fasset update march 2013

Fasset UpdateMarch 2013

Fasset UpdateMarch 2013Seta Funding Regulations

Overview of major changes• WSP submission will be due on 30 April (and not 30 June as with current) as

from 2014

• Mandatory Grants (previously 50% of SDL) is now 20%

• 80% of the Discretionary Grants funding will be allocated to PIVOTAL

programmes

• PIVOTAL is defined as professional, vocational, technical and academic learning

programmes that result in qualifications or part-qualifications on the National

Qualifications Framework

• There is a new ‘minimum requirements’ Mandatory Grant form

Fasset UpdateMarch 2013Fasset’s Strategy 2013 / 2014

Fasset is focusing on new relationships in order to extend the skills development reach in implementing a career pipeline approach• Further Education Training (FET) Colleges

• Universities

• Addressing skills need in the public sector

• Provincial footprint, focus on rural areas

A PIVOTAL Grant will be introduced for all races, however the transformation agenda will continue to be pursued through specific interventions such as SCG, Bridging Programmes, LCG, NLRG etc.

Fasset UpdateMarch 2013Mandatory Grant

Training plan for the upcoming year and training report for the previous year• 20% of the SDL, paid quarterly

• 2 forms: <50 Employees and >50 Employees (MS Excel format)

• All training, including short courses, PIVOTAL programmes to be specified

• No discretionary criteria e.g. any population group, gender etc... applies

• Cost of training not linked to payout amount

• Training committee recommended for employers employing 50 or more

• Due 30 June 2013 – to be submitted via hand delivery on Friday

• Will move to 30 April from 2014

Fasset UpdateMarch 2013Combined Pivotal and Strategic Cash Grant

• Now 50% of the SDL

• 30% of grant may fund any learner on pivotal programme

• 20% of grant to fund Black African learners and people with disabilities

• Qualifications (degrees, diplomas), learnerships, internships – to be NQF-

registered

• Learners currently commencing, undergoing, or completing a pivotal programme

in the 2013 calendar year

• Tariffs are applicable

• Due date 15 February 2014 – to be submitted via hand delivery on Friday

Fasset UpdateMarch 2013Learnership Cash Grant

Entry Grant : On registration of Black African learners on learnerships

Exit Grant: On completion of Black African learners on learnerships

• SDL payers and non-levy payers

• Fasset learnership or specific other Seta

learnership

• 10 entry grants per employer

• 10 exit grants per employer

• Black African learners and learners with a disability

• Higher amount for learners with a disability

• Employers with staff complement under 150

• Due date 15 February 2014 – to be submitted via

hand delivery on Friday

Length of Learnership Entry Tariff Exit Tariff

12 month R 5,000 R 5,000

24 month R 7,000 R 13,000

36 month R 20,000 R 20,000

Fasset UpdateMarch 2013NSFAS Loan Repayment Grant

Ensuring retention of learners on learnerships• 3 year learnership attracts R 60,000 grant towards NSFAS account

• Transformation in the sector: Black African learners and people with disabilities

• Learners currently commencing, undergoing, or completing a learnership in the

2013 calendar year with a Fasset employer

• Employed learner or an employer representative may apply

• Black African learners will be relieved of the NSFAS financial burden

• Salary threshold applies

• May be applied for in tranches


Fasset UpdateMarch 2013NSFAS Grant Amounts

Length Tariff Amount12 (1 year) On registration R 5,000

In month 12 of the learnership R 25,000

24 (2 year) On registration R 5,000

In month 6 of the 24-month learnership R 15,000


36 (3 year) On registration R 5,000




Fasset UpdateMarch 2013Assessor and Moderator Grant

To ensure the supply of assessors of academic and workplace training• Reimbursement of the cost of training

• Maximum of R 4,500

• Assessor/moderator to be registered with Fasset in 2013

• Training can take place before 2013


Fasset UpdateMarch 2013Lifelong Learning

Month Topics Target Occupations

Mar 2013 Budget & Tax Update 2013 Legislative (All)

Apr 2013 Change Management HR (SDFs, HR Professionals)

May 2013 How to Manage your Business Leadership and Management (Middle & Senior Managers)

Jun 2013 Culture and Diversity in the Workplace Leadership and Management (Junior and Middle Managers)

Jul 2013 Project Management Leadership and Management (Junior and Middle Managers)

Aug 2013 Managing Teams Leadership and Management (Middle and Senior Managers)

Sep 2013 Compliance with Changes in Legislation relevant to the Finance Sector Legislative (All)

Oct 2013 Mentoring and Coaching HR (SDFs, HR Professionals)

Nov 2013 Conflict Management Leadership and Management (Middle and Senior Managers)

Feb 2014 Survive and Thrive in an Office Environment Leadership and Management (Junior and Middle Managers)

Only firms with a valid SDL number with Fasset will be able to register for the eventsThis calendar is subject to change

Fasset UpdateMarch 2013Innovations in accreditation

Whole firm accreditation• To accredit non-credit bearing training

• Firms that offer training that they would like recognised and accredited

• Non-credit bearing training i.e. no assessment

• Functions as Approved Provider accreditation i.e. not linked to unit standards

Internships• Internships that fall into the graduate work-based category

• Companies apply for programme and site accreditation

• May then apply for Fasset grants

• Claim points of BEE scorecard


Bridging Programme: Access into Higher Education

The funding window opens doors for learners to enter higher education.• Black African and all disabled learners

• Learners lacking requisite entry requirements into a sector-specific higher

education qualification

• Incorrect subject choices or followed an unrelated discipline

• 2nd chance learners

• Complete programmes and meet entry requirements which allow them to enter

sector-relevant higher education qualifications, for progression in the sector

• Tuition fees, examination support courses and soft skills interventions


Bridging Programme: Academic/Professional Body Qualifications

The funding window opens doors for learners to enter higher education.• Public providers and professional bodies to assist learners to obtain formal

qualifications

• Learners will be placed in learnerships, internships or full-time employment

• Number of learners with scarce skills qualifications will increase

• Employers will have access to increased numbers of employable learners

• Broader economy will benefit with learners who have a cross-cutting skill that is

needed to grow the whole economy


Bridging Programme:Access into Employment

Designed to assist unemployed learners (NQF levels 6 – 8) and bridge the gap between theoretical learning and workplace experience.

