cost to Employer (excludes finance, interest charges and includes VAT)
- Held under a lease - Market value of the lease to the Employer (Incl. VAT if the Employer cannot claim the VAT or Excl. VAT if the Employer can claim VAT)
- If a limit is placed on the value of the vehicle ,the Employee can obtain the more expensive vehicle make a contribution to the more expensive vehicle, contributions made by the Employee must be deducted from the cost price of the vehicle duly obtained
- If vehicle is obtained under any other manner (i.e. it is a gift) - Market value of vehicle at the time right of use is obtained
• If Employee is granted a vehicle for more than 12 months after the Employer obtained the vehicle, the determined value of the vehicle must be reduced by 15% for each completed 12 month period (reducing balance method)
• Value of the fringe benefit is calculated at 3.5% of the determined value (for each month the
Employee uses the vehicle)
• If the vehicle is subject to a maintenance plan, the fringe benefit is valued at 3,25% of the
determined value
• 80% of the fringe benefit must be included in the Employee’s taxable remuneration
• If the Employer is satisfied that at least 80% of the benefit will be used for business purposes,
then only 20% of the benefit needs to be included to taxable income
• In the case where an Employee has a company fuel, petrol or maintenance card, this is deemed
as the Employer purchasing fuel and is part of the benefit amount. i.e. it does not increase the amount of the benefit
Meals and Refreshments
• Employee is granted a meal, refreshment or voucher entitling them to a meal or refreshment
• Value of benefit is the cost to the Employer less any consideration paid by Employee
• No value shall be placed on:
- Any meal or refreshment supplied by an Employer to his/her Employees in any canteen, cafeteria or dining room operated by or on behalf of the Employer and patronised wholly or mainly by his/her Employees or on the business premises of the Employer
- Any meal or refreshment supplied by an Employer to any Employee during business hours or extended working hours or on special occasions
- Any meal or refreshment enjoyed by an Employee in the course of providing a meal or refreshment to any person whom the Employee is required to entertain on behalf of the Employer
- Board and meals provided with accommodation. They are dealt with as part of the accommodation benefit
Provision of Accommodation
A taxable benefit shall be deemed to have been granted where the Employer has provided the Employee with residential accommodation either free of charge or for a rental consideration which is less than the value of the accommodation.
- Formula: (A-B)*(C/100)*(D/12)
- A = Remuneration Factor (i.e. annualised remuneration received in the previous tax year)
15
- B = 73 650 (i.e. Tax threshold for the year - official confirmation of the limit is normally published after the budget speech)
- C = 17/18/19 (i.e Depends on type of accomodation supplied) - D = number of months accommodation granted during the tax year
• It is however, important to note that a fringe benefit will not arise in cases where the Employee
is granted accommodation within South Africa while they are away from their usual place of residency (provided the residency is within the Republic). This provision will however not apply if the Employee is granted more than one residential unit in different locations and that Employee is entitled to use them from time to time while performing their duties
Free/Cheap Services
• Employer provides Employee with a service and Employee utilises the services for private or
domestic purposes
• The following values are placed on the benefits:
- Travel facility - if the Employer is in the business of transporting people by sea/air and Employee travels to destination outside SA lowest fare payable by any passenger less amount paid by the Employee
- Other services - cost to Employer to render service less amount paid by Employee
Low/Interest-free Loans
• Any Employer loans granted fall under the National Credit Act even if the Employer is exempt
from registering with the National Credit Regulator
• An Employee is exempt from registering with the National Credit Regulator if:
- The company does not charge interest
- The company has less than 100 agreements or the total loan book is less than R 500 000 - The loans are incidental and become loans if the Employee does not repay in the stipulated time
• Employers are to check the Employee’s credit record before awarding a loan
• A low or interest free loan is when an Employer grants an Employee a loan and the interest on
the loan is charged at a rate below the official interest rate and the interest rate paid by the Employee
• The fringe benefit is valued at the difference between the interest that would have been paid had
the interest been charged at the official rate
• The SARS official Interest Rate is determined by the current Repo Rate set by the
Reserve Bank of South Africa. This rate is the Repo Rate plus 1 percentage point
No Fringe Benefit value will be placed on a loan in the following circumstances:
The granting of a casual loan or loans if the aggregate of the loans do not exceed the sum of R3 000 at any time. The loans contemplated in this exclusion are short-term loans granted at irregular intervals to Employees and not all loans merely because they are less than R3 000. A taxable benefit would arise if the loans were granted on a regular basis to all Employees or a certain category of Employees notwithstanding the fact that the loan does not exceed R3 000.
