201
4/5
TAX
GUIDE
kpmg.co.za
01
Income Tax:
Individuals
02
1
Income Tax:
CORPORATE TAXPAYERS
03
11
Income Tax:
INTERNATIONAL TAXPAYERS
26
Indirect Tax:
vat/trade and customs
29
04
contents
INCOME TAX:
INDIVIDUALS
INCOME TAX:
CORPORATE
TAX PAYERS
INCOME TAX:
INTERNATIONAL
TAXPAYERS
INDIRECT TAX:
VAT/TRADE
AND
CUSTOMS
INCOME TAX: Individuals
INCOME TAX: Individuals and Special Trusts
Tax rates (year of assessment ending 28 February 2015)
Taxable income
Rates of tax
R
R
0-
174 550
R
R
18% of each
1
174 551 -
272 700
31 419 +
25% of the amount above
174 550
272 701 -
377 450
55 957 +
30% of the amount above
272 700
377 451 -
528 000
87 382 +
35% of the amount above
377 450
528 001 -
673 100 140 074 +
38% of the amount above
528 000
40% of the amount above
673 100
673 101 and above
195 212 +
Tax rates for previous year (year of assessment ending 28 February 2014)
Taxable income
Rates of tax
R
R
0 -
165 600
165 601 -
258 750
29 808 +
25% of the amount above
165 600
258 751 -
358 110
53 096 +
30% of the amount above
258 750
358 111 -
500 940
82 904 +
35% of the amount above
358 110
500 941 -
638 600 132 894 +
38% of the amount above
500 940
40% of the amount above
638 600
638 601 and above
R
R
18% of each
185 205 +
1
Tax Thresholds
Age
Threshold (R) 2014/15
Below age 65
Threshold (R) 2013/14
70 700
67 111
Age 65 to below 75
110 200
104 611
Age 75 and over
123 350
117 111
Trusts, other than special trusts, will continue to be taxed at a flat rate of 40%.
Tax Rebates
2014/15
2013/14
Primary rebate
for natural persons
12 726
12 080
Secondary rebate
for natural persons aged 65 and older
7 110
6 750
Tertiary rebate
for natural persons aged 75 and older
2 367
2 250
1 | 2014/15 Tax Guide
Allowances
Subsistence Allowances and Advances
Where the recipient is obliged to spend at
least one night away from his or her usual
place of residence on business and the
accommodation to which that allowance
or advance relates in South Africa and the
allowance or advance is granted to pay for:
•
•
Meals and incidental costs, an amount
of R335 per day is deemed to have
been expended
Incidental costs only, an
amount of R103 for
each day which falls
within the period
is deemed to
have been
expended.
For overseas
costs, the
applicable rate
per country is
available on the
SARS website
under Legal & Policy /
Secondary Legislation /
Income Tax Notices / 2014.
Travel Allowance
A log book confirming business kilometres
travelled must be maintained in order
to claim any deduction for business
kilometres. PAYE must be withheld by
the employer on 80% of the allowance
granted to the employee. The percentage
may be reduced to 20% if the employer is
satisfied that at least 80% of the use of the
motor vehicle for the tax year will be for
business purposes.
Any reimbursement of travel costs over
and above a travel allowance provided by
an employer must be added to the travel
allowance for purposes of the year-end
tax return calculation. It is not subject to
PAYE, however, the employee may claim a
deduction at the time of preparing his/her
income tax return for business kilometres
travelled and will be taxed on the portion of
the allowance not claimed as a deduction.
The fuel cost may not be claimed if the
employee has not borne the full cost
of the fuel used in the vehicle.
The maintenance cost
may not be claimed if
the employee has not
borne the full cost
of maintaining the
vehicle (i.e. if the
vehicle is covered
by a maintenance
plan). The fixed
cost must be
reduced on a prorata basis where
the vehicle is used
for business purposes
for less than a full year.
Where the distance travelled
for business purposes does not
exceed 8 000 kilometres per annum, no
tax is payable on an allowance paid by an
employer to an employee up to the rate
of 330 cents per kilometre, regardless of
the value of the vehicle. This alternative is
not available if other compensation in the
form of an allowance or reimbursement
(other than for parking or toll fees) is
received from the employer in respect of
the vehicle.
|2
INCOME TAX: Individuals
Travel Table
Rates per kilometre which may be used in determining the allowable deduction for businesstravel, where no records of actual costs are kept, have been amended as follows:
Value of the vehicle
(including VAT) (R)
Fixed cost (R/p.a)
Fuel cost (c/km)
Maintenance cost
(c/km)
0 – 80 000
25 946
92.3
27.6
80 001 – 160 000
46 203
103.1
34.6
160 001 – 240 000
66 530
112.0
38.1
240 001 – 320 000
84 351
120.5
41.6
320 001 – 400 000
102 233
128.9
48.8
400 001 – 480 000
120 997
147.9
57.3
480 001 – 560 000
139 760
152.9
71.3
Exceeding 560 000
139 760
152.9
71.3
Company Car / Employee Owned
Vehicles
The monthly taxable value is 3.5% of the
determined value (the cash cost including
VAT) per month of each vehicle.
Where the vehicle is –
•
subject of a maintenance plan when
the employer acquired the vehicle
the taxable value is 3,25% of the
determined value; or
•
Acquired by the employer under an
operating lease, the taxable value is
the cost incurred by the employer
under the operating lease plus the
cost of fuel.
80% of the taxable benefit will be
subject to PAYE on a monthly basis. The
percentage is reduced to 20% if the
employer is satisfied that at least 80%
of the use of the motor vehicle for the
tax year will be for business purposes.