• Accounting and non-accounting graduates

• Unemployed, part of NEET population of learners

• Ministerial imperative

• Will undergo work readiness programmes e.g. bridging technical, assertiveness,

it, English language, attitude

• Available for employment on learnerships, internships or full-time employment

• Employers will have access to increased numbers of employable learners

• Broader economy will benefit with learners who have a cross-cutting skill that is

needed to grow the whole economy

Fasset UpdateMarch 2013Upcoming Research

To assist the Board and sector in aligning training to strategic objectives.• 2012/13 (Year 13) Grant Analysis Report

• Sector Skills Plan Update for the period commencing 1 April 2014

• Annual Benchmarking of Training in the Sector

• Learnership Readiness Pack

• Internship Readiness Pack

• Lifelong Learning Learnership Programme (LLLP) Employer Support Guide

• Tracer Study on Development Projects (Academic)

• Database Update (Employers)

• Database Update (Learners)

Fasset UpdateMarch 2013FET Funding Window

To develop FET colleges, which is also a national and ministerial imperative.• Capacitating FET colleges with funding set aside

• Improvement of relevant courses offered by FET colleges

• Development of lecturers so as to ensure a quality supply of FET learners

• Partnership agreements to be put in place with Waterberg and Sekhukhune FET

colleges in Limpopo as part of a broader joint Seta initiative to establish a

regional presence in rural areas and townships through FET colleges

• Fasset will support the co-ordinated Seta collaborative effort to establish a

regional presence in rural areas and townships through public FET colleges

• Appointment of a Fasset Provincial Liaison / Brand Ambassador

Fasset UpdateMarch 2013Career Guidance and Provincial Strategy

Fasset has an intensive National Career Guidance campaign:

• In line with DHET’s National Career Guidance initiatives

• Setas have a role to play in drawing the youth into the mainstream economy

• Targeting learners from Grade 9 level onwards, awareness on careers in finance

• Extend and deepen Fasset’s footprint and reach in rural and impoverished areas− Fasset Brand Ambassadors− Print and online advertising− Exhibitions− Print and digital motivational career guidance material− Social media− Partnerships

Fasset UpdateMarch 2013Stakeholder Engagement

Engaging with Fasset stakeholders by informing and educating through regular, effective communication, meeting the following strategic imperatives:

• The promotion of critical and scarce skills areas within our sector

• Promotion of skills development within sector through targeted marketing

• Promoting skills, access to jobs, sustainable livelihoods via development projects

• Developing a culture of high-quality, lifelong learning and fostering skills

development for high-quality jobs

• Focus on the critical SMME component, specifically levy-exempt employers

• Fostering skills development in the formal economy for productivity and

employment growth

Fasset UpdateMarch 2013Tools

• Fasset website: www.fasset.org.za

• On the website you can gain access to the following:

− Download all the application forms you are required to complete for the grants

− Latest Fasset information

− List of all the relevant Fasset contacts

− List of Fasset learnerships

− Apply for Mandatory Grant online

− Lifelong Learning calendar

http://www.fasset.org.za/

Thank You

For more information please contact the Fasset Call Centre on 086 101 0001

or visit www.fasset.org.za


Facilitated by Deloitte.

Introductory Overview

23

Where is most of our tax collected?*

38%

22%

30%

6%5%

Income tax on persons and individualsCompaniesValue-added-taxGeneral fuel levyCustoms Duties

*Figures per Budget Review 2013

24

Detailed comparison of revenue – 2013 vs. 2012*

Individuals Companies Value-added-tax General fuel levy Customs Duties -

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

20132012


25

Detailed comparison of revenue – 2013 Actual To Budget *

Individuals Companies Value-added-tax General fuel levy Customs Duties -

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

ActualBudgeted


Budget Proposals: Individuals

• Personal income tax relief of R7 billion• Individuals whose taxable income is from one employer and is below

R250 000 a year are not required to submit income tax returns• Clarity on Retirement reforms • Tax-preferred savings and investment vehicles are to be introduced by

2015, to encourage greater savings• Tax relief on transfer of low cost housing to employees• Rules to ensure uniform tax treatment of employee share schemes• Monetary threshold for bursaries given to relatives of employees be

increased• Alignment of income protection and disability policies• Amendment to exemption when working offshore

27

Budget – Individual Overview

28

Rebates

Thresholds

Budget – Individual Rates

Rebates 2013/2014 2012/2013

Primary R12 080 R11 440

Secondary R6 750 R6 390

Tertiary R2 250 R2 130

Tax thresholds 2013/2014 2012/2013

Below 65 R67 111 R63 556

Age 65 and over R104 611 R99 056

Age 75 and over R117 111 R110 889

29

Budget – Individual Fiscal Drag

Effect of fiscal drag2012/2013 2013/2014

No adjustment2013/2014

With adjustment

Salary R500 000 R528 000 R528 000

Tax thereon R123 040 R133 680 R131 097

After tax R376 960 R394 320 R396 903

Restate tax to 2012/2013 terms (R133 680 and R131 097/1.056) R123 040 R126 591 R124 145

30

Budget – Individual Fiscal Drag

Effect of fiscal drag

Taxable income 2013 rates 2014 rates Claimed benefit

Actual benefit/(loss)

R100 000 R6 560 R6 928 R640 RNIL

R300 000 R54 860 R58 431 R1 469 (R472)

R500 000 R123 040 R131 097 R2 555 (R1 105)

R1 000 000 R320 700 R340 085 R3 015 (R1 350)

• Tax exempt: Returns generated (including interest, capital gains and dividends)

• Annual contributions limited to R30 000 p.a. per taxpayer (no rollover)• Lifetime limit of R500 000 (to be adjusted for inflation)• Interest exemptions to be replaced with interest bearing and equity

savings vehicles • Purpose of this is to encourage savings to fund short and medium term

expenditure• Current status: The new accounts will be introduced by April 2015.

31

Budget - Tax-preferred savings and investment vehicles

Christoper Green

confirm if need to amend wording

Budget - Retirement reforms • Retirement fund contribution deduction 27.5% of greater of remuneration or

taxable income limited to R350 000

• Contributions in excess of the annual capped amounts may be rolled forward

to future tax years

• Non-deductible contributions will be exempt on retirement – both annuities &

lump sums

• Provident fund contributions to be allowed as part of the 27.5% tax deduction

• Employer contributions to retirement funds will constitute a taxable fringe

benefit, which will qualify for the 27.5% tax deduction.

• Proposed that provident funds are subject to the same annuitisation rules as

pension and retirement annuity funds.

32

Budget - Individuals

Trust reform

• Proposals not apply to special trusts (minor children or disabled

persons)

• Discretionary trusts will no longer operate as flow-through vehicles

– Taxable income/(loss) and capital gains/(losses) taxed in trust

– Distributions treated as deductible expenses iro current taxable

income

– Possible double taxation of capital gains

– Review of trusts as generation skipping devices

33

34

Budget - IndividualsDiscretionary Trust Current Proposed

Interest R22 800 R22 800

Capital profit R20 000 R20 000

Net profit before tax R42 800 R42 800

Less: distribution to beneficiary -R42 800

Less: capital profit -R20 000

Add: capital gain R13 333

Less: tax deductible payment to ben -R36 133

Taxable income in trust RNIL RNIL

Beneficiary Current Proposed

Interest R22 800

Interest exemption -R22 800

Capital gain (33% inclusion) R6 667

Taxable income from trust R36 133

Taxable income in beneficiary R6 667 R36 133

Tax @ 40% R2 667 R14 453

Christoper Green

added this slide, was a late addition in PE budget deck and I think a good one, this probably the most "controversial" change relevant to audience - you agree on including?