Loan Subsidies
• Employer pays a subsidy in respect of any amount of interest or capital due by an Employee on
a loan
• The fringe benefit is valued at the amount of the subsidy paid by the Employer
Settlement of Employee Debt
• Employer pays an amount owing by the Employee to a third party (without requiring the
Employee to repay the amount) or the Employee is released from an obligation to pay a debt due to the Employer
• Settling of medical aid contributions is however, excluded
• The fringe benefit is valued at the amount paid by the Employer to the third party or the amount
of debt from which the Employee is released
Medical Aid Contributions
• Employer contributes to a medical scheme on the Employee’s behalf (whether directly or
indirectly)
• The fringe benefit is valued at the amount of the contribution made by the Employer
Medical Costs Incurred by Employer
• Employer incurred medical expenses on behalf of an Employee/their spouse, relative, child or
dependent (whether directly or indirectly)
• The fringe benefit is valued at the amount incurred by the Employer
17
Employer Contributions to Insurance Premiums
• Employer pays insurance premiums on the Employee’s behalf (whether directly or indirectly)
• The premiums are paid for the benefit of the Employee/their spouse, child dependent or nominee
• The fringe benefit is valued at the premium paid by the Employer
Long Service Awards
• Employer pays cash or awards an asset to an Employee for long service
• Value of benefit is the amount of the award or cost of the asset
• The award is tax free if the amount is under R5 000 provided:
- The initial unbroken service period is 15 years; and - Subsequant unbroken service periods of 10 years
ALLO
W
ABLE DEDUCTION
Allowable Deductions
Retirement Funding Income (RFI)/Non-Retirement Funding Income (Non-RFI)
• RFI is the amount of income used to determine what the contribution amount for a pension or
provident fund should be
• RFI is the amount of income that is left after RFI is calculated
Pension Fund Contributions
• Employee contributions to a pension fund are deductible from the amount of remuneration
received by the Employee before tax is deducted • Current contribution deduction limited to the greater of:
- R1 750
- 7.5% of retirement funding income • Arrear contribution deduction limited to R1 800
Retirement Annuity Fund Contributions
• Employer may (at their discretion) deduct the Employee’s contributions to a Retirement Annuity
fund when calculating the Employee’s taxable remuneration
• The Employee is however required to provide proof of payment • Current contribution deduction limited to the greater of:
- R1 750
- R3 500 minus the pension deduction allowed - 15% of non-retirement funding income • Arrear contribution deduction limited to R1 800
Medical Expenses Persons over 65:
• If the Employee or dependent has a disability, they are allowed the following deductions (over and above the standard Medical Tax Credit):
- Contributions to a registered Medical Aid that are in excess of 4 times the Medical Tax Credit - Additional Medical expenses paid
- Medical expenses incurred outside SA Limited to 33.3 %of the sum of the full medical aid contributions in excess of 3 times the credit plus 33.3 percent of all other qualifying out of pocket medical expenses paid by that person (excluding medical aid contributions’)
Persons under 65:
• with no disability, are allowed the following deductions (over and above the Medical Tax Credit):
- Contributions to Medical Aid that are in excess of 4 times the Medical Tax Credit - Additional Medical expenses in excess of 7.5% of taxable income (determined prior to Medical Aid deduction) Limited to 25% of the aggregate of the full medical aid contributions in excess of 4 times the credit plus all other qualifying out of pocket medical expenses (excluding medical scheme contributions), only to the extent that it exceeds 7.5% of the taxable income
19
ALLO
W
ABLE DEDUCTIONS
Calculation of Additional Medical Expenses Tax Credit
Fees paid to a medical scheme or fund
Qualifying medical expenses paid by that person (excl. medical scheme contributions)
Person 65 and older 33.3% of the total of fees
paid to medical scheme or fund, as exceeds 3 times
