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.
Tax News
Guidelines for SARS Third Party Appointments (AA88)
What is it? The Commissioner for the South African Revenue Service (SARS) has the power to appoint any person (referred to as an agent) to pay any outstanding tax, which is due by a taxpayer, out of any money that is held on behalf of the taxpayer. More information: If a taxpayer has outstanding tax debts (this includes penalties), the Tax Administration Act empowers the Commissioner for the South African Revenue Service (SARS) to appoint a third party to recover money held by third parties on behalf of the taxpayer, or owed by the third party to the taxpayer. Third parties could be an employer or a bank, etc.
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.
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.