Budget - Individuals

• Disparity between deduction on disability or income protection policies

– Proposed treatment is non-deductible contributions and exempt

pay-outs

• Cross border services

– Current – exemption from SA tax if > 183 days outside SA in 12

months

– Proposal indicates possible substitution on of exemption tax

credits if SA employer

35

Amendments: Individuals

• For the 2013 (and 2014) tax year there is a combination of rebates and deductions

• The phasing in of the rebate system as opposed to the deduction system will be complete by 1 March 2014 (i.e. the start of the 2015 year of assessment) when the s18 deduction provisions will be deleted

37

Medical

Leave pay and other variable cash remuneration

• Section 23E deleted and section 7B inserted

– From 1 March 2013

– Leave pay, over-time pay, commission, bonuses and travel

reimbursement will shift to a “payment basis”.

– Payment will trigger

• employee gross income

• pay-as-you-earn withholding, and

• employer deductions.

38

Provision of leased (operating) company cars par 7 7th Schedule:

• Fringe benefit for car use currently based on premise employer owns

the vehicle –determined value based on car value

• Companies increasingly renting cars-rental costs will now form the

basis of the fringe benefit value

• The employees can still claim a deduction based on business v private

use

• The benefit of using an employer’s petrol card will form part of

inclusion in cost if linked to specific vehicle

39

Employer owned insurance policies

• Amendments to clarify when s11(a) deduction on employer owned insurance

policies may be claimed

• Specific exclusion from 11(w) widened to include:

– insurance policies against death/ disability /severe illness in the course of

employment

– The effect will be to allow 11(a) deduction for these policies

– This will not create a fringe benefit but any pay-out to employee will be

taxable

40

Cession Of Employer-owned Insurance Policies (With Investment Values) To Retirement Funds

• Paragraph (d)(iii)(cc) of the definition of “gross income” in section 1

• Deferred compensation schemes used as retirement saving vehicle

• Concession allows for a cession of employer-owned insurance policies

(despite any investment element) to a pension or provident fund

without triggering tax for employees

• Deferred compensation schemes will continue to be discouraged

going forward

41

Exemption For Compulsory Annuity Income Stemming From Non-deductible Retirement Contributions

• Insert section 10C; amend section 11(n); amend paragraphs 5(1) and

6(1)(b) of the Second Schedule

• Lump sums are exempt to the extent that non deductible contributions

were made

• This will be extended to retirement annuities

42

Provisional Tax Amendments

• Tax Administration Laws Amendment Act

• Clarity that retirement fund lump sum benefit, retirement fund lump

sum withdrawal benefit and severance benefit excluded from estimate

of taxable income

• Current anomaly that creates a potential penalty where actual tax paid

exceeds the estimate is addressed

• Clarity that penalties are considered percentage based penalties

imposed under Chapter 15 of the Tax Administration Act

43

Budget Proposals: Corporate

Budget - Corporate

Relief for small businesses corporations and social-impact firms

• Reforms to the tax regime applicable to small business corporations are proposed.

• The reforms are aimed at broadening the regime for qualifying entities by increasing the

turnover limit from R14 million to R20 million.

• It is proposed to provide additional tax relief for qualifying companies in the form of an

increase in the tax threshold and a reduction in tax payable on the first R550 000 of

taxable income.

45

Budget - Corporate

Protection of the tax base

• Closure of artificial and excessive debt has been on the tax policy

agenda for more than two years

• Rules on artificial debt – will re-characterise to treat as shares (with

interest deduction disallowed)

• Rules on connected person debt – will place limits on interest incurred,

with a roll over for interest disallowed

• Rules on acquisition debt – time limits to be imposed for claiming

interest

46

Budget - Corporate

Tenant improvements to commercial buildings

• It is proposed that the ownership test for allowance be replaced with

“possession and use”

• Associated amendments to the taxation of the lessor and treatment of

leasehold improvements will be effected

• The lack of allowance to commercial tenant was complicating many

commercial arrangements

47

Budget - Corporate

Special Economic Zones

• Tax treatment in special economic zones designed to attract investment

• 15% corporate income tax rate for businesses

• Tax deduction for employment of workers earning less than R60 000 p.a.

• Accelerated depreciation allowance for buildings

Donations

• Donations to PBOs in excess of the current allowable limit of 10% of taxable income will

be carried forward and allowed as a deduction in subsequent years

Clarification of trading stock cost calculations

• It is proposed that the cost price of trading stock automatically agree to IFRS without the

need for SARS approval

48

Budget – Corporate

Employment Tax Incentive

• A youth employment tax incentive will be tabled in parliament within

the course of this year.

• This incentive will be aimed at providing the youth with the opportunity

to enter the labour market, gain valuable experience and access

career opportunities.

• It will be a graduate tax incentive at the entry-level wage, falling to

zero when earnings reach the personal income tax threshold.

49

Amendments: Corporate

New Definitions

• Revised share definition

– Old: “share” means, in relation to any company, any share or

similar equity interest in that company

– New: ‘share’ means, in relation to any company, any unit into

which the proprietary interest in that company is divided

• Debt terminology consistency

– Debt will continue to bear its ordinary meaning

– Sections related to debt have been aligned

51

Dividends tax amendments

• Section 64EB –New section inserted

– Closure of dividend conversion schemes

– Schemes for the benefit of foreign shareholders that arguably

reduces the Dividends Tax rate to zero (without any reliance on a

tax treaty)

– The proposed amendment will be effective on 1 September 2012

in respect of transactions entered into on or after that date and to

amounts paid on or after 1 October 2012 in respect of transactions

entered into before 1 September 2012

52

Dividends tax amendments

• s64k Tax Administration Laws Amendment Act:

– Amended to make clear that dividends tax return must be filed when a

dividend is paid, regardless of withholding tax

• s64L Tax Administration Laws Amendment Act:

– Late rebate allowed if claimed within three years from payment of

dividend.

– declaration AND written undertaking to be submitted for refund.