The taxable value may be reduced on
3 | 2014/15 Tax Guide
assessment of the employee’s income
tax return in accordance with the ratio
of business kilometres travelled to total
kilometres travelled as substantiated by a
log book.
Further relief is available for the cost of
licence, insurance, maintenance and fuel
for private travel if the full cost thereof
has been borne by the employee and the
number of private kilometres travelled is
substantiated by a log book.
Interest and dividend income natural persons – exemptions
Foreign interest and dividends
No exemption applies to foreign sourced
interest income.
Where an individual holds less than 10%
of the equity share capital of a foreign
company, which distributes a dividend,
the dividend will be taxed at a maximum
effective rate of 15%, as determined by a
formula.
Deductions from Income
Retirement and Savings Reforms
Current Pension Fund Contributions
Contributions to Pension, Provident
and Retirement Annuity Funds
The deductible amount is the greater of:
(1) 7.5% of remuneration from retirement
funding employment, or
(2) R 1 750.
Any excess may not be carried forward to
the following year of assessment.
Arrear Pension Fund Contributions
Maximum of R 1 800 per annum. Any
excess over R1 800 may be carried forward
to the following year of assessment.
Current Retirement Annuity Fund
contributions
The deductible amount is the greater of:
With effect from 1 March 2015 employer
contributions to retirement funds on
behalf of employees will be deemed to be
a taxable fringe benefit in the hands of the
employees.
From that date, individuals will be allowed
to deduct up to 27.5% of the higher of
taxable income or employment income
for contributions to pension, provident and
retirement annuity funds. The maximum
deduction will be capped at R 350 000 per
annum.
Any excess over R 350 000 will be carried
forward and available for deduction in
future tax years.
(1) 15 % of taxable income other than from
retirement funding employment, or
Non-retirement / Tax preferred savings
accounts
(2) R 3 500 less current deductions to a
pension fund, or
Banks, asset managers, life insurers and
brokerages will be able to offer individual
savers a tax-preferred savings account in
order to encourage household savings. An
initial annual contribution limit of R 30,000
will apply, which will be increased annually
in line with inflation, with a maximum
lifetime contribution limit of R 500,000.
(3) R 1 750.
Any excess may be carried forward to the
following year of assessment.
Arrear Retirement Annuity Fund
contributions
Maximum of R1 800 per annum. Any
excess over R1 800 may be carried forward
to the following year of assessment.
Donations to certain Public Benefit
Organisations
The deduction is limited to 10% of
taxable income before deducting medical
expenses and donations.
Medical and disability expense
Taxpayers may deduct from their tax
liability a monthly tax credit of R257 for the
first two beneficiaries and R172 for each
additional beneficiary, in respect of medical
aid contributions.
A further deduction from the tax liability of
taxpayers under the age of 65 is available.
|4
INCOME TAX: Individuals
The deduction from tax is calculated as
25% of an amount equal to qualifying
medical expenses paid and borne by the
individual and an amount by which medical
scheme contributions paid by the individual
exceed 4 times the medical scheme fees
tax credits for the year. The deduction
from tax is limited to the amount which
exceeds 7.5% of taxable income (excluding
retirement fund lump sums and severance
benefits).
In the case of individuals who are over the
age of 65, or individuals who are disabled
or whose spouse or child is a person with a
disability, a tax deduction, equal to 33% of
qualifying medical expenses borne by the
individual and an amount by which medical
scheme contributions exceed 3 times the
medical scheme fees tax credits for the
year, is available.
more than R110 200 from one or
more sources or received more than
R250 000 from a single source of
employment, during the tax year
•
are older than 75 years of age and
received an income of more than
R123 350 from one or more sources
or received more than R250 000 from
a single source of employment, during
the tax year; OR
•
at any time during the tax year:
•
carried on any trade
•
received a travel, subsistence or
office bearer allowance
•
hold any funds or assets outside
South Africa that have a value of
more than R50 000
•
received a local Capital Gain/Loss
exceeding R20 000
•
hold any rights in a Controlled
Foreign Company
•
received any income or Capital
Gain in a foreign currency
•
received interest income from a
source in South Africa
•
earned an income through the
letting of any property
•
received an Income Tax Return
(ITR12) from SARS or were
requested to submit an Income
Tax Return for the year in
question
Personal insurance policies
From 1 March 2015, contributions made
in respect of life and disability insurance
will not be tax deductible, with the
concomitant proceeds on these policies
being treated as tax-free.
Submission of an Income Tax
Return by an Individual
Income tax returns have to be filed by
individuals if they:
•
are under 65 years of age and received
an income of more than R70 700 from
one or more sources or received more
than R250 000 from a single source of
employment, during the tax year
•
are older than 65 but under 75 years
of age and received an income of
5 | 2014/15 Tax Guide
International Executive Services
Providing practical know-how to organisations
enabling them to develop a globalised approach
to managing individuals and cross-border
employment within a pro-active, tax compliant
environment.
CAROLYN chambers (Johannesburg)
M: +27 83 440 5564
E: carolyn.chambers@kpmg.co.za
ZOHRA DE VILLIERS (Cape Town)
M: +27 82 821 5850
E: zohra.devilliers@kpmg.co.za
|6
INCOME TAX: Individuals
Taxation of lump sum benefits
Retirement and severance benefits
The tax-free lump sum benefit upon retirement and in respect of severance benefits is
increased from R315 000 in the 2013/14 tax year to R500 000 in the 2014/15 tax year.
The rates for the taxation of lump sums upon retirement and in respect of severance
benefits are set out below:
2014/15 tax year
Taxable income
R
Rates of tax
R
0-
500 000
500 001 -
700 000
700 001 -
1 050 000
1 050 001 and above
R
R
0% of amount
0+
18% of the amount above
500 000
36 000 + 27% of the amount above
700 000
130 500 + 36% of the amount above 1 050 000
Retirement fund lump sum benefits consist of lump sums from a retirement fund on
death, retirement or termination of employment due to redundancy or termination of the
employer’s trade.