the amount of medical scheme fees tax credit
33.3% of qualifying medical expenses paid by that person
Disability 33.3% of the total of fees
paid to medical scheme or fund, as exceeds 3 times
the amount of medical scheme fees tax credit
33.3% of qualifying medical expenses paid by that person
Person under 65 years 25% of the aggregate of fees paid to medical scheme or fund
as exceeds 4 times amount of medical scheme fees tax credit and the amount of qualifying medical expenses as exceeding 7.5% of taxable income (excluding retirement fund lump sum
benefit and severance benefit)
Donations
• Only donations to certain Public Benefit Organisations (PBO) are deductible
• These deductions are limited to 10% of the total taxable income of an Employee during a tax
year. An Employee would claim these amounts on assessment
• A payroll-giving programme operated by an Employer enables Employees to donate from their
salaries on a monthly basis to organisations that have been approved to issue section 18A receipts. The donation is taken into account by the Employer when calculating the monthly
Employees’ tax to be deducted. The deduction is limited for Employees tax purposes to 5% of
remuneration after deducting certain amounts as specified
Employer Paid Insurance Premiums
• These premiums are only deductible by the ER if they have been taxed as a fringe benefit in the
Employee’s hands
Home Office Expenses
• Home office expenses include:
- Rental - Interest on bond - Repairs to premises - Telephone expenses - Rates & taxes - Cleaning - Office equipment - Wear and tear - Office stationery
- Other premises related expenses
For Home Office expenses to be deductible in the following conditions must be met:
- The part of the home in respect of which a claim is submitted must be occupied for purposes of a ”trade”
- The part that is so occupied must be specifically equipped for purposes of the trade. - If the trade is employment or the holding of an office:
- the income derived from this trade must be 50% or more commission or other payments which are based on the taxpayer’s work performance, and the taxpayer’s duties were not performed mainly in an office provided by his or her Employer;
- the taxpayer’s duties must be performed 50%or more in that part of the private premises occupied for purposes of trade
ALLO
W
Medical Tax Credits
• Medical Tax Credits apply to Employees who are members of a registered medical scheme • The Medical Tax Credits will be allowed as a deduction from normal tax payable • Monthly credit allowed is as follows:
- R270 per month for 1 member - R540 per month for 2 members
- Additional R181 per month for each member in excess of 2
• Contributions made to a Medical Aid by an Employer on the Employee’s behalf will result in a
taxable fringe benefit
• Contributions and medical expenses paid on behalf of a pensioner by an Employer are excluded from taxable income
• The above-mentioned Medical Tax Credits replace the previously allowed Medical Aid deductions that were based on the capped amounts
Special Income
Director’s Remuneration
• A director qualifies for Director’s Remuneration:
- If he/she is a registered director of a registered company or member of a CC; and - Earns less than 75% of their income from fixed income
• Is taxed on the higher of:
- Deemed remuneration; or - Actual remuneration
• Deemed remuneration is determined on the formula:
Y = T/N
- Y - Monthly amount to be determined
- T - Balance of remuneration in previous year excluding remuneration:
o From relinquishment, termination, loss, repudiation, cancellation or variation of any office of employment
o In commutation of amounts due under any contract of employment
o Gains made by the exercise, cession or release of any right to require marketable security o Gains made from the disposal of any qualifying equity share
21
O
THER
- N - the number of completed months in the tax year used to determine T
o If the previous year has not been determined as yet, then the SARS commissioner must determine the amount for the formula
o If the remuneration for the last year has not been determined, then use the year prior to that year and add 20% and N will be the number of completed months for that year.
