The inclusion of any part of an allowance paid or payable in an employees taxable income is governed by section 8(1)(a) of the Income Tax Act 58 of 1962 (Act). At a glance It has recently been reported in the news that the Department of Health has agreed to pay a temporary allowance of R3,153 to nurses in the public sector to enable them to buy uniforms. From a tax perspective, this amount will potentially not be subject to tax. In terms of section 10(1)(nA) of the Income Tax Act 58 of 1962, where an employee is, as a condition of their employment, required while on duty to wear a special uniform which is clearly distinguishable from ordinary clothing, the value of such uniform, or any allowance provided in lieu of any such uniform, given to the employee by his employer, will be exempt from normal tax and therefore not Read More …
Category: Tax Returns
Commissioner for the South African Revenue Service v Medtronic International Trading S.A.R.L (Case no 456/2021) [2023] ZASCA 20 (03 March 2023)
The Supreme Court of Appeal (SCA) dismissed an appeal from the Gauteng Division of the High Court, Pretoria. This appeal concerned itself with whether certain provisions of the Tax Administration Act 28 of 2011 (TAA) precluded remission of interest levied on late payment of value added tax (VAT), as provided for in the Value Added Tax Act 89 of 1991 (VAT Act).
New tax dispute resolution rules come into effect immediately
New tax dispute resolution rules provide for, amongst others, 80 days to submit an objection and more independence of an ADR facilitator. On 10 March 2023, the Minister of Finance published new dispute resolution rules in the Government Gazette in terms of the Tax Administration Act (TAA). These rules describe the procedures for objections and appeals, for the alternative dispute resolution (ADR) mechanism and for the conduct and hearing of appeals before a Tax Board or Tax Court.
South Africans bask in solar power tax breaks
Authors: Joon Chong & Chetan Vanmali, Partners at Webber Wentzel. The demand for solar power installations in South Africa is likely to heat up considerably this year after new incentives were announced in the February 2023 Budget. Responding with glacial speed to years of escalating load shedding, National Treasury has provided new incentives for installing solar PV systems to help expand the countrys available power generation.
What to do if you receive income from two sources?
Taxpayers who receive income from more than one source of employment are reminded that the employees tax (PAYE) deducted by the respective employers may not be enough to cover their final tax liability on assessment. The reason for this is the manner in which a taxpayers tax liability is calculated on assessment. The South African tax system is based on the principle of adding together all sources of income of a taxpayer into a single sum, and applying a progressive tax rate table to determine the final tax liability of the taxpayer on assessment. A progressive tax rate system means that the more income is earned, the higher is the marginal tax rate and more tax is paid on assessment.
IRP5/IT3(a) Certificate Validation Process
From the 2020 year of assessment, SARS is performing additional validations on the IRP5/IT3(a) certificates. These validations check if the: IRP5/IT3(a) certificates was already assessed on the Income Tax System; Income Tax Reference number on the IRP5/IT3(a) certificate is not duplicated for multiple individuals; Income Tax Reference number on the IRP5/IT3(a) certificate is the registered Income Tax Reference number for the individual; Directive information on the IRP5/IT3(a) certificate corresponds with the directive information on the SARS Directive System; Correct amount of PAYE or SDL was deducted from employee/declared on the IRP5/IT3(a) certificate by employer.
Obligation to deduct correct amount of PAYE every month
Employers are obligated to deduct the correct amount of employees tax (PAYE) from an employees remuneration and to declare and pay such amount to SARS on a monthly basis. The amounts declared by the employer on the EMP201 monthly return is the total amount of all PAYE deducted from all employees during the relevant month.
SCA rules on the imposition of USP where a taxpayer relied on an opinion
The South African Revenue Service (SARS) may impose penalties on taxpayers who make errors in their tax returns, but relief is available under certain circumstances. Understatement penalties (USPs) are levied in terms of section 222(1) of the Tax Administration Act, 2011 (TAA) and provide that in the event of an understatement by a taxpayer, the taxpayer must, in addition to the tax payable, pay a USP, unless it is the consequence of a bona fideinadvertent error. A provision in theTAAfurther states that SARS must remit a penalty imposed for a substantial understatement if it is satisfied that: the taxpayer was in possession of an opinion by an independent registered tax practitioner that was issued by no later than the date the relevant return was due; the opinion was based upon full disclosure of the specific facts and circumstances of the arrangement; and the opinion confirmed that the taxpayers position is Read More …
Another reminder that SARS bears the onus of proving understatement penalties
In the matter ofLance Dickson Construction CC v Commissioner for the South African Revenue Service, the High Court set aside the order of the Tax Court in favour of the South African Revenue Service (SARS) and upheld an appeal by Lance Dickson Construction CC (Taxpayer) with costs. The Taxpayer, in its tax return for the 2017 year of assessment, did not declare any proceeds from the disposal of certain property to a related entity, Kwali Mark Construction CC (KMC), as it believed and as stated in the agreement of sale between the Taxpayer and KMC, that capital gains tax (CGT) would be paid by the Taxpayer when the property was on-sold by KMC to an unrelated third-party and the relevant proceeds were received by the Taxpayer. Because these conditions were not fulfilled in the 2017 year of assessment, the Taxpayer did not declare proceeds on the disposal of the property Read More …
What happens to your retirement annuity when you die?
A retirement annuity (RA) is a voluntary pension plan in which individuals can contribute in a tax-efficient manner to provide for their retirement years. Unlike pension and provident funds which are occupational in nature, RAs are private and, as such, an employee/employer relationship is not necessary for membership. Subject to a few exceptions, the earliest a member can retire from an RA is age 55, with no upper age limit for retirement, at which point they are required to use at least two-thirds of the fund to purchase an annuity income. But what happens if the member dies before retiring from the RA? How are the funds distributed and to whom?