Severance benefits consist of lump sums from or by arrangement with an employer due
to termination of a person’s office or employment where:
a) the person is over the age of 55; or
b) the termination is due to the person becoming permanently incapable of holding
office ore employment due to sickness, accident injury or incapacity through infirmity
of mind or body; or
c) the termination is due to
i) the person’s employer having or intending to cease to carry on the trade in respect
of which the person was employed or appointed; or
ii) the person having become redundant in consequence of a general reduction in
personnel or a reduction in personnel of a particular class by the person’s employer,
provided that where the person’s employer is a company, the person did not at any
time hold more than 5% of the issued shares or member’s interest in the company.
Taxation of lump sum benefits upon withdrawal from a retirement fund prior to
retirement
The tax-free lump sum benefit upon withdrawal from a retirement fund prior to retirement
is increased from R22 500 in the 2013/14 tax year to R25 000 in the 2014/15 tax year.
7 | 2014/15 Tax Guide
Taxable income
R
Rates of tax
R
0-
25 000
25 001 -
660 000
660 001 -
990 000
990 001 and above
R
R
0% of amount
0 + 18% of the amount exceeding
25 000
114 300 + 27% of the amount exceeding 660 000
203 400 + 36% of the amount exceeding 990 000
Capital Gains Tax
Effective CGT rates
Type of taxpayer
Inclusion rate %
Statutory rate %
Effective rate %
Individuals and special
trusts
33.3
0 – 40
0 – 13.3
Companies
66.6
28
18.6
Small business
corporations
66.6
0 – 28
0 -18.6
Personal service provider
companies & Permanent
establishments
(branches)
66.6
28
18.6
Non-residents
(immovable property
situated in or interest
in property-rich entity
with immovable assets
situated in South Africa)
66.6
28
18.6
66.6
40
26.6
Other Trusts
Exclusions:
• Annual individual and special trust
exemption – R30 000.
• On death, the exclusion granted to
individuals during the year of death –
R300 000.
• The exclusion on a primary residence –
R2 million.
• Exclusion on disposal of a small
business for persons over 55 –
R1.8 million if the market value of the
business does not exceed R10 million.
• Most personal use assets.
• Retirement benefits.
• Payments made in respect of original
long-terms insurance policies.
|8
EMPLOYEES TAX (PAYE):
Employers
Employment Tax Incentive
•
Purpose
•
Provides employers with an incentive
for creating jobs by offering a tax
incentive in the form of a reduction
from the employers Pay-as-you-earn
liability
•
Incentive is available monthly, from
1 January 2014 and will cease to exist
from 1 January 2017
•
Applies to all new hires on/after
1 October 2013.
Is not disqualified from receiving
the incentive arising from the
displacement of an employee or
failure to meet certain conditions
prescribed by regulation (for example,
a PAYE default)
An employee is seen to be a qualifying
employee if the employee:
•
Is between the ages of 18 and 28
years old; or
•
Is employed by the employer who
operates in a special economic zone,
or
Application
•
An employer will be eligible to receive the
incentive for qualifying employees if the
employer:
Is employed in an industry as
designated by the Minister of Finance
in the Gazette and
•
Is in possession of either an identity
card or an asylum seeker permit
•
Is not a connected person to the
employer
•
Is not a domestic worker
•
Was employed on / after 1 October
2013 and
•
Must receive a salary between the
minimum wage for that sector and
R6 000 per month.
•
•
Is registered for the withholding of
and payment of employees’ tax as per
the Fourth Schedule to the Income
Tax Act;
Is not an entity specified in the Act,
which prohibits such entity from
constituting an eligible employer such
as:
•
The Government of the Republic;
•
A public entity that is listed in
Schedule 2 or 3 to the Public
Finance Management Act, other
than those public entities that the
Minister of Finance may designate
by notice in the Gazette or a
municipal entity;
•
A municipal entity defined
in Section 1 of the Local
Government Municipal Act.
9 | 2014/15 Tax Guide
The incentive will not be available if the
employer:
•
Fails to submit a return; or
•
Has outstanding tax debt
•
However the amount will be
available, subject to limitations, once
non-compliant taxpayers become
compliant.
Calculation of the incentive
The incentive is calculated according to
the period of employment, based on the
remuneration of the employee, that is:
•
During each month of the first
12 months in respect of which
an employer employs a qualifying
employee; and
•
During each of the 12 months after
the first 12 months that the same
employer employs the qualifying
employee
The incentive is calculated as follows:
Year 1
MONTHLY
RENUMERATION
R0 - R2 000
R2 001 - R4 000
R4 001 - <R6 000
Year 2
Employment Tax Incentive
Employment Tax Incentive
per month during the first 12 per month during the next 12
months of employment of the months of employment of the
qualifying employee
qualifying employee
50% of Monthly Remuneration
25% of Monthly Remuneration
R1 000
R500
Formula: R 1000 (0.5x (Monthly Remuneration R 4 000))
Formula: R 500 (0.25x (Monthly Remuneration R 4 000))
If the qualifying employee is employed
by an associated institution on / after
1 January 2014, the employee will be
deemed to be in the employment of the
employer for that period, therefore the
combined number of eligible periods is 24
months.
The incentive is apportioned if the
employer employs a qualifying employee
for part of a month.