• s64M Tax Administration Laws Amendment Act:

– Refunds in respect of dividends paid by regulated intermediaries-as for

64L

53

Revision of the learnership allowance s12H

• Amendments to address two practical issues which were limiting the

effectiveness of the learnership allowance:

– Timing of registration

– Failed learnerships

54

Repeal of anti-avoidance for the transfer of depreciable assets between connected persons s23J

55

• The anti-avoidance rules for connected person sales created certain

anomalies

• The increase in the CGT inclusion rate greatly reduced the arbitrage

opportunity

• For above reasons, anti-avoidance provisions under section 23J wholly

deleted

• Considering adoption of domestic transfer pricing principles to address

larger problem of inflating untaxed gains

Allowance amendments

56

• Section 11(e)(iiA) - requirement for SARS approval of foundation

and supporting structure removed

• Section 12B - supporting structures for electricity generation are now

included also at 50:30:20 allowance if fixed to and integrated with the

machinery or plant

• Section 12C - requirement for SARS approval of foundation and

supporting structure removed

• Section 13quat – Urban Development Zones extended from 2014 to

2020

Revision Of The Industrial Policy Project Incentive s12I

57

• Allowance intended to promote investment in domestic manufacturing

sector

– Clarification that allowance limit is over life of project and not annual

– Scrapping of tax clearance requirement

– Annual reporting period will be clarified

– Effective 1 January 2012

Government transfers and subsidies s12P

• Consolidation of tax treatment of government grants

• Basic principles-

– Government grants listed in new 11th Schedule are “exempt” from

normal tax

– Intention for double dipping not to be permitted

– Generally, unexpended portion of cash grant = recoupment

• Effective years of assessment commencing on/after 1 January 2013

58

Hybrid Equity Instruments –s8E

• Anti avoidance measure: Any dividend on a share that is a hybrid

equity instrument is deemed to be income (formerly deemed to be

interest)

• Exception introduced: where shares issued as a financing tool to

acquire substantial interests in a target operating company

• The rule prohibiting “indirect” securities (and even the definition of a

prohibited financial instrument) was considered too wide, and

amendments narrow the application

59

Third Party Backed Shares s8EA

• Anti avoidance measure: Any dividend on a share that is a third party

backed share is deemed to be income

• Amendments to widen relief for the exception where shares issued as a

financing tool to acquire substantial share interests in a target operating

company

• Amendments to rules specifically catering for multi-tier preference share

schemes

• Certain adjustments to cover certain emerging avoidance gaps

60

Qualifying Interest In Asset-for-share Reorganisations

• Section 42

– Minimum threshold for participation exemption reduced to 10%

– Qualifying interest reduced to 10% to align with participation

exemption

61

Debt reductions

• s20(1)(a) and para 12(5) of the Eight Schedule replaced by s19 and para 12A

• Applies on or after 1 January 2013

• If reduction was subject to donations tax, estate duty or was taxed as a fringe

benefit no recoupment or gain

• If not potential recovery or recoupment (s 19 and 8(4)(a)) or capital gain (para

12A)

• Position of lender - loss on write off of debt to connected person disregarded

unless:

– Debtor reduces base cost of asset (para 12A)/aggregate capital loss (para

12A)/includes amount in gross income (e.g. a recoupment)

– Acquirer includes the amount in gross income/aggregate capital gain

62

Debt reductionsY/A commencing after 1 January 2013

• Debt used to acquire trading stock still held

– Reduce “cost” of stock for tax purposes

– Excess treated as recovery or recoupment

• Debt used for expenditure other than trading stock or allowance assets

– Reduction amount treated as recovery or recoupment

• Capital assets

– Reduce base cost (if still held)

– Excess reduces assessed capital losses

– Any remaining excess is not taxed

• Allowance assets

– First applies to capital portion i.e. reduce base cost, excess recouped

63

Debt reductionsY/A commencing after 1 January 2013

• Relief from capital gains for:

– A group of companies

– The debt is reduced in the course of liquidation and if owed to a connected person

– To the extent the reduction does not exceed base cost of the connected person

• No relief applies if:

– Debt was reduced as part of a scheme to avoid tax, and

– The parties became connected after the debt arose or

– The company has not taken steps to liquidate within 36 months

– Has not withdrawn steps

– Does anything to invalidate

64

Incurral of interest in terms of certain debts deemed to be inproduction of income Section 24O

• Introduced to provide parity with so called indirect share acquisitions i.t.o s45

• Deduction will be allowed for interest incurred if that interest is associated

with:

– debt used to acquire controlling share interests and,

– the acquisition is comparable to those indirectly allowed for indirect share

acquisitions

• into operation on 1 January 2013 and applies in respect of acquisition

transactions entered into on or after that date

65

Share-for-share recapitalisations s41/43 Par 78 8th Schedule

• Currently relief in recapitalisation limited to capital gains

• Under new rules rollover will apply to any type of recapitalisations unless

consideration other than shares is received

• The entire "tax profile" of the shares disposed of applies to the new shares

acquired, including cost, date of acquisition, and, pre valuation date valuations

• The rules only apply to non equity shares if non equity shares were acquired

by means of a subdivision or consolidation

66

Value Mismatches Involving Share Issues s24B(1) and 40CA

• Deletion of 24B(1) asset received as subscription price for shares

– cost is lesser of the market value of the asset and the market

value of the shares issued

• 40CA introduced-company acquires asset in exchange for shares

issued (subject to 24B)

– deemed to have incurred a cost equal to the market value of the

shares issued.

– If debt is issued, the cost is equal to the amount of the debt

67

Value Mismatches Involving Share Issues s24BA

• Applies where the company acquires an asset in exchange for the issue of

shares and the consideration is not at market value

– MV>Value of shares

• Issuer of shares has capital gain

• Acquirer of shares:

– Capital asset - reduce base cost

– Trading stock - reduce amount

– MV<Value of shares

• excess deemed dividend for issuer of shares

68

Value Mismatches Involving Share Issues s24BA

• Will not apply when:

– transaction where consideration is at arm’s length

– company and that person form part of the same group of

companies

– Effective 1 January 2013

• Amendment to value shifting rules:

– because of 24BA no longer necessary for companies

– will apply only to a trust or partnership going forward

• Effective: 1 January 2014

69

Unified System for Taxing Real Estate Investment Vehicles

• In order to qualify as a REIT for tax purposes, the entity must be a resident

and its securities must be a listed on the JSE as securities in a REIT

• The REIT may claim deductions in respect of amounts:

– declared by the REIT as dividends (other than in respect of share buy-

backs) to its shareholders;

– and incurred by it as interest on the debenture portion of a linked unit

issued to shareholders (if applicable)

• Resident shareholders: Dividends distributed by a REIT to its resident

shareholders are subject to normal tax

• Foreign shareholders: From1 Jan 2014, dividends distributed to foreign

shareholders of a REIT will be subject to dividends tax

70

IT14SD

• Supplementary disclosure normally issued when:

– Refund is due

– As a pre cursor to an audit

• Essentially a self audit

• Most of the required reconciliations are not readily available

• 21 calendar days from date of issue option of further 21

• Failure to comply results in re-assessment or failure to pay refund

71

Micro Business par 11 6th Schedule

• Gives effect to the turnover tax and employees’ tax aspects of the

2012 Budget proposal

– Micro-businesses have the option of making tax payments twice-

yearly

• Aligns the relevant provisions of the Income Tax Act with those of the

Tax Administration Act, 2011,

– Clarifies that a penalty under paragraph 11 of the Sixth Schedule

is deemed to be a percentage based penalty imposed under

Chapter 15 of the Tax Administration Act

72

Budget Proposals: VAT

Budget - VAT

• Registration of foreign businesses in e-commerce for SA VAT

(imported services?)

