Welcome to the latest edition of Tax Practitioner Connect, the electronic newsletter for tax practitioners that keeps you up to date with the tax matters that affect you.
In his budget speech, delivered on 21 February, the Minister of Finance, Malusi Gigaba, said that in 2018 the focus will be on restoring business and consumer confidence by putting South Africa’s finances on a sustainable path. The key points are summarised below:
- Value-added tax (VAT) rate increases from 14 per cent to 15 per cent on 1 April 2018. This increase will raise additional R36 billion in revenue. Raising VAT is estimated to have the least harmful effects on growth over the period ahead
- Limited relief for the effect of inflation in adjusting personal income tax rates resulting in additional tax revenue of R6.8 billion
- Estate duty rate increases from 20 to 25 per cent on dutiable amount of estates of more than R30 million
- Donations tax rate increases from 20 to 25 percent on donations of more than R30 million per annum
- The Minister of Finance will approve six special economic zones for tax relief
- The general fuel levy increases by 22 cents per litre and road accident fund levy increases by 30 cents per litre on 4 April 2018 This will push up:
- the general fuel levy to R3.37 per litre of petrol and to R3.22 per litre of diesel
- the road accident fund levy to R1.93 per litre for both petrol and diesel.
- Increased excise duties on tobacco and alcohol
- Environmental taxes on plastic bags, incandescent light bulbs and vehicle emissions tax to be increased from 1 April 2018
- Health promotion levy on sugary beverages will commence on 1 April 2018
- Monthly medical scheme tax credits will increase from R303 to R310 for the first two beneficiaries and from R204 to R209 for additional beneficiaries. The increased amounts are effective from 1 March 2018
- Personal Income Tax Rate
The 2018 Budget provides for some changes to personal income tax. The amount an individual can earn before being required to pay tax has been adjusted as follows for the tax year, 1 March 2018 to 28 February 2019:
OF INDIVIDUALS (R)
|TAX PAYABLE (R)|
|0 to 195 850 ||18% of taxable income|
|195 851 to 305 850||35 253 + 26% of taxable income above 195 850|
|305 851 to 423 300||63 853 + 31% of taxable income above 305 850|
|423 301 to 555 600||100 263 + 36% of taxable income above 423 300|
|555 601 to 708 310||147 891 + 39% of taxable income above 555 600|
|708 311 to 1 500 000||207 448 + 41% of taxable income above 708 310|
|1 500 001 and above||532 041 + 45% of taxable income above 1 500 000|
|Trusts other than special trusts||Rate of tax 45%|
Several changes to the Income Tax Return for Companies will be implemented on 26 February 2018. Some of the changes include:
- Section 12H: Learnership agreements
A new schedule has been added to the return. This schedule requires the number of learners and the allowance amount to be completed for each field listed in the learnership schedule. The schedule requires separate disclosure for learners with a disability and learners without a disability for NQF levels 1 – 6 and NQF levels 7 – 10
- Submission of IT10
To ease compliance a new IT10 schedule has been introduced, enabling all companies to upload the IT10 schedule as a supporting document regardless of the number of Controlled Foreign Companies
- Group of companies that prepares consolidated financial statements
Companies with subsidiaries will now be required to submit the complete group structure
- A number of additional line items have been added in the tax computation to provide for the relevant legal changes
- New questions pertaining to Country by Country regulations have been added
- Supporting documents and additional information
The following documents (at a minimum) are needed in order to complete the Income Tax Return for Companies (ITR14) on eFiling:
- Financial statements and/or administration deductions
- All certificates and documents relating to income and deductions
- Proof in relation to any tax credits claimed
- Particulars of assets and liabilities.
- If filing at a SARS branch all relevant supporting documents must be provided.
The PAYE legislative changes for the 2019 year of assessment are as follows:
- Bursaries or Scholarships
The exemption thresholds for bursaries or scholarships granted by an employer to enable or assist a non-disabled relative of an employee to study at a recognised educational or research institution have been increased from 1 March 2017.