Penalty and disqualification for
displacement
An employer is deemed to have displaced
an employee if:
•
Dismissal constitutes an automatic
unfair dismissal; and
•
The dismissed employee is replaced
by a qualifying employee, enabling
the employer to be eligible for the
incentive
The employer will be liable for a penalty
of R 30 000 if it is found that the employer
displaced an employee. In addition,
the employer may be disqualified from
receiving the incentive, after considering
the number of employees that have
been displaced and the effect of the
displacement on employees.
If an employer receives the ETI in respect
of an employee that is paid below
minimum wage, the employer must pay
a penalty equal to 100% of the value of
the ETI, and will be liable for a penalty
with respect to the underpayment of
employees’ tax as the ETI would have been
disallowed.
| 10
INCOME TAX:
Corporate Taxpayers
General corporate tax proposals
Debt Reduction Rules
The Debt Reduction Rules were
significantly amended as part of the 2012
Income Tax Amendments. In terms of
these amendments the reduction of debts
for no or insufficient consideration will be
applied firstly to reduce the tax cost of
assets acquired with that debt and / or to
reduce capital losses. Only in instances
where a deduction or allowance has been
claimed and the asset is either no longer
held or the tax cost is less than the amount
of the debt reduction will an immediate tax
charge be triggered. The reduction in the
tax cost effectively defers any tax charge
until the date that the asset is disposed
of. Capital Gains Tax is no longer levied
where the debt compromised was used to
acquire assets of a capital nature. Further
amendments are proposed in the Budget
where debt is partially or fully discharged
through the implementation of a business
rescue. It is proposed that tax relief
measures be considered for companies
undergoing business rescue and other
forms of debt compromise in order to ease
their burden.
Third-party backed shares
The tax treatment of hybrid instruments
has been a focus area for a number
of years. With effect from years of
assessment commencing on or after 1
January 2014, the dividends on preference
shares will be re-characterised as income
where either the dividends or the return of
capital are guaranteed or indemnified. The
current exceptions to this anti-avoidance
rule only include the direct investment
11 | 2014/15 Tax Guide
in preference shares used to fund the
acquisition of equity shares in operating
companies and requires that the party
providing the indemnity or guarantee
falls within a narrowly defined class of
parties. The proposed refinement to the
exceptions to the anti-avoidance rule will
include:
•
the refinancing of preference shares
that were initially used to fund equity
share acquisitions in operating
companies;
•
the inclusion of an ‘exploration
company’ in the definition of an
‘operating company’; and
•
a carve out where the pledges
provided to the funder (i.e. the
preference share holder) is limited to
equity shares held by the acquiring
company’s (i.e. the preference share
issuer) equity shareholders directly or
indirectly in the underlying operating
company.
Limitation of interest deductions for
reorganisations and acquisitions
Legislation was introduced in 2011
targeted at limiting the deduction of
interest on debt used to fund certain
acquisition or reorganisation transactions.
In terms of this dispensation, taxpayers
are required to apply to the South African
Revenue Service to claim a deduction of
interest on these loans. With effect from
1 April 2014, the current discretionary
system will be replaced with new
provisions which limit the quantum of
interest that can be claimed based on a
percentage of adjusted taxable income.
Assessed losses brought forward are
currently included in the calculation of
taxable income and hence of the adjusted
taxable income used for purposes of
determining the interest deduction. It is
proposed that these provisions
be relaxed by ignoring
assessed losses
brought forward
from prior years.
Further, interest
deductibility
should
increase
when the
average
repo rate
exceeds
8% (instead
of the 10%
currently
legislated) and
by taking into
account the level
of adjusted taxable
income in the year prior
to the transaction date.
Venture Capital company tax regime
Government is proposing certain relaxations
to the venture capital company regime
in order to encourage uptake thereof.
Such relaxations/amendments may
include making deductions permanent if
investments are held for a certain period
of time, the transferability of tax benefits
when investors dispose of their holdings,
the increasing of the total asset limit for
qualifying investee companies and the
waiver of capital gains tax in respect of the
disposal of assets.
Public-private partnerships
The Income Tax Act requires that land be
owned in order to claim capital allowances
on qualifying improvements. When
Government enters into public-private
partnerships, it makes land
available to the private party.
The inability to claim a
capital allowance on
improvements to
the land because
the land is not
owned, affects
the financial
viability of the
project. It is
proposed that
the merits
of allowing
deductions
where the
taxpayer is not the
owner of the land will
be considered.
Industry specific
proposals: Financial Services
Long-term insurance
The reform of the income tax regime
was announced in the 2013 Budget,
particularly with regard to risk business
no longer being taxed in the policyholder
funds, but rather in the corporate fund. No
legislation was tabled to give effect to this
announcement in 2013, and this specific
reform was reiterated in the 2014 Budget.
In addition, the taxation rate of 30% being
applied irrespective of the income level of
policyholders in the individual policyholder
fund, is also being reviewed.
| 12
Financial Services Tax:
We have an experienced and passionate team who have been specialising in
taxation for the financial sector for over a decade. These are some of the key areas
we are currently advising on:
•
The application of the section 24JB fair value rules for financial instruments.
•
Fair value rules applicable to financial instruments within corporate
treasuries.
•
The application of the new REIT rules.
•
Hedge fund structures in terms of old and new tax rules
•
Implementation of share schemes
•
Taxation of manufactured dividends and synthetic returns
Michael Rudnicki
M: +27 83 377 6492
E: michael.rudnicki@kpmg.co.za
Instruments
It is proposed that certain policies issued
by insurers, such as endowment, smooth
or stable bonus products that have a
guaranteed value for policyholders be
excluded from the scope of the provisions
of the Income Tax Act which deal with
the incurral and accrual of interest on
instruments.
Top-up retail savings bond
A new top-up retail savings bonds will be
introduced by National Treasury this year,
and a Shariah compliant version (Sukuk) is
also being explored.