• If tax paid on actual director wholly responsible
• If tax paid on deemed director responsible for actual and balance by company
- Company can reclaim tax at end of year with assessment from the director
Severance Pay
• Remuneration paid by an Employer to an Employee for:
- Relinquishment, termination, loss, repudiation, cancellation or variation of a person’s office or
employment, if:
o The person has reached the age of 55 years
o The person has become permanently incapable of holding the office o The company ceasing to do business
o The person has become redundant
• The company must apply for a directive from SARS for the taxation
• Leave pay and other termination related pay does not form part of the severance pay • The amount paid to the Employee is exempt from tax if:
- The amount is paid in respect of the death or disablement caused by an occupational injury or disease contracted before 1 March 1994
- The amount does not exceed R 500 000
- The amount was paid in terms of the Road Accident Fund Act (in this case a directive must still be applied for )
Compensation Benefits due to Death of the Employee
• A lump sum paid by the Employer as the direct result of an occupational death of the Employee • The lump sum payment must be made in connection with the COID Act
• The amount must be deemed to have accrued to the Employee immediately prior to their death • The company must apply for a directive from SARS for the taxation amount
O
THER
• The benefit is exempt from tax if: - The benefit is paid in terms of the COID Act - The Employer is liable
- The amount does not exceed R 300 000
Lump Sum Benets for Withdrawal from Retirement Funds due to Termination of Employment
• Early withdrawal from retirement funds to be categorized as: - Those before 1 March 2009; and
- Those after 1 March 2009
• The fund administrators must apply for a directive from SARS for the taxation • Early withdrawal includes retrenchment, dismissal and divorce
Restraint of Trade Payments
• A payment to enforce a restraint of trade agreement
• Must be payable to a natural person, labour broker without an exemption certificate, or personal
service provider
• Taxed as an annual payment or bonus
Arbitration Awards
• An award to a person on order from the CCMA or Labour Courts • Can be awarded for:
- Unfair dismissal
- Termination of contract prior to expiry date - Unfair labour practices
• Company to send written application to SARS to determine tax exempt amount • Amount taxed as an annual payment or bonus
Independent Contractors
• Income received by an Independent Contractor is subject to certain conditions,
• Specifically excluded from the remuneration definition (i.e. it is not subject to Employee’s Tax)
• An Independent Contractor differs from an Employee in the following manner:
- They are not subject to the supervision or control of another person with regards to the manner in which their duties are performed as well as the hours within which these duties are to
be performed
- Payment is based on the results of the output produced by the individual
23
O
THER
- The individual is required to provide their own tools and resources to ensure completion of the job
- The individual bears all business risk arising
• The tax liability due by the individual is to be withheld in accordance with a tax directive issued by SARS
Employment Tax Incentive
• The ETI is an incentive reimbursement for employing youth for the first time • A qualifying Employer can claim the ETI from 1 January 2014 to 31 December 2016 • Any Employer registered for PAYE except government, municipal and public entities qualifies for
the incentive
• Employees who qualify are:
- Employed on or after 1 October 2013 - Between the ages of 18 to 29 years of age; or
o If an Employer is in a Special Economic Zone, the age criteria is ignored - In possession of a valid RSA 13 digit identity document; or
o In possession of a valid Asylum Seeker permit - Not a connected person to the Employer - Not a domestic worker
- Paid the minimum wage of the sector they work in; or o If no minimum wage, more than R 2 000 per month; or o Less than R 6 000 per month
• The ETI can be claimed for the first 24 qualifying months the Employee is employed • The first 12 qualifying months the ETI claim is 50% of the remuneration to a maximum of
R 1 000
• The second 12 months the ETI claim is 25% of the remuneration to a maximum of R 500 • The formula for the ETI amount is:
- R 2 000 or less, 50% (1st 12 months) or 25% (2nd 12 months) of the monthly remuneration - More than R 2 000 but less than R 4 001, an amount of R 1 000 (1st 12 months) or R 500 (2nd 12 months)
- More than R 4 000 but less than R 6 001, an amount determined by the formula X = A – (B x (C - D)
o X -– monthly employment tax incentive
o A - the amount of R 1 000 (1st 12 months) or R 500 (2nd 12 months) o B - the number 0.5 (1st 12 months) or 0.25 (2nd 12 months)
T
AX INCENTIVES FOR COMP
o C - The Employee’s monthly remuneration
o D - The amount of R 4 000 - More than R 6 000, an amount of Nil
• The amount is withheld from the PAYE on the EMP201
Other Related Statutory Requirements
Over and above having to withhold PAYE from an Employee’s income, the Employer is required to
make Skills Development Levy (SDL) and Unemployment Insurance Fund (UIF) contributions on the
Employee’s behalf
SDL
• Remuneration for SDL purposes is remuneration as defined for PAYE purposes (after accounting