Four new tax certificate codes for bursaries or scholarships granted by an employer to enable or assist a disabled member of the family of an employee in respect of whom the employee is liable for family care and support, to study at a recognised educational or research institution have been introduced with effect from 1 March 2018.
Detail of the different threshold amounts applicable to a non-disabled relative of an employee and a disabled member of the family of an employee in respect of whom the employee is liable for family care and support are available in the Guide for Employers in respect of employees’ Tax (2018 Tax Year).
- Reimbursive Travel Allowance
The definition of “remuneration” was amended with effect from 1 March 2018. The amended definition now includes the travel expenses reimbursed by the employer (based on the employer reimbursement rate per km) as exceeds the amount based on the prescribed rate (R 3.61 for 2019).
The travel expenses reimbursed by the employer based on the prescribed rate (R 3.61 for 2019), is not remuneration. The 12000 kms limit to enable using the R3.61 rate per km, was removed from 1 March 2018.
The new source codes and information about the application thereof will be made available in the relevant SARS guides and Business Requirement Specifications.
- Dividends not exempt
The definition of “remuneration” was also amended to include any amount received by or accrued to a person by way of a dividend contemplated in paragraph (kk) of the proviso to section 10(1)(k)(i).
More information will be available in the relevant SARS guides on this website.
As part of our ongoing efforts to promote efficiency and compliance we will be implementing several changes to the Income Tax Return for Trusts (ITR12T) in February in respect of the year of assessment ending on 28 February 2017.
If you have saved or submitted your 2017 ITR12T prior to the implementation of the latest changes, none of the new fields will be presented for completion. The contents of the return are fully customisable based on answers to certain questions presented to you for completion. Some of the changes include:
- Dividends deemed to be income in terms of s8E and s8EA
The introduction of a new local income type, i.e. dividends deemed to be income i.t.o. s8E and s8EA.
- Disclosure of Details of Trusts / Companies / Individuals that Transacted with the Trust
The ITR12T has been updated to:
- Exclude trusts that are collective investment schemes or employee share incentive schemes from having to disclose information related to details of persons that transacted with the Trust
- Introduce additional validations for all other trusts to ensure that the income distributed by the trust to other persons (trusts / companies / individuals) is fully disclosed.
- Learnership Agreements (s12H)
The ITR12T has been updated to require a detailed schedule of all learnerships registered/ entered into and learnerships completed where the trust claims a s12H deduction. This schedule requires the number of learners and the allowance amount to be completed for each field listed in the learnership schedule. The schedule requires separate disclosure for learners with a disability and learners without a disability for NQF levels 1 – 6 and NQF levels 7 – 10.
- Loan, advance or credit to a trust (s7C)
A new section 7C has been added which makes provision for interest free or low-interest loans that are made directly or indirectly by a natural person or a company at the instance of the natural person connected to such company to a trust. A number of conditions apply, as well as certain exclusions. In essence, the difference between the amount incurred by the trust as interest and the amount that would have been incurred by that trust at the official rate of interest as defined in section 1(1) of the Income Tax Act, No 58 of 1962 (as amended) (“the Act”) will be treated as having been donated by the natural person to the trust and will therefore be subject to donation tax in terms of section 54 of the Act. The natural person may use the annual donations tax exemption of R100 000 (or the remaining portion if applicable) against this deemed donation.
The section 7C donation is deemed to be a continuing annual donation for purposes of donations tax and deemed to be made by the natural person on the last day of the year of assessment of the trust which is generally the last day of February. It is important to note that in terms of section 60(1) of the Act, donations tax is payable by the end of the month following the month during which a donation takes effect or such longer time as SARS may allow. Therefore, in almost all section 7C deemed donations, the donations tax payments must occur by the end of March.
For more information on how to make donation tax payments, click here.