Industry specific proposals:
Oil and Gas
Oil and gas incentives
An oil and gas company holding an
exploration or production right, and
that has entered into a fiscal stability
13 | 2014/15 Tax Guide
agreement with the government, is
currently allowed to assign all of its fiscal
stability rights to another oil and gas
company. However, it was uncertain
whether that oil and gas company could
assign only a portion of its fiscal stability
rights if it wanted to enter into a joint
venture with another oil and gas company.
To alleviate the uncertainty, it has been
proposed that part assignments of fiscal
stability rights would be allowed.
Industry specific proposals:
Fishing
Fishing vessels registered in South
Africa
It is proposed that the allowance for
repairs to ships, which has inadvertently
been deleted from the Income Tax Act, be
reinstated from the date of its repeal
(12 December 2013).
Mining / Oil and Gas Tax Teams
•
Specialist Mining / Oil and Gas tax solutions/advice
•
Tax advice on Mining / Oil and Gas and BEE deals
•
Mining royalty tax reviews
•
Mining tax due diligences
•
Oil and Gas tax due diligences
•
Applications for upliftment of mining ringfences
and “effective valuations”
•
Assistance with SARS queries
•
Diesel refund assistance
•
Advice on Oil and Gas Farm in
•
Farm out arrangements
BEN-SCHOEMAN GELDENHUYS (Johannesburg)
Mining
M: +27 83 266 3109
E: ben-schoeman.geldenhuys@kpmg.co.za
MUHAMMAD SALOOJEE (Johannesburg)
M: +27 78 339 1454
E: muhammad.saloojee@kpmg.co.za
DI HURWORTH (Cape Town)
Oil and Gas
M: +27 82 719 2262
E: di.hurworth@kpmg.co.za
| 14
INCOME TAX:
Corporate Taxpayers
Incentives
Small and Medium enterprise
development
It is proposed that the turnover tax regime
for micro business should be retained, but
that the requirements should be simplified,
that turnover up to R335 000 should
not be taxed and that the maximum tax
rate should be reduced from 6% to 5%.
Other suggestions include doing away
with the requirement for businesses to
opt in to the regime for three years and
requiring annual, rather than bi-annual tax
returns. It is further recommended that
the reduced tax regime for small business
corporations be replaced with an annual
refundable tax compliance rebate (subject
to certain conditions). It is proposed that
grants received by small and mediumsized enterprises should be tax exempt,
regardless of the source of the funds.
Philanthropic foundations
The Income Tax Act provides a tax incentive
for donations to qualifying public benefit
organisations, including philanthropic
foundations. These foundations aim to
build up and maintain sufficient capital to
provide financial support to worthy causes
carried out by public benefit organisations.
They have been required to distribute up
to 75% of the money they generate within
a year, unless they can demonstrate that
the funds accumulated will be used for
specific qualifying purposes. Because
this requirement has been affecting the
sustainability of these foundations, it is
proposed to relax this requirement while
ensuring that foundations distribute
15 | 2014/15 Tax Guide
accumulated capital to worthy causes
within a reasonable period.
Private Equity Tax
Services
We are a private equity solution
provider with strong credentials
in the tax, legal and regulatory
aspects of private equity.
We provide a wide range of
services and technologies that
cater for all stages of the private
equity life cycle.
Michael Rudnicki
M: +27 83 377 6492
E: michael.rudnicki@kpmg.co.za
INCOME TAX:
Corporate Taxpayers
Environmental Taxes
Acid Mine Drainage
Carbon Tax
Measures to address acid mine drainage,
such as a potential environmental levy
on the mining sector, will be explored in
an attempt to compliment current efforts
to address the serious environmental
consequences of acid mine drainage.
The implementation of carbon tax is
postponed to 2016, to allow for adequate
time for consultation on draft legislation.
Climate change
As part of South Africa’s commitment to
reducing greenhouse gas emissions, the
proposed carbon tax and incentives, such
as the energy-efficiency tax incentive, will
provide price signals to encourage the
economy on a path of low-carbon growth
over the long-term.
Environmental conservation
The incentive for land owners to enter into
an agreement with Government to declare
land as a nature reserve or a national
park will be streamlined, by proposing a
straight-line deduction over a period of 25
years of the adjusted value of the land at
the time of entering into the agreement.
Research and Development (R&D)
Research and development tax
incentives
Further changes to the R&D tax incentive
legislation have been proposed, relating to
the extent to which activities in respect of
clinical trials may qualify as eligible R&D. In
addition, further amendments to address
unintended consequences relating to
companies that fund R&D activities carried
out by another party, can be expected.
These changes will be retrospective from
1 January 2014.
| 16
R&D Tax and Incentives
•
Advising on claiming the 150% R&D tax incentive
•
R&D tax workshops to identify eligible R&D projects
and costs
•
Preparing pre-approval applications
•
Liaison with DST and SARS
•
Advising on applying for other Government Grants
administered by the Department of
Trade and Industry
•
Review of legal agreements between
taxpayers and external contractors and
research institutions
•
Global R&D planning
MOHAMMED JADA (Johannesburg)
M: +27 82 719 5531
E: mohammed.jada@kpmg.co.za
CHRISTIAN WIESENER (Cape Town)
M: +27 82 719 2012
E: christian.wiesener@kpmg.co.za
17 | 2014/15 Tax Guide
INCOME TAX:
Corporate Taxpayers
Capital Allowances for Businesses
Buildings
Industrial (used in manufacturing or a similar process)
%
Commenced 1/7/96 – 30/9/99
10
After 1 January 1989
5
Other
2
New and unused commercial buildings and improvements
5
Hotels
Annual Allowance; Erection of building or qualifying improvements
commenced:
Before 4 June 1988
From 4 June 1988 onwards
%
2
5
From 17 March 1993, but only in respect of improvements that do not extend the
existing exterior framework
20
Hotel equipment brought into use after 15 December 1989
20
Intellectual Property
Costs incurred in acquiring:
Inventions, patents or copyrights
Designs
%
5
10
| 18
INCOME TAX:
Corporate Taxpayers
Research and Development (R&D)
Costs incurred in any year of Assessment:
%
Systematic investigative or experimental
activities of which the result is uncertain
for discovering non-obvious scientific
or technical information, or creating any
invention, design or computer program.