• Special time-of-supply rule - services where consideration not

determined upfront due to contingent future event

• Motor car as defined to include racing and recreational cars

• Time of supply rules for connected persons

• Conversion date for foreign denominated standard rated invoice

74

Budget - VAT

• Finalisation of export incentive scheme – indirect exports by road

• Home-owners association

• Claw-back of VAT – debt relief

75

Amendments: VAT

Various issues

• Section 1 (paragraph (b) of the ‘instalment credit agreement’ definition)

– expanded to cater for certain aspects of Sharia compliant (Ijarah)

finance leases

• Credit and debit notes – s21(1)

– Allowance to correct mispriced invoices

• Transfer duty limitation also does not apply in respect of second-hand

fixed property change of use adjustments (backdated to 10 January

2012).

77

Christoper Green

detail from Alex

Potential Vat Double Charge For Goods Removed From Customs Controlled Areas (CCA) – Existing rules

• A. Goods imported into a customs controlled area (CCA)

– VAT on imports exempt on movable goods into a CCA of an IDZ

– On exit of CCA deemed import triggers VAT

• B. Goods locally supplied to a vendor in a CCA/IDZ

– Local supplies in CCA are zero rated

– VAT relief on temporary (30 day removal)

– On exit (over 30 days) deemed supply triggers VAT

• C. Personal consumption of goods in a CCA

– VAT triggered if not wholly consumed in the course of making taxable

supplies

78

Potential Vat Double Charge For Goods Removed From Customs Controlled Areas (CCA)-New rules

• A. Goods imported into a customs controlled area (CCA)

– Will remain outside of VAT net regardless of 30 day rule when entered for

home consumption

• B. Goods locally supplied to a vendor in a CCA/IDZ

– Customs officials will set triggering event

• C. Personal consumption of goods in a CCA

– If initially converted to private use won’t be taxed again under 30 day rule

on removal

79

Imported Goods Sold By Foreign Persons Prior To Entry For Home Consumption

• Pre-entry sales by foreign persons exempt if occur within South African

territory before home consumption

• Will eliminate need for registration

• Taxpayer may waive with SARS approval

80

Relief For Bargaining Councils and political parties

• Goods or services supplied by bargaining councils/political parties to any of

their members should exempt to the extent that membership contributions are

received as consideration

• Deregistration for councils/parties that solely supply service to members for

contributions

– Deemed supply reduced to zero

– Outstanding VAT assessed reduced to zero on written application

– No refunds will be paid on outstanding assessments

81

Miscellaneous provisions

• Abridged tax invoices

– Threshold increased to R5 000

• Microbusiness

– Option to pay turnover tax, VAT and employees tax twice a year

• E-filing

– Deemed filed on 25th if filed on last day of the month

82

Budget Proposals: International Tax

Budget - International

Protection of the tax base

• Uniform cross-border withholding tax to prevent base erosion

• Service fees now to be included in cross-border withholding

framework, together with the existing withholding on interest and

royalties

• Subject to treaty relief

• Interest, royalties and cross border service fee amendments ALL

effective 1 March 2014

84

Budget - International

Deferral of expenditure incurred by certain connected persons

• To limit potential abuse, deductions will be deferred until payment

Streamlining currency taxation

• The current tax calculation of currency gains and losses is extremely

complex and not wholly in sync with accounting principles

• The currency taxation rules will continue to be simplified in favour of a

more practical approach that aligns more fully with IFRS

85

Amendments: International Tax

Rollover relief for CFC intragroup transactions s45

• Current tax system fully extends the domestic rollover regime to

cross-border transactions except for intra-group transactions (ie

section 45 transactions)

• The domestic intra-group rollover rules will be extended to include:

– inbound restructurings

• same group of companies

• built-in gain equity shares at the transferor company level

– and foreign-to-foreign restructurings

• same group of companies

87

Exit charge on ceasing to be a Resident of South Africa

•In response to the Tradehold case:

•Deemed capital gain or deemed capital loss when either:

– a resident ceases to be a resident

– a resident becomes a Headquarter Company (“HQC”)

– A controlled foreign company (“CFC”) ceases to be a CFC (otherwise than by

becoming a resident)

• Achieved by deeming the person/company to have disposed of its assets on the day

immediately before it ceases to be a resident/becomes a HQC /ceases to be a CFC,

for an amount equal to the market value thereof; and

• Deemed reacquired at market value to establish new base cost.

88

Exit charge on ceasing to be a Resident of South Africa

• Prior position:

– Section 9H only dealt with a resident ceasing to be a resident or becoming a HQC.

• New position:

– CFCs now included within the ambit of section 9H

– Split between companies and persons other than companies

– Determines the commencement and ceasing of years of assessment, including

the foreign tax year in respect of a CFC

– Upon a company ceasing to be a resident or becoming a HQC – deemed to have

declared and paid a dividend in specie

– Section 9H provides for an exemption in respect of assets which, after a person

ceases to be a resident or a CFC, are attributable to a permanent establishment of

that person in South Africa – becoming a HQC is specifically excluded now.

89

• In terms of the current “resident” definition, a company will be resident in South Africa if it is:

– incorporated, established or formed in South Africa; or

– has its place of effective management (“POEM”) in South Africa.

• Added proviso that that where any person that is a resident ceases to be a resident during a year of assessment, that person must be regarded as not being a resident from the day on which that person ceases to be a resident

90

Resident definition section 1

Resident definition s1• Relief from the effective management test in the case of high-taxed

controlled foreign companies (CFCs)

• “resident” does not include a company if:– The company is incorporated, formed or established outside South Africa– The company’s POEM is located in South Africa– The company would be a controlled foreign company with a foreign

business establishment, had it not been for its POEM being located in South Africa; and

– The aggregate amount of tax payable to the government of any other country in respect of any foreign tax year, constitutes at least 75% of the normal tax that would have been payable in respect of the company’s taxable income, had the company been a resident of South Africa for the foreign tax year.

91

Foreign rebates for service fees improperly subject to foreign withholding taxes s6quin

• Position prior to amendments– Section 6quin could not be claimed where tax was imposed in violation of a DTA

(not legally payable)

• Position after amendments– Section 6quin has been broadened to allow for a credit in respect of South

African sourced income that has been subject to foreign taxes even if those foreign taxes were improperly imposed.

– The credit can be claimed in the absence of a DTA.– Amendments dealing with improperly imposed foreign withholding taxes will be

effective for years of assessment beginning on or after 1 January 2013.