for the allowable deductions), subject to the following exclusions: - Amounts paid to a labour broker with an exemption certificate - Pension, superannuation, or retirement allowances
- Annuities
- Voluntary awards in respect of relinquishments or termination of office - Lump sums from a pension fund
- Amounts payable to a learner
• The amount to be contributed is 1% of the Employee’s taxable remuneration
• Employers whose total taxable remuneration is not in excess of R500 000 per annum are exempt
from SDL
UIF
• Remuneration for UIF purposes is remuneration as defined for PAYE purposes (prior to accounting
for the allowable deductions), subject to the following exclusions: - Pension, superannuation, or retirement allowances
- Amounts received from a restraint of trade
- Voluntary awards in respect of relinquishments or termination of office - Retirement lump sum benefits
- Lump sums from a pension fund
• Both the Employer and Employee are each required to make a contribution of 1% of the
Employee’s taxable remuneration
• The maximum amount on which these contributions are calculated is R178 464 per annum or
R14 872 per month or R 3 432 per week - Subject to change in the 2015/2016 tax year
25
T
AX INCENTIVES FOR COMP
ANIES
In the 2015 budget speech a special proposal for UIF was mentioned. A substantial reduction in UIF contributions can be expected but this will only
COIDA & BCEA
• The earnings ceiling for COIDA & BCEA contributions has been set at R 332 479 per annum
(effective 1 April 2014). This amount must be used for all Employees who exceed this limit when doing the declaration
Dividend Tax & Capital Gains Tax (CGT)
Dividend Tax• This tax is to be levied at a rate of 15% of any dividend declared or paid
• This tax is to be withheld by the company paying over the dividend
CGT
• This tax is levied on the disposal of assets and any gains arising are to be included in taxable
income
• The effective tax rates for CGT are as follows:
- Individual and special trust 13.3% - Companies 18.6%
- Other trusts 26.6%
• The following specific exclusions are applicable for CGT:
- R2 million gain/loss on the disposal of a primary residence - Disposals of retirement benefits
- Payments in respect of long term insurance policies - Annual exclusion of R30 000 for all individuals and special trusts - Small business exclusion of R1.8 million
- A R300 000 exclusion upon the death of an individual
Useful Tax/Legislative Calendar
Payment Type Date Due
VAT 25th day after the end of the period
(last working day if you are an e-Filer)
PAYE 7th day of each following month
SDL 7th day of each following month
UIF 7th day of each following month
O
THER
PA
YR
OLL T
AXES
COIDA Return of Earnings to be submitted by end of March for preceding tax year
Notice of Assessment and payment normally due in September
Employment Equity Reports Beginning of October
SA Stats Reports Quarterly
If any of the above dates fall on a weekend or a public holiday, payment or submissions must be made on the immediately preceding working day.
Other Taxes: Trusts
Special Trusts are taxed according to the progressive tax rates that are used to calculate tax due by individuals. A trust other than a special trust will be taxed at a rate of 41%.
Tax Directives
Tax directives are issued by SARS to instruct the Employer on how to deduct Employee’s Tax in cases
where the prescribed tax tables do not cater for certain forms of remuneration or payments. When
calculating the Employee’s Tax due, Employers must apply the rate stated on the directive issued. The
following is applicable with regards to tax directives:
• The directive is only valid for 1 year or the period stated thereon
• Employers may not act on photocopies of directives
• Employers may not deviate from the instructions stated on the directive
Tax directives can be obtained by submitting the relevant forms to SARS and can be applied for under the following circumstances:
• The Employer pays gratuities (upon retirement, retrenchment or superannuation)
• Employee’s Tax is to be deducted from remuneration earned by commission agents or a personal
services provider
• An Independent contractor receives income
• In cases of hardship
• When a pension, provident or retirement annuity fund makes a lump sum payment
27
T
AX INCENTIVES FOR COMP
Provisional Tax
A provisional taxpayer is any person who earns income other than remuneration. The following individuals are however, exempt from the provisions of provisional tax:
• Provided the following conditions are met:
- They do not carry on a business
- Their taxable income does not exceed the tax threshold
- Their annual passive income (interest, dividends or rental income will be R30 000 or less)
Company Taxes... in your Pocket!
Interest and Dividends
The following exemptions are applicable with regards to interest and dividends received by a natural person:
• Individual below the age of 65 - first R23 800 of local interest earned per annum is
exempt
• Individual 65 years and older - first R34 500 of local interest earned per annum is exempt
Of the above-mentioned amounts, an amount not exceeding R3 700 per annum can be used to exempt foreign dividends and interest earned (exemption to be applied to foreign dividends first)
Company Tax
Companies with their financial year ending during the period 1 April 2015 - 31 March 2016 will be taxed at a rate of 28%.