150
Buildings
5
New and unused machinery or plant used for R&D
purposes
40/20/20/20
Plant and Machinery
Manufacturing or similar (new only)
40/20/20/20
Renewable energy technology equipment
50/30/20
Small business corporations
Manufacturing assets
100
Other depreciable assets
(General regime optional)
50/30/20
Corporate Tax Rates
Basic rate (other than entities specified below): 28%
Small business corporations (financial years ending on any date between
1 April 2014 and 31 March 2015):
Taxable income
R0 – R70 700
Rate of Tax
0% of taxable income
R70 701 – R365 000
7% of taxable income above R70 700
R365 001 – R550 000
R20 601 + 21% of taxable income above R365 000
R550 001 and above
R59 451 + 28% of the amount above R550 000
19 | 2014/15 Tax Guide
INCOME TAX:
Corporate Taxpayers
An elective presumptive turnover tax applies for microbusinesses (financial years ending
on any date between 1 April 2014 and 31 March 2015):
Turnover
Liability
R0 - R150 000
0%
R150 001 - R300 000
1% of each R1 above R150 000
R300 001 - R500 000
R1 500 +2% of the amount above R300 000
R500 001 - R750 000
R 5 500 + 4% of the amount above R500 000
R750 001 and above
R15 500 + 6% of the amount above R750 000
KPMG LINK 360
KPMG LINK 360 aligns tax and finance with the rest of the
organisation and delivers a 360 degree view of a company’s
global compliance position – across teams, across divisions
and across borders.
Global Compliance Management Services
BRIGITTE WEBB
M: +27 82 718 8820
E: brigitte.webb@kpmg.co.za
ELIZABETH LOMBAARD (Cape Town)
M: +27 82 719 1988
E: elizabeth.lombaard@kpmg.co.za
CORPORATE TAX - Creating Tax Synergy
We believe that the active management of corporate tax issues
is a core business discipline. We provide insight, business
understanding and a composite solution in any tax environment.
MUHAMMAD SALOOJEE (Johannesburg)
M: +27 78 339 1454
E: muhammad.saloojee@kpmg.co.za
JOUBERT BOTHA (Pretoria)
M: +27 83 456 7734
E: joubert.botha@kpmg.co.za
DEBORAH TICKLE (Cape Town)
M: +27 82 492 0375
E: deborah.tickle@kpmg.co.za
YASMEEN SULIMAN (Durban)
M: +27 82 778 1031
E: yasmeen.suliman@kpmg.co.za
TANETTE NELL (Port Elizabeth)
M: +27 82 719 2172
E: tanette.nell@kpmg.co.za
INCOME TAX:
Corporate/Individual Taxpayers
Tax Calendar
Provisional tax – individual / company
1st Payment within 6 months after
previous tax year
2nd Payment on tax year end
3rd Payment Voluntary payment made
within 7 months after tax year end (if tax
year end is 28/29 February), or voluntary
payment made within 6 months after year
end (if tax year end falls on any other date).
Individuals who on the last day of the year
of assessment will be below the age of
65 years who do not carry on a business
and whose taxable income will not exceed
R70 700 or whose taxable income from
interest, foreign dividends and rental will
be R20 000 or less will be exempt from
provisional tax.
Individuals who on the last day of the year
of assessment will be over the age of 65
years are exempt from provisional tax if
they are not directors or private companies
and only receive employment income,
interest, rental or dividends amounting to
taxable income of up to R 120 000.
Provisional tax – penalties on
underestimation
An underestimation penalty will be levied
on second provisional tax estimations as
follows:
•
Where the final actual taxable
income is more than R 1 million:
A 20% penalty may be levied if the
combined first and second provisional
tax payments are less than 80% of the
tax on the actual taxable income for
the year of assessment.
•
In any other case: A 20% penalty
will be levied if the combined first
and second provisional tax payments
are less than 90% of the tax on the
actual taxable income for the year of
assessment and are also less than the
basic amount.
The penalties may be waived at the
discretion of SARS.
| 22
INCOME TAX:
Corporate/Individual Taxpayers
Interest Rates
Rate of interest
Fringe benefits - interest-free or low-interest loan
(official rate)
Rate of interest
Rate (from 1 February 2014)
6.5% per annum
Rate (from
1 March 2011)
Rate (from
1 May 2014)
Late or underpayment of tax
8.5% p.a.
9% p.a.
Refund of overpayment of provisional tax
4.5% p.a.
5% p.a.
Refund of tax on successful appeal or where the
appeal was conceded by SARS
8.5% p.a.
9% p.a.
Refund of VAT after prescribed period
8.5% p.a.
9% p.a.
Late payment of VAT
8.5% p.a.
9% p.a.
Customs and Excise
8.5% p.a.
9% p.a.
Fixed-amount penalties
There are a number of obligations that a taxpayer is legally required to comply with, and a
fixed amount penalty is imposed when a taxpayer does not comply with an obligation.
