September 2013
Income Tax
Guide
A step-by-step guide to submitting your income tax returns via e-Filing.
Introduction
At Direct Axis we’re committed to creating a healthy and prosperous future for all South Africans.
While none of us enjoy paying tax, it is essential that the Government is able to collect
revenues to support public service delivery and investment in the country’s infrastructure
and people.
We’ve put this guide together to help people understand how to submit a return using the
South African Revenue Service’s e-Filing system. And as tax is often seen as being a boring and
dry topic we’ve included some fun statistics.
22
Remember this date!
22 November
Deadline for all non-provisional tax payers who submit their return via e-Filing.
What is tax?
Governments around the world use taxes as a way of raising money to finance their endeavours.
To use a simple analogy, if you go to a gym, you more than likely pay a monthly membership fee to use its facilities. Tax is the way
that governments make us pay for using many of the services that the nation provides to the country, such as education, defence
and the provision of roads. The first recorded instance of income tax was in the year 10 AD when Chinese emperor Wang Mang
brought in a tax, 10% on all profits, for skilled labourers and professionals.
Although there are many different taxes we have to pay, they generally fall into one of the following three categories:
Personal income tax
This is what we pay on our earnings. For most of us, our employers deduct it from our salaries in the form of PAYE (Pay As You
Earn), but if we have other income, such as property rental, or make profits on selling items such as shares we need to pay tax on
these (this is sometimes in the form of Capital Gains Tax). The amount of tax we pay depends on how much income we earn and
the basic rate starts at 18% and rises to 40% for top earners.
Consumption taxes
These are taxes we pay when we buy things. VAT is the most visible of consumption taxes and in South Africa we are fortunate it
is only 14% (the UK charges VAT at 20% whilst it is 25% in Denmark). Other consumption taxes include the levies we pay on petrol,
tobacco, alcohol as well as customs and excise duties on imported goods.
Company tax
Companies that make profits also need to pay taxes. The current rate for corporate taxation is 28%.
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© Direct Axis 2013 www.directaxis.co.za
Index
Should I submit a tax return?.................................................................................................................4
I have to submit a tax return. What do I do know?.........................................5
How to use e-Filing...................................................................................................................................................5
Sources.............................................................................................................................................................................................12
Did you know?
Newspapers have such large-sized sheets of paper because of a British
1816 tax on newspapers. The “knowledge tax” was levied by page. In response, newspapers started using larger paper size to accommodate more
text, thereby reducing the number of pages taxed.
And, did you know this?
Russian Emperor Peter the Great placed a tax on beards in 1705. He hoped that
the tax would encourage men to have a clean-shaven look that was popular in
Western Europe.
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Should I submit
a tax return?
Not all South Africans need to submit tax returns.
This simple decision tree will help you understand
if you need to register for tax and complete
a return.
START HERE
Do you earn more
than R250 000
per annum?
Have you been working
at the same company
for one tax year (1 March
– 28/29 February)?
NO
YES
You have to
submit a tax
return.
Do you receive any
allowance from
which tax was not
fully deducted?
YES
NO
You have to
submit a tax
return.
NO
YES
You have to
submit a tax
return.
Do you receive any
additional income
(rental income, etc)?
NO
You have to
submit a tax
return.
Do you have any
medical aid policies,
retirement annuities,
etc. on which you can
claim tax back?
NO
You DO NOT
have to submit
a tax return.
YES
YES
You have to
submit a tax
return.
4.
© Direct Axis 2013 www.directaxis.co.za
I have to submit
a Tax Return
What do I do now?
The easiest way to complete a return is to
use SARS’ e-Filing system.
This is an online process and, if you’ve got
the right information to hand and follow
our simple guide, it should be a breeze.
How to use e-Filing
1 Register for e-Filing
If you’ve never registered for e-Filing before, you have to do so in order to submit an electronic return.
You will need the following information to register:
• income tax registration number
• identity number
• bank account details
Go to www.sarsefiling.co.za, click on “register” and follow the online instruction. Once the process is complete, you are
registered for e-filing.
