An employee incentive scheme that is commonly used works as follows: A company forms a trust. The company funds the trust, and the trust then uses the funds to buy shares in the company. The employees of the company are given units in the trust, usually free of charge. The units entitle the employees to receive distributions from the trust on the underlying shares. The employees forfeit their units in certain circumstances and may generally not dispose of their units. The trust may “repurchase” the units from the employees in certain circumstances.
On 8 July 2016, the National Treasury (Treasury) released the draft Taxation Laws Amendment Bill 2016 (TLAB). The TLAB aims to give effect to the various tax proposals announced in the 2016 National Budget. By way of background, s10(1)(q) of the Income Tax Act, No 58 of 1962 (Act) exempts from taxable income, any “bona fide” scholarship or bursary granted to assist or enable any person to study at a recognised educational or research institution. However, if such scholarship or bursary has been granted by an employer to an employee or relative of such employee, the exemption will not apply:
Many employees receive a cell phone allowance in some form or other as part of their employment remuneration package. Despite these employment benefits being relatively common, some employers and employees still run into unexpected tax consequences. Esther van Schalkwyk, Senior Tax Consultant at BDO South Africa unpacks some of the important aspects of cell phone allowances and highlights the value of proper tax planning. “Cell phone allowances or the use of employer-provided cell phones
In the recently reported case of Anglo Platinum Management Services v SARS  ZASCA 180 (the Anglo case), the judgment of which was delivered on 30 November 2015, the Supreme Court of Appeal (SCA) ruled in favour of the taxpayer in respect of a motor vehicle salary sacrifice scheme. The judgment stresses the importance of employers and employees properly agreeing to, understanding and correctly implementing remuneration structures that contain a salary sacrifice component. Before dealing with the SCA judgment, it is useful to touch on the basic principles of a ‘salary sacrifice’ arrangement, or more eloquently put, a ‘salary substitution’ arrangement. I use the word ‘substitution’, as that is what it boils down to: it is the substitution of a cash component of an employee’s overall cost to company remuneration package, for a non-cash benefit, that generally results in a lower amount subject to the deduction of employees’ tax.
Author: Ruaan van Eeden (Cliffe Dekker Hofmeyr). In the recently reported case of Anglo Platinum Management Services v SARS  ZASCA 180 (Anglo), the judgment of which was delivered on 30 November 2015, the Supreme Court of Appeal (SCA) ruled in favour of the taxpayer in respect of a motor vehicle salary sacrifice scheme. The judgment stresses the importance of employers and employees properly agreeing to, understanding and correctly implementing remuneration structures that contain a salary sacrifice component.
The removal of a few words in the latest version of the Taxation Laws Amendment Bill, 2015, appears to have rectified a loophole contained in an earlier version of the Bill that would have resulted in a notable reduction in an employee’s take-home pay if they belonged to a retirement fund.
Author: Laura du Preez (Personal Finance) Life assurance companies have responded differently to the change in how income protection policies are taxed, which took effect at the beginning of this month, and you should know how this could affect your finances. Income protection policies provide you with a monthly income if you become disabled.
By David Honeyball, Tax Partner Grant Thornton Cape Some employers provide residential accommodation for their employees, especially when the employees work far from their homes. While this provides some practical benefit to the employees who save money and time by not commuting between home and work, they should be taxed on the value of the accommodation, whether it is furnished, unfurnished, supplied with or without meals, power, water or other utilities.
In the recent case of ABC Limited v The Commissioner for the South African Revenue Service (case number 12984, as yet unreported), the Tax Court had to determine whether the Appellant had entered into an effective salary sacrifice scheme with its employees in respect of motor vehicle benefits. If there truly was a salary sacrifice, only the taxable value of such benefit in accordance with the provisions of the Seventh Schedule to the Income Tax Act, No 58 of 1962 (Act) will have accrued to the employee, otherwise the amount expended by the Appellant to provide the benefit will have accrued.
Author: Rob Cooper The draft 2014 Taxation Laws Amendment Bill (TLAB) brings with it some important proposed changes to the formula that employers use to calculate the fringe benefit value of their contributions to employees’ defined benefit funds. The TLAB raises the possibility of making incorrect payroll calculations in certain circumstances, unless legislators make changes to some of their formulas and definitions. Under retirement reforms legislated in 2013, employer-paid contributions to a pension, provident or retirement annuity fund must be valued as a fringe benefit for employees with effect from 1 March 2015.