The amount of the penalty imposed in a penalty assessment will increase automatically
for each month, or part thereof, that the person fails to remedy the non-compliance within
one month after:
•
the date of the delivery of the penalty assessment, if SARS is in possession of the
current address of the person and is able to deliver the assessment, but limited to 35
months after the date the date of assessment of the penalty; or
•
the date of the non-compliance if SARS is not in possession of the current address of
the person and is unable to deliver the penalty assessment, but limited to 47 months
after the date of non-compliance.
23 | 2014/15 Tax Guide
The table below reflects examples of what could attract a fixed-amount administrative
non-compliance penalty.
Duty
Penalties could be imposed for:
Registration
requirements
•
•
•
•
If there is a change
to registration
details
• Not informing SARS when there is a change –
• of a postal, physical or electronic address;
• to the representative taxpayer; or
• to banking details.
Returns
•
•
•
•
not filing a return at all
not filing a return on time
not using the prescribed form not signing the return as required
•
Not retaining records in their original form or in an authorised
manner
Not retaining records for the prescribed period
Not keeping the records open for inspection by SARS
Retaining records
Information
gathering
•
•
•
•
•
Debt management
•
not registering when required to
registering outside of the time prescribed to register
not completing a registration form in full or correctly
not submitting the supporting documentation
Not attending an interview when requested
Not providing material available when requested at all or on
time
Not co-operating during a field audit or investigation
Not giving full and accurate information when requesting a
deferred or instalment payment arrangement
Dispute Resolution and Tax Controversy Services
Dealing with tax disputes can mean uncertainty and complexity. KPMG has the
experience to help you take control of the dispute resolution process.
JOHAN VAN DER WALT
MUHAMMAD SALOOJEE
Head of Dispute Resolution &
Controversy services
Partner:
Corporate Tax
M: +27 82 465 7195
E: johanvdwalt.tax@kpmg.co.za
M: +27 78 339 1454
E: muhammad.saloojee@kpmg.co.za
| 24
INCOME TAX:
Corporate/Individual Taxpayers
The Act specifies precisely what amount is imposed for non-compliance. As can be seen
from the table below, the amount depends on the amount of the taxpayer’s taxable
income or assessed loss for the preceding year of assessment.
Assessed loss or taxable income for “preceding year”
R
Penalties
R
Assessed loss
R
250
0- 250 000 250
250 001 - 500 000 500
500 001 - 1 000 000 1 000
1 000 001 - 5 000 000 2 000
5 000 001 - 10 000 000 4 000
10 000 001 - 50 000 000 Above 50 000 000
8 000
16 000
Understatement penalties
In the case of tax being underpaid because of an understatement made by a taxpayer,
Section 223 of the Tax Administration Act provides for different rates of understatement
penalties based on the type of behaviour or the degree of culpability involved. These rates
are as follows:
Voluntary
Voluntary
disclosure
disclosure
after
before
notification notification
of audit
of audit
Standard
case
If obstructive,
or if it is a
“repeat case”
Substantial
understatement
10%
20%
5%
0%
(ii)
Reasonable
care not taken in
completing return
25%
50%
15%
0%
(iii)
No reasonable
grounds for tax
position taken
50%
75%
25%
0%
(iv)
Gross negligence
100%
125%
50%
5%
(v)
Intentional tax
evasion
150%
200%
75%
10%
Item
Behaviour
(i)
25 | 2014/15 Tax Guide
INCOME TAX:
International Taxpayers
Secondary adjustment for transfer Foreign dividends of CFCs owned
pricing
by individuals
It has been recommended that the
application of the secondary adjustment in
the form of a deemed loan be removed and
the transfer pricing provisions be amended
to state that the secondary adjustment
is deemed to be a dividend or capital
contribution depending on the facts and
circumstances.
High tax exemption for Controlled
Foreign Companies (“CFC”)
Section 9D of the Act requires that the
net income of CFCs is taxed in the hands
of the South African resident participant
unless an exemption applies. One such
exemption is the high tax exemption which
deems the net income of the CFC to be nil
if the foreign tax suffered by the CFC is at
least 75% of the hypothetical South African
income tax liability.
Currently the high tax exemption requires
an actual calculation to be performed to
determine the hypothetical South African
income tax which is compared to the
actual foreign tax suffered by the CFC to
determine whether the high tax exemption
applies. This calculation has proved to
be an administrative burden where the
South African resident owns many foreign
companies and most of the income of the
CFC is attributable to a foreign business
establishment.
Accordingly it has been proposed that an
option be provided to deem the net income
of a CFC to be nil if either the high foreign
tax or the foreign business establishment
test, when applied to aggregate taxable
amounts, is met.
If a CFC of a resident individual receives a
taxable foreign dividend the effective tax rate
on the dividend is 21%. Accordingly it has
been proposed that the ratio in section 10B
be changed to reflect that an individual (not
a company) is taxed with reference to the
foreign dividend.
Currency of assets “reacquired” by
persons who cease to be a resident
Currently a person who ceases to be a South
African resident is deemed to have disposed
of and reacquired shares in a South African
property rich company. There is uncertainty
as to which currency the share reacquisition
takes place in. Therefore it has been proposed
that this is clarified to ensure that when the
shares are disposed of in the future there is
no uncertainty of the base cost of the shares.
Real estate investment trust (REIT)
When determining whether a company is a
“property company”, in the context of REITS,
one of the tests refers to a percentage of
assets which is attributable to immovable
property which is reflected in the Annual
Financial Statements which have been
prepared in accordance with the South
African Companies Act. However, foreign
companies would not be required to comply
with the Companies Act, therefore, it has
been proposed that the Annual Financial
Statements which comply with the
International Financial Reporting Standards
should be taken into account when
calculating the aforementioned percentage.
| 26
INCOME TAX:
International Taxpayers
Exchange Control
Introduction of foreign member funds
A proposal was made to introduce
“foreign member funds” which are not
subject to the macroprudential limit.