2 Login
Use your username and password to log in and to start the e-Filing process.
3 Open Your Tax Return
Click on “ITR12” to open your tax return.
4
Confirm that all the information that displays is correctt
Check that all relevant employer-related info is complete. Compare what’s on your electronic return with the
information printed on your IRP5 to check that it is correct as well.
Don’t want to pay any income tax?
Then move to any of these countries where there is NO income tax:
Monaco, Kuwait, Bermuda, United Arab Emirates, The Bahamas, Saudi Arabia
Great! You’re getting there!
33.3 % complete!
5.
© Direct Axis 2013 www.directaxis.co.za
5
Create and complete all other sections that apply to you
Answer the questions on the first page to build the rest of your tax return. As you complete sections, the pages
will be created. If you are employed or receive a pension, the info on your supporting documents that relates to
your salary or pension should already have been filled in. Use your documents to check that information is correct.
If your additional earnings are from business activities or if you are self-employed or if you have deductions to
claim, you have to complete the sections related to these yourself.
6 Ensure that you have all the necessary documentation
•
Your IRP5/IT3(a) certificate(s).
•
The certificates that you (and your spouse if you are married in community of property) received for interest earned
on additional income sources.
•
Financial statements that reflect any business income you earned.
•
The certificates for retirement annuity contributions you made.
•
Information that relates to any capital gains you have made.
•
Documents that relate to medical expenditure, such as a statement from your medical scheme and proof of medical claims not paid by your scheme. If you or a member of your family is disabled, you will also need a completed
“Confirmation of diagnosis of disability” form (ITR-DD).
•
If you receive a travel allowance, you would need the odometer reading at the beginning (1 March) and at the end (28/29 February) of the tax year, as well as details of your business travel and/or costs involved.
•
Any other information that relates to income that must be declared or deductions that you want to claim.
Remember that even though you do not have to submit documents with your income tax return, you must keep them for five years after submitting your return. SARS could within this period ask you to submit the documents to verify the
information you have declared.
7
Check your personal details
Ensure that all your details as they appear on your tax return are correct. Pay special attention to your
banking details. If any information is outdated, you have to update it.
Did You Know?
Income tax was introduced in the UK in 1188 by Henry II. He wanted to raise money for his
third crusade against the “Infidel”. He raised a tax which demanded that each ‘layperson’
in the UK paid a tenth of their income and all moveable property to the king.
The tax was known as the Saladin Tithe.
You’re almost halfway!
48% complete!
6.
https://www.directaxis.co.za/news.aspx
8
Investment Income
Did you earn any local or foreign investment income? This excludes dividends on locally listed shares, which are tax-free. If
you did, you have to declare it under Investment Income.
!
Good to know
Check the certificates you received from banks, life assurance companies and unit trust companies – these will show how much interest you earned from your investments.
If you received interest on local or rand-denominated foreign investments from more than one investment or financial
institution, add the amounts together and enter the total on your tax return.
Convert foreign interest income and foreign dividends into rands before adding them up.
Declare any tax you’ve paid in foreign countries. SARS will decide if it qualifies.
9 Taxable Capital Gains
Did you make any local or foreign taxable gains or losses? If you did, you have to declare them to SARS.
!
Good to know
Each transaction that results in a capital gain or loss must be declared separately.
Do not split the gains or losses if you are married in community of property. SARS will do this for you.
10 Any Other Income
You do not have to complete this section if you earned only a salary, pension or investment income.