O
THER T
Small Business Corporations
Small business corporations with their financial year ending during the period 1 April 2015 - 31 March 2016 will be taxed at the following rates:
Micro Businesses
Micro Businesses with their Financial year ending during the period 1 April 2015 - 31 March 2016 will be taxed at the below rates (no change from previous year):
Taxable Income (R) Tax Rate
R0 - R73 650 0%
R73 651 - R365 000 7% of the amount above R73 650
R365 001 – R550 000 R20 395 + 21% of the amount above R365 000
R550 001 + R59 245 + 28% of the amount above R550 000
29
O
THER T
AXES
Taxable Income (R) Tax Rate
R0 - R335 000 0%
R335 001 - R500 000 1% of the amount above R335 000
R500 001 - R750 000 R1 650 + 2% of the amount above R500 000
Learnership Allowance
• Learnership Agreement:
- A learnership Allowance is applicable to registered learnership agreements entered into between a learner and an Employer before 1 October 2016
- A registered learnership agreement means a learnership agreement that is registered in accordance with the Skills Development Act
- A learneship that is registered within 12 months after the last day of the year of assessment in which it was entered into, must be deemed to have been registered on the day in was entered into
- The agreement must be entered into pursuant to a trade carried on by the Employer
• Annual Allowance:
- R30 000 (R50 000 for a person with a disability) - in respect of every completed 12 month period
O
THER T
AXES
VAT
• VAT is levied at a rate of 14% on the supply of goods and services by a registered vendor
• Vendors making taxable supplies of more than R1 million are required to register asVAT vendors
• Vendors making taxable supplies of more than R50 000 but less than R1 million may register
31
O
THER T
AXES
Transfer Duty
Transfer duty is payable upon the acquisition of property, provided that the transaction was not subject to VAT. Transfer duty is levied at the following rates:
Estate Duty
• This tax is levied at a rate of 20% on the property of South Africans and the South African
property of non-South Africans
• This tax is levied upon the death of an individual
• A basic deduction in the amount of R3.5 million is allowable when determining an estate’s tax
liability
• The following deductions are also allowed (provided certain conditions have been met):
- Liabilities incurred by the estate - Bequeaths to Public Benefit Organisations - Property accruing to the surviving spouse
Donations Tax
• This tax is levied at a rate of 20% of the value of property donated
• The first R100 000 of the value of property donated by a natural person is exempt from
donations tax (exemption available per annum)
• Casual gifts (donated by a person other than a natural person) not exceeding R10 000 are
exempt from donations tax
• Donations between spouses as well as donations to a PBO are exempt from donations tax
Value of Property (R) Tax Rate
R0 - R750 000 0%
R750 001 - R1 250 000 3% of the value above R750 000
R1 250 001 - R1 750 000 R15 000 + 6% of the value above R1 250 000
R1 750 001 and 2 250 000 R45 000 + 8% of the value above R1 750 000
O
THER T
AXES
Securities Transfer Tax
• This tax is levied at a rate of 0.25% and is levied on the transfer of listed securities
LabourNet Products & Solutions
Recruitment
As a prominent corporate recruiter, LabourNet assists businesses to source an effective workforce by identifying talented individuals who will help them achieve their objectives. Our recruitment specialists offer a range of unique and flexible solutions geared for permanent positions, temporary employment services as well as skills testing and verification services.
Payroll Solutions
s
LabourNet Payroll Solutions provides companies of all sizes and in any industry the flexibility to truly take control of their payroll functions and to align these functions to their business needs, however simple or complex they may be. Clients can choose to fully outsource their payroll functions to LabourNet or maintain administrative payroll tasks within their company whilst making use of our payroll technology. Our highly skilled LabourNet staff offer payroll support and best practice advise focused on ensuring continued compliance with current tax and labour legislation.
Payroll & HRIS Technology
LabourNet’s technology platforms, PSIberWORKS and PSIberLITE, have been designed and developed to create a powerful suite of Payroll & HRIS products and supporting modules which have proven to be the benchmark for future developments in the world of Internet based Payroll, HR and Tax Management systems. The LabourNet solutions cover all aspects of Payroll and HR management from recruitment to retirement.
Talent Management
LabourNet offers a unique set of services which incorporate talent management functions such as on-boarding, performance management, human resourced development, reward and remuneration and retention and succession functions to ensure the optimal and efficient management of your human resources.
