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.
TAX SEASON 2017
Changes to the ITR12
For Tax Season 2017 we are introducing the following changes to the Income Tax Return for Individuals (ITR12):
- Medical expenditure
The medical contributions (4005) disclosed by the employer on your client’s IRP5/IT3(a) certificate will no longer automatically be deemed to be claimed by your client. The rebate in respect of medical contributions and medical expenditure will solely be based on the information completed in the relevant medical containers on the tax return. You must therefore ensure that the amounts displayed next to the 4005 code on the IRP5/IT3(a) certificates are completed in the field for medical contributions in the Medical Container(s) created on the return.
The disclosure of medical contributions and medical expenses in respect of an immediate family member, who is dependent on your client for family care and support, must also be disclosed separately. Your client must provide proof of these payments on request.
In the separate medical scheme containers, medical expenditure not covered by the medical schemes that is reflected on the relevant medical scheme tax certificates must be completed in the fields next to the code 4020.
- Out of pocket expenses not reflected on any medical scheme tax certificate
Your client can also claim any qualifying medical out of pocket expenses that he/she did not claim from the medical scheme and that is not reflected on your client’s medical scheme certificate (code 4034). Any qualifying medical expenses paid by your client not claimed from any medical scheme and therefore not reflected on any medical scheme tax certificate must be disclosed separately in the field next to the new code 4034.
Additional information of each qualifying person with a disability needs to be completed on the ITR12, e.g. the person with the disability (yourself, spouse or qualifying child), date of birth of person with disability, severity of disability, the date on which the latest ITR-DD was confirm by a medical practitioner, the registered medical practitioner practice number, etc.
- Medical expenditure not paid by any medical scheme
Please note that all qualifying medical expenses claimed as out of pocket expenses (codes 4020, 4034, 4022 and/or 4023) by your client must have been proved to be paid by your client and the necessary receipts must be available should it be requested by SARS.
- Retirement Annuity Fund Contributions
If your client wants to claim deductions for retirement annuity fund contributions he/she made, the individual policy number(s) and the name(s) of the insurer(s) or fund(s) must be provided.
- Income distributed/vested as a beneficiary of Trusts
If your client received income as a beneficiary of a trust/s the trust details for each trust as well as details about local and foreign income derived from each of the trusts must be provided individually. The trust income from more than one trust must not be combined, but must be declared in separate containers.
- South African Residency status
Taxpayers will have to indicate, where applicable, on which date during the relevant year of assessment (e.g. 1 March 2016 to 28 February 2017) they ceased to be a resident of the Republic of South Africa.
- Employment status
Taxpayers who were unemployed for the full year of assessment (e.g. 1 March 2016 to 28 February 2017), and received no form of income (including no capital gains/loss) will need to indicate this on the ITR12. Taxpayers who were unemployed for any period during the relevant year of assessment will also have to indicate the period(s) of unemployment in the specific container provided on the ITR12.
The submission deadlines for the ITR12 depend on the channel used and type of taxpayer:
|Channel||Deadline||Type of Taxpayer|
|Manual – post or at SARS branch drop boxes||22 September 2017||Non-provisional + provisional|
|eFiling or electronic filing at SARS branch ||24 November 2017||Non-provisional|
|eFiling||31 January 2018||Provisional|
We have implemented additional security measures at our branches for taxpayers who need to change banking details or any other details registered with SARS.
Taxpayers will be authenticated through the following steps:
- Taxpayer must present his/her ID
- We will scan the taxpayer’s fingerprint
- We will take the taxpayer’s photograph
- We will check this information with the Department of Home Affairs to make sure it corresponds with their records.
AUTOMATIC EXCHANGE OF INFORMATION (AEOI): CLOSING THE NET ON TAX AVOIDANCE
From September 2017, over 50 jurisdictions will be taking part in the annual automatic exchange of information to assist with domestic tax compliance.
The Common Reporting Standard (CRS)
The CRS is the common standard for the automatic exchange of information requiring financial institutions to perform due diligence procedures and to systematically transmit financial data of their non-resident clients. The type of information and the due diligence put in place for all financial accounts are defined by the CRS regulations.
The CRS is effectively creating a global framework for information sharing between governments on a reciprocal basis. This means that SARS will simultaneously receive financial information of South African tax-resident taxpayers from revenue authorities in other jurisdictions that have committed to the CRS. As financial institutions around the world will be gathering this data, it becomes important that their customers are also aware that their data will be shared with resident jurisdictions.
For more information on the CRS regulations please visit the OECD website.
Foreign Account Tax Compliance Act (FATCA)
The Foreign Account Tax Compliance Act (FATCA) was designed to facilitate the exchange of taxpayer information between South Africa and the United States of America (USA). According to the agreement financial services companies such as banks, brokers, asset managers, private equity funds and long term insurers in both countries collect information and submit it to the relevant revenue authority. The chief intent of FATCA, as with the CRS, is to ensure compliance and transparency with regards to tax information.
Country-by-Country (CbC) Financial Reporting
SARS has long been aware of the complex schemes that are used by Multinational Enterprise (MNE) Groups to take advantage of cross‐border structuring and transfer pricing manipulations to evade or impermissibly avoid paying tax. This has led to huge losses in terms of tax revenues.
In recognising that it had become necessary for countries to work together to close the gaps and address the mismatches that arise in the interaction between the tax systems of multiple countries the OECD and G20 countries including SARS, adopted the Base Erosion and Profit Shifting (BEPS) Action Plan in 2013.
The OECD /G20 BEPS project provided the ambit for the development of the Country-by-Country (CbC) reporting plan. CbC reporting requires MNE Groups to report on their operations in every country that they operate in. This report enables revenue authorities to investigate irregular activities, monitor and eradicate unlawful practices and ensure that MNEs satisfy their tax obligations and pay taxes legally owed by them in the country that they operate in.
On 23 December 2016 regulations specifying the changes to the CbC Reporting Standard for MNE Groups specifically required for South Africa’s circumstances were published. The South African CbC Regulations were closely modelled on the legislation related to CbC reporting published in the Action 13 (2015) Final Report. In addition to this domestic legal framework and by public notice SARS will be able to receive and where relevant exchange pertinent transfer pricing information provided in the CbC Reports, master files and/or local files with other jurisdictions.
The South Africa Revenue Service (SARS) is currently hard at work to automate the platform for submission of the company financial data as well as master and local file. A progress update on the readiness of the new platform will be provided in the near future.
The Special Voluntary Disclosure Programme (SVDP)
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 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.