But you must complete it if you earned:
•
business or professional income (tax imposed on businesses incorporated under the laws of the Republic of
South Africa), or rental income. Declare it under “Local Business, Trade and Professional Income”
•
any other taxable income or accruals, like royalties. Declare it under “Other Taxable Receipts and Accruals”
The 5 Countries with the Highest Tax Rates
1. Aruba (58.95% for anyone earning at least $171 149 - that’s R1 679 611)
2. Sweden (56.6% for anyone earning at least $85 841 – that’s R842 421)
3. Denmark (55.38% for anyone earning at least $70 633 – that’s R693 174)
4. Netherlands (52% for anyone earning at least $70 090 – that’s R687 845)
5. Belgium (50% for anyone earning at least $45,037 – that’s R441 981)
South Africa
– Individual income tax rates vary from 18% (for anyone earning
below R160 000) to 40% (for anyone earning more than R617 000)
Keep going! You’re getting there!
62% complete!
7.
© Direct Axis 2013 www.directaxis.co.za
11 Annual Medical Expenses
Did you pay your own medical scheme contribution from your bank account or do you have any medical expenses that you
did not recover from your medical scheme? If you answer “yes” to either question, you can claim for medical expenses.
To claim for contributions
Record the number of dependents on your medical scheme in each month of the year. SARS will then use this information to
calculate how much of your contributions you can claim as deductions.
To claim for medical expenses
You can claim for three kinds of un-recouped medical expenses:
1.
medical expenses not related to physical impairment or disability. Record these expenses under the field titled “State any Medical Expenses Not Recovered from Your Medical Scheme”
2.
medical expenses related to a physical impairment that affects your ability to function mildly. Record these expenses under the field titled “State any Physical Impairment Expenses not Recovered from Your Medical Scheme”
.
3
medical expenses related to a disability that you or a family member may have. In this instance, “disability” could refer to deafness, blindness or the necessity to use a wheel chair as a result of a permanent disability. Record these
expenses under the field titled “State any Disability Expenses not Recovered from Your Medical Scheme”
If you are over the age of 65, all qualifying medical expenses in these three categories will be allowed.
No limitation will be placed on the medical expenses that you incurred if you are 65 years of age or older, or if you, your
spouse or your child is considered a person with a disability as defined by SARS.
Add up all of your expense and then enter the total in the relevant field.
12 Retirement Annuity and Income Protection Payments
Retirement Annuity Contributions
You can only claim for contributions made in your own name.
The institution you make payments to will issue you a statement. Enter the amount(s) from the statement for your claim. If
you contribute to more than one institution, calculate the total amount.
You must declare any and all contributions, including those that were made through your employer.
Income Protection Payments
You have to declare contributions made to a policy to protect yourself against loss of income as a result of illness, injury,
disability or unemployment. Record the amount paid under the section titled “Retirement and Income Protection
Contributions”.
Did You Know?
Denmark is the first country to impose a fat tax. They are now taxing all
foods which contain more than 2.3% of saturated fat.
Don’t stop now, you’re almost done!
75% complete!
8.
© Direct Axis 2013 www.directaxis.co.za
13 Work Related Travel Expenses Against Allowance
Do you receive a travel allowance from your employer because you use your vehicle for work purposes?
If you do, you must:
tell SARS how much of your allowance you actually spent on travel for work purposes. State if you used more than
one vehicle.
What to record:
• your car’s registration number
• your car’s cash value or cost price
• the “opening kilometres”, “closing kilometres” and “business kilometres”
Good to know
!
Your mileage for the entire tax year should be recorded in a log book. Travelling between your home and your place of work is not considered to be business travel, thus you cannot add it to your claim.
14 Any other Deductions
There are only a few other deductions that qualify:
•
if you are paid a subsistence allowance because you are obliged to travel for business purposes and spend nights away from home
•
donations made to an approved public benefit organisation in terms of Section 18A of the Income Tax Act
•
depreciation of an asset, such as a computer, that you are obliged to use for work purposes
•
home office expenses if you use part of your home regularly and exclusively as an office
It’s a numbers game...
5.2 million
number of penalty notices submitted in 2012 (to approximately 486 000 taxpayers with
outstanding returns from previous years)
18 000
the number of returns filed in the first 4 hours after the 2013 tax season opened in July
R14.55 billion
the value of tax rebates paid to taxpayers in 2012
3 seconds
the time it took to assess 93% of all e-filing returns in 2012
5.66 million
total number of tax returns submitted on time in 2012 - 4.214 million were from individuals with the
balance from companies and trusts in 2012
R4 billion
the total amount collected from tax penalties in 2012
So close!