33
GENERAL
Training & Development
As your Training Manager, LabourNet is able to position your training expenditure to ensure alignment towards skills development indicators on your B-BBEE scorecard in order to derive maximum impact from you investment in Training and Development. LabourNet’s accredited training and development programmes, facilitated by subject matter experts, use practical and interactive training methods to ensure the application of critical management skills.
Transformation
Transformation is a critical tool for driving meaningful and sustainable growth in your organization. LabourNet assists businesses to structure and implement systems to achieve diversity, drive innovation and ensure compliance while maximizing employee potential. These systems align business processes and procedures with appropriate Employment Equity, Skills Development and B-BBEE requirements.
Health & Safety
LabourNet facilitates the management of a safe, healthy and environmentally-friendly workplace for both employers and employees alike. Our range of professional and quality services establishes a comprehensive Occupational Health and Safety Management System (OHSMS), identifies hazards and risk assessment, to accident/incident investigation and compliance with regulations.
Industrial Relations
LabourNet proactively installs best practice and procedures in Industrial Relations, ensuring optimal staff performance, reduced workplace conflict and minimised risk in dismissing staff, all within the required legislative framework. Our firm but fair approach to trade union collective bargaining, discipline management, strike handling, incapacity investigations and restructuring minimise disruption to your company’s operations so that you can achieve your strategic objectives.
Litigation
LabourNet assists clients to face the ever increasing risk of litigation within their business by analysing disputes and identifying strategies that prevent them from escalating or resulting in unnecessary settlements which create a negative precedent. Our expert consultants provide professional legal advice, training, and preparation for conciliations and arbitration, as well as access to a preferred panel of
Copyright
Copyright belongs to LabourNet Payment Solutions (Pty) Ltd t/a LabourNet Payroll Solutions (”LPS”) under the copyright laws of South Africa. No part of this document may be reproduced, translated or modified in any manner or form by any means whatsoever without the express written permission from LabourNet Payroll Solutions.
Disclaimer
We suggest that you do not act solely on material contained in this guide as the nature of the information contained herein is general and may in certain circumstances be subject to misinterpretation. In addition, the budget proposals may not include all legislative adjustments which could be made in the near future. The information is provided with the understanding that no legal or professional advice is being rendered in this guide. We recommend that our advice be sought when encountering these potentially problematic areas. While every care has been taken in the compilation of this guide, no responsibility of any nature whatsoever will be accepted for any inaccuracies, errors or omissions.
LabourNet Head Office
Tel: (011) 532 8802 | Fax: (011) 532 8845 | Email: support@labournet.com LabourNet JHB North
Tel: (010) 590 9422 | Fax: (0866) 393 658 | Email: jhbnorth@labournet.com LabourNet JHB East
Tel: (011) 916 7700 | Fax: (011) 894 7255 | Email: jhbeast@labournet.com LabourNet JHB South
Tel: (011) 867 0086 | Fax: (011) 867 7466 | Email: jhbsouth@labournet.com LabourNet JHB West
Tel: (011) 958 0539 | Fax: (011) 958 0264 | Email: jhbwest@labournet.com LabourNet Pretoria
Tel: (012) 991 1445 | Fax: (086) 607 6141 | Email: pretoria@labournet.com LabourNet Rustenburg
Tel: (014) 594 2349 | Fax: (014) 594 2063 | Email: rustenburg@labournet.com LabourNet Bloemfontein
Tel: (051) 447 2332 | Fax: (051) 447 7896 | Email: bloemfontein@labournet.com LabourNet Durban
Tel: (031) 266 6570 | Fax: (031) 266 9887 | Email: kzninfo@labournet.com LabourNet Cape Town
Tel: (021) 552 4220 | Fax: (021) 910 4931 | Email: ctinfo@labournet.com LabourNet Port Elizabeth
Tel: (041) 373 2994 | Fax: (041) 373 2742 | Email: portelizabeth@labournet.com LabourNet East London
Tel: (043) 726 9844 | Fax: (043) 726 9842 | Email: eastlondon@labournet.com LabourNet Nelspruit
Tel: (013) 751 3262 | (086) 532 0961 | Email: nelspruitinfo@labournet.com LabourNet Garden Route
Tel: (044) 873 6085 | Fax: (086) 545 3987 | Email: gardenroute@labournet.com
