Important tax proposals to note: 1. Employment Tax Incentive: Government proposes to maintain the current value of the employment tax incentive. However, effective from 1 April 2025, the formula to calculate the incentive and the eligible income bands will be adjusted, in part due to adjustments of minimum wages since the last increase in the value of the incentive in 2022. 2. Cross-border tax treatment of retirement funds: The current treatment of cross-border retirement funds may have resulted in double non-taxation, particularly where South Africa is granted the taxing right by treaty. It is proposed that changes be made to the rules that currently exempt lump sums, pensions and annuities received by South African residents from foreign retirement funds for previous employment outside South Africa, with amendments in the current legislative cycle. 3. Government aims to expand South Africas tax treaty network and renegotiate some existing treaties to strengthen economic Read More …
Tax News
South African Budget 2025 – Tax Proposals
Tax Proposals Corporate Income Tax Rate:Remains the same at 27%. Personal Income Tax:Personal income tax brackets remain unchanged. The primary, secondary and tertiary rebates also remain unchanged. National Treasury anticipates that additional revenue will be raised by not adjusting these brackets for inflation. It is interesting to note that the initial Budget Documents that related to the original February Budget did propose increases to these thresholds. VAT:Increases by 0.5 percentage points with effect from1 May 2025and a second 0.5 percentage point increase will take effect from1 April 2026. Therefore, the VAT rate increases from 15% to 15.5% on1 May 2025and to 16% on1 April 2026. The basket of items that are zero-rated for VAT will be expanded to include specific edible offal, specific meat cuts, unflavoured dairy liquid blends and specific canned vegetables to assist poor households. Capital Gains Tax:No changes are proposed in respect of Capital Gains Tax. Medical Read More …
SARS Company Income Tax Return changes
16 September 2024 The following Corporate Income Tax enhancements were implemented based on legal and form changes: Tax treatment of an asset acquired as government grant in kind: If a taxpayer acquires an asset as or with a government grant, wear and tear cannot be claimed on the asset. This also means that even if the taxpayer uses the grant to buy another asset, that something cannot be depreciated either (for tax purposes). Credit Agreements and Debtors Allowance: A new field for Credit agreement and debtors allowance (lay-by) (s24) will be added to the ITR14 return. This is an allowance that can be claimed in the current year, but it needs to be reversed in the following year. Additional deduction in respect of learnership agreements: A deduction for learnership agreements can only be allowed if the agreement was entered into before 1 April 2024 and therefore a new validation question Read More …
New tax requirements for foreign employers in South Africa: PAYE withholding obligations
Effective 22 December 2023, new South African tax legislation requires non-resident employers with a permanent establishment (PE) in the country to register as employers for employees tax (PAYE) purposes and to withhold PAYE from remuneration paid to their employees. This change could have a significant impact on employers with employees that opt to work in South Africa remotely, a situation that has become common recently. This new legislation means that foreign employers need to take greater care to ensure compliance with regard to their remote working population.
Navigating tax assessments and objections in South Africa: A legal roadmap
Receiving a tax assessment from SARS is often the starting point for a complex journey for taxpayers. In South Africa, taxpayers have the right to contest an assessment if they believe it to be incorrect, but this process comes with its own set of rules and challenges. Understanding the grounds of assessment and the burden of proof Upon receiving a tax assessment, it is crucial for taxpayers to carefully review the details. If they disagree with the assessment, they have the right to lodge an objection. However, understanding the grounds on which the assessment was made is key. Unfortunately, there are instances where SARS fails to provide adequate reasons for its assessments, leaving taxpayers in the dark. In such cases, taxpayers can request the grounds for assessment within 30 business days from the date the assessment was issued. Once it has received the requested grounds for the assessment, the taxpayer Read More …
The VAT refund process
A VAT refund is an amount of VAT that is payable by SARS to a vendor. In terms of section 1 of the VAT Act No. 89 of 1991 (the VAT Act), a vendor means any person who is or is required to be registered under the VAT Act, provided that where the Commissioner has under section 23 or 50A determined the date from which a person is a vendor, that person shall be deemed to be a vendor from that date.
A new enhanced Corporate Income Tax Return with new challenges
On 16 September 2024 SARS released an enhanced Corporate Income Tax Return (ITR14) on its website. This new version of the ITR14 must be submitted by all companies with effect from this date. Amongst a number of changes to the ITR14 is the requirement that all companies are now required to provide detailed information of the individuals that are regarded as their beneficial owners. Failure to comply with these requirements can result in penalties and compliance notices. The aim is to enhance transparency and combat money laundering and terrorism financing by ensuring the identity of ultimate beneficial owners is known. The concept of beneficial ownership has been integrated into the corporate income tax return process to enhance transparency and combat illicit activities such as money laundering and terrorism financing. The following key points should be noted: a. Definition – Beneficial ownership in respect of a company means, an individual who, Read More …
Bad and doubtful debts – income tax issues
In the current economic climate, especially given the high interest rates, businesses often experience financial difficulties. This often results in an inability to settle outstanding debts owed and conversely, to recover debts due by customers. Irrecoverable or doubtful debts owed by or to a taxpayer may respectively result in an additional or reduced income tax liability. It is important to bear income tax principles in mind when dealing with these situations. This article focusses on the key income tax considerations for taxpayers relating to irrecoverable and doubtful debts. Banks and other types of moneylenders will generally be subject to other forms of tax treatment that are not covered here. A taxpayer may become entitled to a section 11(i) deduction for bad debts when a debt owed to that taxpayer becomes irrecoverable. Such a deduction can only be claimed in the year of assessment that the debt first becomes irrecoverable. This Read More …
Thistle Trust v Commissioner for the South African Revenue Service CCT337/22
Case CCT 337/22 [2024] ZACC 19 Ordered Date: 08 February 2024 Judgement Date: 02 October 2024 Post JudgmentMedia Summary The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court. On 2 October 2024, the Constitutional Court handed down judgment in an application for leave to appeal and a conditional application for leave to cross-appeal against a judgment of the Supreme Court of Appeal. The application concerned the applicability of the conduit principle to capital gains when distributed by multiple trusts in the same tax year in terms of the common law, section 25B and paragraph 80 of the Eighth Schedule of the Income Tax Act 28 of 1962. The conditional cross-appeal concerned whether the circumstances giving rise to the tax treatment by the Thistle Trust warranted the imposition of an understatement penalty.
Transfer pricing has finally washed up on South Africas shores
With increasing economic globalisation, revenue authorities around the world continue to shift their focus to issues of transfer pricing. Broadly, this fits in with the global move to combat so-called profit shifting, a practice where multinational groups attempt to concentrate their profits in low-tax countries in which they operate. In a moment that many tax practitioners have eagerly awaited, the Tax Court finally passed down its first judgment dealing with transfer pricing in the case of ABD Limited v Commissioner, SARS (IT14302). Between 2009 and 2012, the taxpayer licensed its intellectual property to subsidiaries operating in various other countries (opcos) against payment by these opcos of a royalty. For all of these opcos, this royalty was charged at the same flat rate of 1%. The South African Revenue Service (SARS) took the view that this 1% royalty was, in fact, not arm’s length and should have been higher. However, the Read More …