92

Tax treatment of Foreign Exchange Differences s24I(10A)

• Will only defer unhedged non-current assets or liabilities between

group members or connected persons

• The meaning of current asset or current liability will follow the

meaning in accordance with IFRS

• The revised regime will trigger mark-to-market treatment for foreign

currency debts hedged by derivatives and back-to-back loan funding

stemming from parties outside the group

93

Tax treatment of Foreign Exchange Differences s24I(10)

• Section 24I(10) exchange items held and not realised will be deemed

to have realised (unless into new section 24I(10A)

• on the last day of the year of the year of assessment which ends

before the year of assessment commencing on or after 1 January

2014

94

Removal Of Misplaced Non-monetary And Monetary Foreign Currency Calculations

• Assets acquired and disposed of in single foreign currency

– natural persons and non trading trusts: Calculate gain or loss in foreign

currency and convert to Rand at average exchange rate

– Other persons: acquisition translated into Rands using exchange rate at

acquisition, disposal price will be translated to Rands using the exchange

rate at disposal.

• Removal of non monetary matching for loans (and associated hedges)

– Currency gains and losses on loans used to acquire assets other than

monetary assets will no longer be matched for companies and trading

trusts

95

Transfer pricing s31(6)

• Initiatives aimed at facilitating the expansion, global competitiveness

and smooth operation of South African multinational companies in

other countries

• Transfer pricing will not apply to certain cross-border financial

assistance transactions (e.g. loans) and certain cross-border uses

of intellectual property

• Relief for transfer pricing in the case of controlled foreign

companies with foreign business establishments and a 75%

hypothetical South African rate

96

Withholding tax on interest paid to non-residents - s37I – s37K

• Rate increase to 15% (now proposed effective 1 March 2014)

• Will apply to interest with an SA source

• Exemptions from withholding tax:

– Interest paid by the Government, any bank or Headquarter Company

(>10% of equity shares and voting rights)

– Interest paid in respect of a listed debt in respect of goods imported into

the Republic

– Payable to non-resident client as defined in the Securities Services Act

– Collective investment schemes

– Natural person >183 days in RSA

– Permanent Establishment in RSA

97

Withholding tax on royalties paid to non-residents

• Rate increase to 15% (proposed to be effective 1 March 2014)

• Will apply to royalty with an SA source

• Exemptions from withholding tax:

– Natural person >183 days in RSA

– Permanent Establishment

– Headquarter Company with at least 10% of the equity shares and

voting rights

98

Budget Proposals: Tax Administration Act

Budget – Tax Administration

Tenders and tax compliance

• SARS is now testing an automated tax clearance certificate for implementation

later this year

• This will enable the real-time tracking of the tax compliance of the person who

tendered

• SARS is also following up on payments made by the state to tenderers to

check whether full tax disclosure was made

Understatement penalties

– Currently – non-waiving

– Proposed - penalty provisions will be refined and relief will be provided for

bona fide errors (welcomed!)

100

Tax Administration Act

Introduction

• High level overview of the TAA

– Understand certain key transitional issues

– Highlight new or interesting changes in each of the chapters of the TAA

– Awareness of certain practical areas we have encountered to date

• Purpose of the TAA:

– Align administration of the general provisions of tax acts into one act

– Prescribe rights and obligations of tax payers

– Prescribe powers and duties of persons engaged in the administration of

tax act

102

© 2012 Deloitte Touche Tohmatsu Limited

Chapters in the act

103

Chapter Chapter1 Definitions 11 Recovery

2 General Administration 12 Interest

3 Registration 13 Refunds

4 Returns and Records 14 Write off or Compromise of Tax Debts

5 Information Gathering 15 Administrative Non-Compliance Penalties

6 Confidentiality 16 Understatement Penalties

7 Advance Tax Rulings 17 Criminal Offences

8 Assessments 18 Reporting of unprofessional conduct

9 Dispute Resolution 19 General provisions

10 Tax Liability & Payment 20 Transitional provisions

Transitional Rules – Frequently Asked Questions

• What is the impact on the public officer ?

– s261 states that public officer appointed ito a tax Act and holding office

prior to TAA remains the public officer

• Which rules for dispute resolution will apply?

– S269 states that rules (and regulations) issued under the provision of a

tax Act remain in force

• What is the impact on Rulings, interpretation notes, practice notes and

other publications?

– S269 states that regarded as having been issued under the authority of

this Act to the extent relevant to and consistent with the TAA

104

Transitional Rules – Frequently Asked Questions

• What happens to my tax number?

– Chapter 20 of the TAA provides that any tax number allocated to a

taxpayer prior to the TAA taking effect will continue to be applicable until

SARS allocates a new number to the taxpayer under the TAA

• When is the new tax ombud coming into existence?

– Section 259 of the TAA provides that the Minister of Finance must appoint

a person as a Tax Ombud within one year of the commencement date of

the TAA

105

Transitional Rules - s270(6)

• Additional tax, penalty or interest which but for the repeal of the

legislation in Schedule 1 would have been capable of being imposed,

levied, assessed or recovered by the commencement date of the TAA

and

• Which has not been imposed, levied, assessed or recovered by the

commencement date of the TAA, may be—

– imposed or levied as if the repeal had not been effected; and

– assessed and recovered under the TAA

106

Definitions – Chapter 1

• Assessment – now includes self-assessment

• Date of assessment – now means date of issue of assessment and not due

date for payment

• Effective date – determines date from which interest accrues

• Official publication – constitutes SARS's practice generally prevailing

• Practice generally prevailing - the only sources of SARS’s binding practices

will be official publications

• Tax – defined for purposes of the administration of the Act & includes

penalties & interest

107

Interpretation - Chapter 2

• If the TAA is silent with regard to the administration of a tax Act and it

is specifically provided for in the relevant tax Act, the provisions of that

tax Act apply

• If there is an inconsistency between TAA and another tax Act, then the

tax Act will prevail

• Tax administration and Promotion of Administrative Justice Act

– Certain provisions were codified

– Certain provisions where administrative fairness limited

108

Tax Ombud – Chapter 2

• Mandate:

–To review and address any complaint by a taxpayer regarding a

service matter or a procedural or administrative matter

• The Tax Ombud may not review—

– (a) legislation or tax policy;

– (b) SARS policy or practice generally prevailing

– (c) a matter subject to objection and appeal under a tax Act

– (d) a decision of, proceeding in or matter before the tax court.

109

Registration – Chapter 3

• TAA provides for a single tax account, and it allows SARS to

implement a single registration process for all tax types over time

• Ultimately this will ease the administrative burden on taxpayers as

they will need to submit only one form to register for any of the taxes.

• Taxpayers will have one account that reflects their entire tax liability.

