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.
Tax News
SA Budget 2023 – Does your controlled foreign company have real substance?
An offshore company which meets the definition of a controlled foreign company (CFC) will have substance if it has a foreign business establishment (FBE) as contemplated. Usually, if the income of your CFC is attributable to an FBE, such income will not be taxed in the South African shareholders hands. Conversely if there is no FBE such income may be taxed in the SA shareholders hands. Earlier this month the Supreme Court of Appeal delivered its judgement in CSARS v Coronation Investment Management on whether the CFC in question had an FBE. The court ruled in favour of SARS.
SA Budget 2023 – Proposed Changes to the Definition of Contributed Tax Capital
Contributed tax capital (CTC) is a tax concept that in essence is the consideration that is received by or that accrues to the company from the issue of its shares. It is defined in relation to each class of a companys shares. In the case of a non-resident company that becomes a South African resident company (due to the companys place of effective management changing to South Africa), CTC is defined as the market value of all the shares in the particular class immediately before the date on which the company becomes a South African resident. The definition of CTC underwent recent amendments to counter perceived avoidance and the 2023 Budget Review proposes further amendments.
SA Budget 2023 – Proposed Changes to the Tax Treatment of Non-Resident Beneficiaries of Trusts
The income tax provisions governing the tax treatment of amounts vested in beneficiaries of trusts are contained in section 25B of the Income Tax Act and paragraph 80 of the Eighth Schedule to that Act. Section 25B deals with amounts which are not of a capital nature, such as interest income or rental income, whereas paragraph 80 deals with vested capital gains. Currently capital gains vested in non-resident beneficiaries remain subject to capital gains tax in the trust. The implication is that capital gains vested in non-resident beneficiaries face a higher flat tax rate of 36%, compared to capital gains vested in resident beneficiaries which incur a maximum effective tax rate of 18%.
SA Budget 2023 – Home Office Expenses
On 22 February 2023, the Minister of Finance announced in his Budget Speech for 2023, that National Treasury and SARS will be committed to a multi-year review of allowances which shall seek to explore the effect of remote working on the personal income tax regime. It was announced that a discussion document shall be released during 2023 which shall outline workplace practices and policies, changes in the current environment and how different workplaces are affected by home office and travel allowance policies.
Solar incentive for businesses expanded but the solar incentive for individuals is a farce
It is no secret that South Africa is currently going through an electricity crisis and much was hoped from Minister Enoch Godongwana on this topic in delivering his Budget Speech today. This on the back of South Africa having experienced loadshedding for 207 days in 2022 compared to 75 days in 2021. In response to the crisis, National Treasury proposes tax incentives for businesses and individuals who produce renewable energy. This is aimed at bringing additional energy capacity onto the grid and achieving energy security in the long-term. In addition, the bounce-back scheme that was initially developed to assist small and medium businesses (SMEs) cope with financial distress during the COVID pandemic will be reviewed and amended to provide for Government loan guarantees to SMEs investing in solar-related projects.
SA Budget 2023: Solar panel tax incentive
In brief The 2023 Budget proposes a solar panel tax incentive (available for a period of one year) for individuals installing solar panels at private residences. Budget proposal Budget 2023 proposes an incentive to encourage households to invest in clean electricity generation capacity which can supplement electricity supply. Individuals who pay personal income tax and install new and unused solar photovoltaic (PV) panels can claim a rebate to the value of 25% of the cost of these panels, up to a maximum of R15,000, against their tax liability. The rebate applies to qualifying solar PV panels that are brought into use for the first time in the period from 1 March 2023 to 29 February 2024.
Budget 2023 gives relief to hard pressed South African taxpayers
By Joon Chong, Partner & Cor Kraamwinkel, Partner at Webber Wentzel. The proposals in South Africas 2023 National Budget include welcome moves on boosting energy generation, relief for consumers and businesses, and improving the efficiency of tax collection The National Budget delivered today by South Africas Minister of Finance, Enoch Godongwana, showed that the government is making some significant financial commitments to restore Eskom to viability and maintain social grants. But with GDP growth projected at 1.4% on average from 2023 to 2025, and a potential tapering-off of the commodities boom over the medium term, how will the government fund these commitments? Below we analyse some of the key proposals on energy and other relief, as well as steps to protect the tax base, foster economic growth and ensure efficient tax collection. Energy We were pleased that government is taking steps to address the current electricity crisis, which the Read More …
Tax considerations for disposing and acquiring of loan accounts owing by connected persons at a price less than base cost or face value
It is not uncommon for loan accounts owing by a company (debtor company) to a shareholder (creditor) to be sold by the creditor together with the shares in the debtor company. So too may creditors be tempted to dispose of a loan owed by the debtor company in circumstances where the debtor company cant service it because of the prevailing economic downturn. In these instances, the market value of the loan may be invariably less than the face value and also the base cost; and, as such, may be sold at a discount to face value resulting in a capital loss. Where the debtor company is a connected person as defined in section 1(1) of the Income Tax Act, 1962 (as amended) (ITA) in relation to the creditor and the loan is sold at a price less than the base cost of the loan (and assuming the base cost is Read More …
Avoid future headaches: raising all grounds of objection is critical in SARS tax disputes
In recent years, SARS has become increasingly litigious, resulting in disputes often ending up in the Tax Court or the High Court. Such a dispute will generally arise when a taxpayer disagrees with an assessment raised by SARS. An aspect of the dispute process that can have dire consequences if overlooked is that a taxpayer must canvas all relevant grounds of objection from the outset, as these form the basis of any future litigation. A case in point isCommissioner for the South African Revenue Service v Airports Company for South Africa.In this case, SARS raised an additional assessment for the taxpayers 2011 year of assessment, disallowing deductions of Corporate Social Investment (CSI) expenditure and allowances in terms of section 13quinand 12F of the Income Tax Act,1962 (the ITA). The taxpayer only objected to the disallowance of the CSI expenditure. No objection was lodged to section 13quin and section 12F allowances Read More …