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Tax Practitioner Connect Issue 7 (28 March 2017)

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.

To read our newsletter below, click on each heading to expand the corresponding article.

The Employer Annual Reconciliation starts on 18 April 2017 and employers have until 31 May 2017 to submit their Annual Reconciliation Declarations (EMP501) for the period 1 March 2016 to 28 February 2017 in respect of the Monthly Employer Declarations (EMP201) submitted, payments made, Employee Income Tax Certificates [IRP5/IT3(a)] and ETI, if applicable.

An updated version of [email protected]™ Employer will be available at the time. Information about the version that you should use will be published on the [email protected]™ page. Remember to back-up your current information on your computer prior to installing a new version of [email protected]™ Employer.

You can submit your Employer Reconciliation Declaration (EMP501) and Employees Income Tax Certificates [IRP5/IT3(a)s]  online via [email protected]™ Employer, or if you have less than 50 employees, via eFiling.

For more information call the SARS Contact Centre on 0800 00 7277.

The Special Voluntary Disclosure Programme (SVDP) is now open for a limited period to allow individuals and companies the opportunity to regularise both their tax and exchange control affairs.
The SVDP is part of Government’s interventions to combat tax avoidance and as such SARS and the South African Reserve Bank (SARB)​​ are working together to ensure that applications for the SVDP are assessed through one joint process for both tax compliance and exchange control contraventions.
 The SVDP opened on 1 October 2016 and will be open for applications until the end of August this year. To date SARS has already received disclosures of R3.8 billion in foreign assets which will yield revenue of about R600 million.

The SVDP is viewed as the precursor to the automatic exchange of information between tax authorities that will come into operation in September this year. It is the last chance that taxpayers will have to voluntary disclose offshore assets and qualify for tax relief provided that they meet the qualifying criteria. Once the automatic exchange of financial information (AEOI) between tax authorities come into operation, they will have to face the full might of the law.

The AEOI is the result of an initiative stemming from South Africa signing an Inter-Governmental Agreement (IGA) with the US Internal Revenue Service (IRS) on their Foreign Account Tax Compliance Act (FATCA) as well as the Organisation for Economic Cooperation and Development (OECD) Common Reporting Standard (CRS).

South Africa has worked with more than 100 jurisdictions in crafting this multilateral instrument that will swiftly modify and implement tax treaty-related measures reducing the scope for aggressive tax avoidance activities.

In terms of the CRS multinational companies are required to file further information with SARS on cross-border activities from the end of the year. SARS will continue to work actively with the international tax community and within government to modernise customs administration and combat cross-border revenue leakages, money laundering and harmful tax practices.

For more information please visit the Automatic Exchange of Information (FATCA AND CRS) page or send an email to [email protected]  

The Dividend Withholding Tax rate has been increased from 15% to 20% with immediate effect from 22 February 2017.

Previously, dividend income paid to shareholders was taxed at a rate of 15 per cent. After accounting for corporate income tax which is paid before the distribution of dividends, the combined statutory tax rate on dividends is 38.8 per cent. The Minister of Finance in his recent Budget Speech said that South Africa’s combined statutory tax rate on dividend income currently falls below the Organisation for Cooperation and Economic Development (OECD) average.

To reduce the difference between the combined statutory tax rate on dividends and the top marginal personal income tax rate, government has increased the dividend withholding tax rate to 20 per cent. The exemption and rates for inbound foreign dividends were simultaneously adjusted in line with the new rate, effective for years of assessment commencing on or after 1 March 2017.

For more information please visit the Third Party Data Submission Platform webpage. 

The South African Revenue Service (SARS) has confirmed the interpretation of the Value-Added Tax (VAT) law that requires non-executive directors (NEDs) of companies to register for and charge VAT in respect of any directors fees earned for services rendered as a non-executive director.

Two binding general rulings – BGR Nos 40 and 41 were issued on 10 February 2017 confirming the interpretation as of 1 June 2017. The value of the fees must, however, exceed the compulsory VAT registration threshold of R1 million in any 12-month consecutive period but NEDs can voluntarily register for VAT as well.

Previously NEDs were subject to employees’ tax (PAYE) because the director’s fees received for services rendered were considered remuneration. However, due to amendments made in 2007 to the exclusions to the definition of “remuneration” in the Fourth Schedule to the Income Tax Act No. 58 of 1962 (the Act), there was uncertainty as to whether the amounts payable to an NED were subject to the deduction of PAYE.

After consultation, review and application of the law it has been confirmed that an NED is regarded as an “independent contractor” and any directors fees paid or payable to an NED for services rendered in that capacity are not regarded as remuneration.
 
NEDs receiving directors’ fees exceeding the compulsory registration threshold are required to register as VAT vendors from 1 June 2017. However, NEDs will not be required to account for VAT in respect of directors fees received prior to this date, provided such NED was subject to PAYE.

SARS would like to encourage those NEDs already registered for another tax type to register for VAT via SARS eFiling or to visit their nearest SARS branch.

For more information NEDs and other parties concerned may contact [email protected].

Taxpayers who have returns or payments due to SARS by 31 March are reminded to comply on time. To avoid any risk of late payment, taxpayers who are making payments on 31 March 2017, are urged to do so by 12:00 midday.

Payments and submissions received after the deadline will be marked as late and will be liable for penalties and interest.

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