The Minister proposed to review certain aspects pertaining to non-executive directors’ fees, as there appears to be a disconnect, or at least a difference of interpretation between the PAYE and VAT treatment of such fees. As a general principle, where an amount is paid to an individual (for example a non-executive director), regarded as independent under common law but not for purposes of the Fourth Schedule to the Act, the individual must levy VAT on those services supplied to their client, but only if that person is (or is required to be) registered as a vendor under the VAT Act. The aforementioned scenario rarely arises in practice though. However, PAYE at the applicable rate, must be withheld from the VAT exclusive amount charged by the individual to their client.
Author: Nyasha Musviba
Budget 2016 – Foreign pension fund contributions and exits to be reviewed
What appears to be part of a broader retirement reform in South Africa, the Minister proposed a further review of the aspects relating to foreign pension contributions, annuities and exits from those funds. This follows hot on the heels of at least some uncertainty being taken away on the issue of Binding Private Ruling 25 on 14 November 2014, which exempted foreign pensions on the basis of the source being outside South Africa. Where an apportionment of foreign source is required, it could result in at least a portion being potentially subject to normal tax in South Africa. The ruling was, however, silent on lump sums which continues to be uncertain.
Budget 2016/17 – Provident fund transfer limitations
Following on from the two year suspension of retirement reforms only relating to the compulsory annuitisation of provident funds to 1 March 2018, the Minister tabled certain interim measures affecting the transfer of amounts out of a provident fund through an urgent Revenue Laws Amendment Bill (Bill). Apart from sterilising the compulsory annuitisation upon retirement for two years, it is proposed that any transfer to another retirement fund during the interim period, would result in any future contributions made by the employee, not being exempt from the compulsory annuitisation requirements. This proposal will surely place funds and members of those funds in limbo for two years.
Budget 2016/17 – Concerted drive to target offshore funds announced in 2016/17 Budget
The 2016/17 Budget announced a concerted drive to target offshore funds and thereby broaden a tax base that is struggling to keep up. “This is not surprising as some companies and wealthy individuals have been making requests about regularising their affairs ahead of the new OECD global standard for the automatic exchange of financial information between tax authorities coming into effect from 2017,” says tax director at Cliffe Dekker Hofmeyr, Ruaan Van Eeden. The proposal is to provide voluntary disclosure relief in respect of tax and exchange control for a period of six months, from 1 October 2016, to allow non-compliant individuals and companies to disclose assets held and income earned offshore. Trusts have been specifically excluded from the voluntary disclosure process.
Proposed amendment to the date on which the estimate for the second provisional tax payment must be submitted
By way of background, provisional tax is not a separate tax payable by certain persons, instead it is merely a method used to collect normal tax that will ultimately be payable for the year of assessment concerned, during the year. Otherwise stated, provisional tax is an advance payment of a taxpayer’s normal tax liability. A provisional taxpayer is generally required to make two provisional tax payments, six months into the year of assessment and at the end of the year of assessment, but has the option to make a third top-up payment after the end of the year of assessment. Provisional tax payments are calculated on estimated taxable income (which includes taxable capital gains) for the particular year of assessment.
2016 South African budget speech summary | tax proposals
overview The Honourable Minister of Finance read the 2016 South African budget speech on 24 February 2016. In this summary, we address only the revenue (i.e. tax) side of the budget proposals. As this budget speech has received an unusual amount of interest, we have set out the tax proposals in more detail than usual, although this summary is not intended to be comprehensive.
It’s called 9/12 – Gordhan remembers Nene
Cape Town – The Budget Speech might have been a tad boring without any red-bereted comedy, but what was lacking in humour in Parliament was made up for behind the scenes during the pre-budget press conference on Wednesday. Finance Minister Pravin Gordhan revelled in the knowledge that the room of over 120 journalists was there to hear how he would save South Africa from a ratings downgrade and change the economic course of the country. “Thank you for welcoming the new old guy in such numbers,” Gordhan told the journalists. “Thank you for your support.” Once his opening remarks were complete, Gordhan was ready to pounce with humour and wit to retort to the challenging questions posed by journalists.
Budget 2016/17 – Budget in a nutshell
Cape Town – Finance Minister Pravin Gordhan’s first comeback National Budget tabled on Wednesday afternoon in Parliament was relatively calm and workmanlike one after all the expectations of tax hikes and spending cuts amid tough economic times. He stressed the need to reaffirm government’s commitment to close the gap between spending and revenue, implementing a plan for stronger economic growth and cooperation between government and the business sector. That should keep the rating agencies that want to downgrade SA’s debt position to junk status temporarily at bay.
Budget 2016/17 – No big tax surprises
Cape Town – Finance Minister Pravin Gordhan delivered a surprise during Wednesday afternoon’s National Budget presentation in Parliament by not hiking the personal income tax rate. Tax rates for companies and VAT were not increased either. However, as part of fiscal measures to narrow the budget deficit and stabilise debt growth government proposes to raise an additional R18.1bn in revenue in R2016/17. This will mainly be achieved by upward adjustments to capital gains tax (the effective rate raised from 13.7% to 16.4% for individuals), transfer duty (11% to 13% on property sales above R10m) and increases in excise duties, the general fuel levy (30 cents per litre) and environmental taxes. Although limited fiscal drag relief of R5.5bn in personal income tax will be given, the government will still raise an additional R7.6bn from individuals. This will be done by partially increasing marginal personal income tax brackets and rebates for inflation.
South African Budget 2016/17 – 2016 BUDGET HIGHLIGHTS
• Personal income tax relief of R5.65 billion • Capital gains tax inclusion rate for individuals, special trusts and insurers’ individual policyholder funds increases from 33.3% to 40%, and for other taxpayers from 66.6% to 80% • Assets transferred through a loan to a trust are to be included in the estate of the founder at death and interest-free loans to trusts are to be treated as donations • General fuel levy increases by 30 cents per litre on 6 April 2016 • Excise duties on alcoholic beverages increase by between 6.7% and 8.5% • From 1 April 2016 the plastic bag levy is to increase from 6 cents to 8 cents per bag and the incandescent globe tax will Increase from R4 to R6 per globe • A tyre levy at R2.30 per kilogram is to be introduced on 1 October 2016 and a tax on sugar-sweetened beverages on Read More …