85% complete!
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© Direct Axis 2013 www.directaxis.co.za
15 Get an Idea of the Possible Results
You can calculate the possible outcome of your tax return just before you submit it. Do this by saving your return and then
clicking on the “tax calculator” button.
This will generate a tax calculation, of which the result will show you how much, if any, you are likely to pay SARS, how much
SARS is likely to pay you, or whether you have paid the right amount of tax.
16 Submit and file your tax return
Upon successful completion and filing of your tax return, you will receive an assessment from SARS that will state what you
owe SARS or what SARS owe you.
If SARS owes you any money, (last year they paid nearly 95% of all reimbursements within 72 hours) they will refund the
money straight into your bank account.
The assessment will also show how SARS reached the final amount, and it will stipulate which deductions SARS did or did
not allow.
If you’re unsure about anything, look for the Help-You-eFile logo on the SARS eFiling website. This allows you to ask a SARS
agent to share your view of the eFiling screen on your personal computer and give you guidance in real time.
Where does my Tax money go?
When Finance Minister Pravin Gordhan delivered the Budget Speech earlier this year,
he indicated that government intended to spend South Africa’s money like this:
53.18% R682.3 bn on Social Services
12.20% R156.5 bn on General Public Services
10.65% R136.6 bn on Overall Economic Affairs
8.49% R108.9 bn on Public Order and Safety
5.81% R74.6 bn on Transport
3.49%
R44.8 bn on Defence
1.82%
R23.4 bn on Agriculture, Forestry, Fisheries, Rural Development and Land Reform
1.74%
R22.3 bn on General Economic and Commercial Affairs
1.27% R16.3 bn on Science and Technology
0.87% R11.1 bn on Fuel and Energy
0.31% R4 bn on the Contingency Reserve
0.17% R2.2 bn on Environmental Protection
You have completed your e-Filing!
100% complete!
10.
© Direct Axis 2013 www.directaxis.co.za
R
Where is the Money for the
Budget Derived From?
35.1%
27.8%
19.5%
17.6%
Personal income tax
VAT
Company tax
Other
Do you need help filing your tax return?
•
Call the SARS contact centre on 0800 00 SARS (7277)
•
Use Help-You-eFile. This service allows you to ask a SARS agent to share your view of the eFiling screen on your
computer. This will enable an agent to help you with any problems you are experiencing in real-time.
•
Visit your local SARS branch.
Tax Dodgers
Not everyone is as diligent and honest as you. In fact, some famous people have tried to avoid paying their taxes. Here are some
well known individuals who got caught recently.
Lionel Messi
In 2013 the Barcelona and Argentina soccer star paid €10 million in back taxes to try and avoid being charged for tax evasion.
He’s still waiting on the outcome of a September 2013 court case which could see him sentenced
to up to six years in prison.
Wesley Snipes
The American actor spent nearly three years in jail, only getting out in April 2013, for
failing to submit income tax returns from 1999 to 2001. His tax advisors at the time
were convicted as well and they both received longer sentences than Snipes.
Julius Malema
In August 2013 SARs revealed that Malema had undeclared tax liabilities of R16 million.
It seized and sold many of his assets and is continuing its investigation of him.
If you suspect someone of not paying their taxes you can report them via the SARS website or by calling their Anti-Corruption
and Fraud Hotline on 0800 00 2870. Unlike their counterparts at the IRS in the States, they won’t give you a reward.
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© Direct Axis 2013 www.directaxis.co.za
Sources
www.bdlive.co.za
www.theblaze.com
www.cnbc.com
www.sars.gov.za
www.therichest.com
www.wikipedia.org
www.sanews.gov.za
www.moneyweb.co.za
www.stanlib.com
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© Direct Axis 2013 www.directaxis.co.za