• The ultimate objective is to create a single view of a taxpayer

110

Returns and records – Chapter 4

• Section 30 - Kept in the original form, in an orderly fashion, and in a safe

place, or, where retained in electronic form, in the manner to be prescribed by

the Commissioner in a public notice, or in a form specifically authorised by a

senior SARS official in terms of section 30(2) of the Act

• The public notice has been issued and allows taxpayers to keep records in

terms of section 29 in an electronic form, so long as the rules contained in the

public notice are adhered to.

111


• Retention periods

– a period of five years from the date of the submission of a

return

– may be longer in certain defined instances (s32)

• Section 28 - Statement concerning accounts by a preparer

– The preparer must, at the request of the taxpayer, submit to that

taxpayer a copy of the certificate or statement

• extent of the examination

• whether disclose the true nature

112


• Reportable arrangements

– All listed arrangements likely to lead to an undue tax benefit are to be

identified by the Commissioner by public notice

– Failure to report a reportable arrangement will not constitute a criminal

offence, but is subject to an administrative non-compliance penalty

• Public notice 1108 identifies the following as arrangements that lead to

an undue tax benefit:

– Any arrangement that would have qualified as a hybrid equity instrument

under s8E/ hybrid debt instrument under s8F of the Income Tax Act if the

prescribed period had been 10 years (but does not include any instrument

listed on an exchange regulated in terms of the Securities Service Act)

113

Information Gathering – Chapter 5

• Keeping a taxpayer informed of the audit

– Stage of audit: A taxpayer is entitled to be informed of the stage

the audit is at, at intervals specified by the Commissioner in a

Public Notice (Government Notice No 788)

– Letter of audit findings: Within 21 days of the audit being finished

the taxpayer must be given a letter of findings or confirmation that

audit inconclusive

114


• Inspections without prior notice

– The inspection may only be done to determine:

• the identity of the person occupying the premises

• whether the person occupying the premises is registered for

tax

• whether the person is keeping records in the required format

115


• Request for relevant material

– SARS may require the taxpayer or another person to, within a

reasonable period, submit relevant material

– “relevant material” defined in section one – “foreseeably relevant”

116


• Notice of field audit

– prior notice of at least 10 business days

– to make available at the person’s premises specified in the notice

relevant material that the official may require to audit

117

What doesn’t kill you makes you stronger!


• SARS audits and taxpayer feedback

– Government Notice No 788 sets out the form and manner of a

report to be submitted by SARS to a taxpayer on the stage of

completion of an audit, in terms of section 42(1) of the TAA.

118


• Interviews by SARS and travelling distance

– Government Notice No 789 (1 October 2012)

– deals with the distance to be taken into account of in determining

whether a person may lawfully decline to attend an interview with

SARS

119


Advance Rulings – Chapter 7

120

• The advance ruling system currently regulated in the Income Tax Act

and the Value-Added Tax Act is incorporated in TAA

• Establishes framework for the system and sets out basic rules

regarding:

– Application process & fees

– Exclusions and refusals

– Effect of rulings

– Impact of subsequent law changes

– Retrospective application

– Publication of rulings

Advance Rulings – Chapter 7

• What is the impact on Rulings?

• S269 states that regarded as having been issued under the authority

of this Act to the extent relevant to and consistent with the TAA

121

Assessments – Chapter 8

• ‘‘Assessment’’ means the determination of the amount of a tax liability

or refund, by way of self-assessment by the taxpayer or assessment

by SARS

• Throughout the TAA provision is made for a transition to a full self-

assessment system to cater for future modernisation of the tax

system

122


• Old “date of assessment” in relation to any assessment, meant the date

specified in the notice of such assessment as the due date or, where a due

date is not so specified, the date of such notice

• “date of assessment’’ now means—

– (a) in the case of an assessment by SARS, the date of the issue of the

notice of assessment; or

– (b) in the case of self-assessment by the taxpayer—

• if a return is required, the date that the return is submitted; or

• if no return is required, the date of the last payment of the tax for the

tax period or, if no payment was made in respect of the tax for the tax

period,the effective date

123


• Important to be aware of impact on timing

– Prescription

– Dispute processes

• Whereas the Income Tax Act merely refers to the "notice of assessment" in

the context of the definition of "assessment", the TAA actually prescribes the

content of the notice of assessment in s96(1) and (2).

• In terms of s96(2) if contrary to return must include grounds

124


New provisions

• Original assessment: Defined term that includes 1st assessment by SARS &

return which incorporates the taxpayer’s determination of the amount of a tax

liability

• Additional assessment: New simplified grounds on which additional

assessments may be issued to achieve alignment across taxes

• Reduced assessment: Clarity that reduced assessment will also be issued if

taxpayer made undisputed errors in return

• Jeopardy assessment: May be issued before end of tax period to secure

early collection of tax at risk e.g. in case of dissipation

125


New provisions

• Estimation of assessment: Concept of ‘estimated assessment’ replaced with

provision that original, additional or reduced assessment may be ‘based on an

estimation’

• Period of limitations for issuance of assessment: SARS assessment 3 years

& self-assessment 5 years

126


127

Old New

s77 Assessment and recording thereof

s91s97

Original assessmentsRecording of assessments

s78 Estimated assessments s95 Estimation of assessments s79 Additional assessment s92 Additional assessment

s79A Reduced assessments s93 Reduced assessments

s79B Withdrawal of assessments s98 Withdrawal of assessments

s80 Inspection of record of assessments

s97 Recording of assessments

s94 Jeopardy assessments

s96 Notice of assessment

Dispute Resolution – Chapter 9

• Chapter 9 must be read with the rules to be issued under TAA s103

(which remain the rules ito s107A in ITA for now)

• New rules will be issued by Minister after consultation with the

Minister of Justice and Constitutional Development, by public notice

• As the dispute resolution process is procedurally intensive, the Guide

on Tax Dispute Resolution has been aligned with TAA and published

128

Dispute Resolution – Chapter 9

• Burden of proof

• The burden of proof generally lies with a taxpayer

• TAA now provides that the burden of proof is on SARS to prove—

– that an assessment based on an estimate is reasonable

– the basis for imposing an understatement penalty

129


Income Tax Act to Tax Administration Act

130

OLD NEW

s 81 Objection against assessment

Chapter 9 Dispute resolution

Part B Objection and appeal

s 104—Objection against assessment or decision s 106—Decision on objection

s 83 Appeals to tax court against assessment

Chapter 9 Dispute resolution


s 107—Appeal against assessment or decision

s 83A Appeals to tax board Chapter 9 Dispute resolution


s 107—Appeal against assessment or decision


Income Tax Act to Tax Administration Act

131

OLD NEW

s 86A Appeals against decisions of a tax court

Part E Appeal against tax court decision

ss 133–141

s 88 Payment of tax pending appeal

Chapter 10 Tax liability and payment

Part B Payment of tax

s 164—Payment of tax pending objection or appeal

Tax liability and payment – Chapter 10

Debt relief measures

• Under certain circumstances the payment of tax may be suspended if a

taxpayer intends to pursue a valid objection

• In order to recognise legitimate circumstances where a taxpayer suffers a

temporary liquidity problem, SARS may extend the date for paying a tax debt

or enter into an instalment payment arrangement with the taxpayer

• SARS is also authorised to compromise a tax debt that is not disputed, and

SARS may also write tax off temporarily or permanently.

132

Tax liability and payment – Chapter 10

Taxpayer account & allocation of payment

• Framework for single taxpayer account with rolling balance

• Framework for “first in first out” payment allocation rule i.e. payment

may be applied to oldest debt first despite taxpayer designation

133

Interest – Chapter 12

• Change (but not yet!)

– Alignment of interest provisions across taxes

– Accrued daily and compounded monthly

• General rule

– Interest accrues from ‘effective date’, i.e. normally the date that tax is

payable under a tax Act, to date of payment (see s187)

– Interest rate is the ‘prescribed interest rate’ except in respect of

overpayments of provisional tax (4% points below)

– Remittance of interest discretion retained - limited to specified

circumstances beyond the taxpayer’s control

134

Interest – Chapter 12

• Refund interest payable by SARS

– Interest calculated from the later of the ‘effective date’ or date that the

excess payment received by SARS

– Taxpayer thus normally entitled to refund interest from same date that

SARS would have been entitled to interest on unpaid tax

• Some exceptions in tax Act e.g. VAT Act where interest on refund only

payable after 21 days of claim

135

© 2012 Deloitte Touche Tohmatsu Limited136

Penalties Overview

Penalty system across taxes

TAA

A: Administrativenon-compliance

PenaltyTargets

administrative non-compliance

Chapter 15

B: Understatement

penaltyTargets serious

non-compliance & tax evasion

Chapter 16

C: Criminal offences

General offences across taxes

Chapter 17


Penalties – Chapter 15 & 16

137

Old New

s 75B Administrative penalty in respect of non-compliance

s208–220 Administrative non-compliance penalties

s 76 Additional tax in the event of de-fault or omission

S221-224 Part A:Understatment Penalty

s 80S Reportable Arrangement Penalties s 212 Reportable arrangement penalty

Fourth Schedule para 20(4)

Additional tax in the event of tax-able income being underestimated

Remains in ITA, deemed percentage based in TA A

Fourth Schedule para 20(A(3)

Additional tax in the event of failure to submit an estimate of taxable income timeously

Remains in ITA, deemed percentage based in TA A

Fourth Schedule para 27(2)

Penalty on late payment of provisional tax Remains in ITA, deemed percentage based in TAA

© 2012 Deloitte Touche Tohmatsu Limited138

Penalties - Chapter 15: Administrative non-compliance penalties

• Fixed amount penalty• Based on assessed loss or taxable income

Administrative non-compliance

• Participant failing to disclose information in respect of a reportable arrangement as required by section 37

• Fixed penalty amounts for promoter and participant respectively

Reportable arrangement

• Imposed if SARS satisfied that an amount of tax was not paid as and when required under a tax Act

• Equal to percentage of amount of unpaid tax• Percentage prescribed in the tax Act

Percentage based penalty

Penalties – Fixed Penalty s210

• If SARS is satisfied that non-compliance

– Non-compliance is failure to comply with an obligation that is imposed by

or under a tax Act and is listed in a public notice

– Only one public notice on this to date

– Failure by a natural person to submit an income tax return as and when

required under the Income Tax Act, for years of assessment commencing

on or after 1st march 2006, where that person has two or more

outstanding income tax returns for such year of assessment, will be liable

to the fixed-amount penalty.

• But – the transitional rules in 270(6) seem to catch other areas of non –

compliance….

139

Penalties – chapter 15

• Remittance of Administrative penalties

– Very similar requirements to s75B regulations gazetted on 31 December 2008

– No significant changes, minor amendments to number of days allowed in certain

instances

140

Penalties - Chapter 16

• New understatement penalty

• The current open-ended discretion to impose additional tax (now

called understatement penalty under TAA) of up to 200% now limited

by a new structure whereby percentage of additional tax will be

determined by :

– Taxpayer’s behaviour (e.g. gross negligence, intentional tax

evasion, substantial understatement), and

– Other objective criteria (e.g. voluntary disclosure, repeat case)

141


Penalties - Chapter 16: Understatement penalty

142

New provisions:• Imposition triggered by an ‘understatement’ (defined)• If understatement is ‘substantial’ (defined) then behaviour irrelevant• Methodology for calculation of tax shortfall prescribed• Onus to prove grounds for alleged behaviour on SARS• Ability to request remittance severely restricted• Administrative & understatement penalty ‘double jeopardy’ avoided?• Permanent ‘Voluntary Disclosure Programme’ – administrative penalty,

understatement penalty & criminal charges relief but not interest


Penalties - Chapter 16: Understatement penalty

143

1 Item 2 Behaviour 3 Standard Case

4 If obstructive, or if it is a ‘repeat case’

5 Voluntary disclosure after notification of audit

6 Voluntary disclosure before notification of audit

(i) Substantial understatement 25% 50% 5% 0%

(ii) Reasonable care not taken in completing return

50% 75% 25% 0%

(iii) No reasonable grounds for tax position taken

75% 100% 35% 0%

(iv) Gross negligence 100% 125% 50% 5%

(v) Intentional tax evasion 150% 200% 75% 10%

Refund – Chapter 13

• A refund need not be authorised by SARS until such time that a

verification, inspection or audit of the refund has been finalised

• If a taxpayer provides acceptable security SARS must release a

refund before a verification, inspection or audit is finalised.

• A decision not to authorise a refund is subject to objection and appeal

144

Registration of tax practitioners – Chapter 18

• Must register with a recognised controlling body

• The second phase will be the establishment of an independent

regulatory board for tax practitioners

• May not register if removed from a professional body or convicted for

a crime involving dishonesty in the preceding five years

145

Tax clearance certificates – Chapter 19

• SARS must issue or decline to issue the certificate within 21 business

days from the date the application is duly filed

• Court ruling in favour of taxpayer on revocation of tax clearance

certificate because the taxpayer was not afforded an opportunity to

make representation to SARS

146

Miscellaneous Budget Proposals

Budget – Miscellaneous Proposals

148

Carbon Tax

• With effect from 1 January 2015 a carbon tax rate of R120 per ton of CO2 equivalent,

with 10 per cent increases a year

• Potential phasing out of electricity levy as carbon tax is phased in

Vehicle CO2 emissions tax (amendment from 1 April 2013)

• Passenger vehicles: increase from R70 to R90 per gram of emissions/km above 120

gCO2/km

• Double cabs: increase from R100 to R125 per gram/km in

excess of 175 gCO2/km

149

[email protected]

Thank You

For more information please contact the Fasset Call Centre on 086 101 0001

or visit www.fasset.org.za

fasset update march 2013

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