The introduction of these funds aims to
support South Africa as a hub for African
fund management. These funds will also
introduce a new domestically-regulated
channel that provides foreign exposure to
domestic investors.
It is proposed that these “foreign member
funds” would be collective investment
schemes and alternative investment funds
(which includes private equity, venture
capital and hedge funds), which may
source funding from:
companies may establish a “Holdco”
to hold African and offshore operations.
The following changes to this regime are
proposed:
•
The allowed transfer to HoldCo is
increased from R750 million to R2
billion per year;
•
There will be no restrictions on the
transfers in and out of the HoldCo
(up to the allowed amount), subject
to regular reporting requirements.
Furthermore the transfer must not be
made in order to avoid tax; and
•
The listing of the HoldCo and joint
ventures will be considered on a caseby-case basis.
The other requirements remain in place,
namely:
•
Non-residents;
•
Domestic institutional funds (subject
to their macroprudential limit); and
•
The HoldCo must be incorporated in
South Africa;
•
Individuals (subject to their annual
investment limit).
•
Must be a South African tax resident;
and
“Foreign member funds” must meet the
following requirements:
•
Must be effectively managed in South
Africa.
•
The funds must be domiciled and
managed in South Africa;
Unlisted companies
•
The funds must be tax compliant in
South Africa; and
•
These funds are subject to the
registration with the Financial
Services Board and the Reserve Bank.
HoldCo subsidiary regime
JSE listed companies
In 2013 it was announced that JSE listed
27 | 2014/15 Tax Guide
•
It is proposed that the HoldCo regime
be extended to unlisted companies.
•
The same restrictions as listed
companies apply, however the size of
transfers to HoldCo is limited to R1
billion per year.
•
The unlisted companies must
have similar transparent and public
reporting and disclosure requirements
as listed companies in order to qualify
for this regime.
Tax treatment
•
All HoldCo’s may use the Treasury
Management Company tax
concessions, namely that they
are allowed to use their functional
currency, not rand, for purposes of
calculating foreign exchange gains
and losses for tax purposes, thereby
providing relief for unrealised foreign
currency gains and losses.
Corporate foreign direct
investment
It is proposed that should companies
obtain approval for foreign direct
investment and the investment limit
was not fully utilised in a specific year,
the company will be allowed to roll over
any unused portion to the next calendar
year, without submitting a new approval
application.
Accessing capital for growth into
Africa
To enable South African technology, media,
telecommunications, exploration and other
research and development companies help
raise capital to expand their business in
Africa and in other fast-growing emerging
markets, the following is proposed:
•
Companies in these industries that
are currently unlisted in South Africa
will be allowed to freely list offshore,
provided they retain South African
incorporation, remain tax residents,
are effectively managed from South
Africa, and their intellectual property
remains registered in South Africa.
Such companies will further be
required to have a secondary listing in
South Africa within two years of their
successful offshore listing.
•
Listed companies in these industries
will be allowed to freely list secondary
listings and depository receipt
programmes, subject to reporting
requirements.
•
Intellectual property generated in
South Africa may be freely assigned
offshore, subject to appropriate tax
treatment.
International Tax
and Transfer Pricing
International tax solutions and
transfer pricing systems that
work.
ROBYN BERGER (Johannesburg)
M: +27 83 273 7390
E: robyn.berger@kpmg.co.za
NATASHA VAIDANIS (Johannesburg)
M: +27 82 458 1043
E: natasha.vaidanis@kpmg.co.za
DEBORAH TICKLE (Cape Town)
M: +27 82 492 0375
E: deborah.tickle@kpmg.co.za
INDIRECT TAX: VAT
Indirect exports
•
The export incentive scheme which
currently allows the zero rate of
indirect exports where the goods
are shipped from a qualifying airport
or harbour (i.e. by air or sea), will be
replaced by new export regulations
which will require legislative
amendments. SARS published a
revised Export Incentive Scheme,
which allows the option to zero rate
exports by road and rail, mainly to
facilitate trade with African countries.
Due to various strict conditions
contained in the draft provisions, the
practical application will only become
apparent after the introduction of the
new rules, which are still in draft.
VAT registration of foreign
businesses
•
The VAT registration provisions
in relation to foreign suppliers of
electronic services were introduced in
the Taxation Laws Amendments Act,
2013 with effect from 1 April 2014. The
definition of electronic services has
been included in a draft regulation and
will result in the VAT registration of
foreign suppliers supplying electronic
services to both South African
business customers (B2B) and private
consumers (B2C). A National Treasury
and SARS workshop was held on 20
February 2014 to discuss the draft
regulation and public comments
submitted to National Treasury and
SARS. The issue of B2B supplies will
be further considered by National
Treasury and SARS and it is envisaged
29 | 2014/15 Tax Guide
that an amended draft regulation will
be published for public comments,
which will be discussed at a futher
workshop to be held on 19 March
2014.
Going concerns
•
VAT legislation and Interpretation Note
No 57 relating to the VAT treatment
on the disposal of a going concern
will be clarified. According to the
Interpretation Note, the recipient
must agree that it will be a vendor
at the effective date. The legislation
will be amended to remove the
uncertainty regarding whether a
person must be a vendor before the
acquisition of the going concern.
Documentation
•
The customs modernisation
programme has eliminated the need
for paper-based documents to be
generated and issued to taxpayers.
The documents that are legally
required to substantiate the VAT
treatment of cross-border transactions
will be aligned with the modernised
customs processes and procedures.
Tax invoices, debit and credit notes
•
A supplier, being a registered vendor
(the principal), is required to issue a
tax invoice within 21 days of the date
of the supply. This time limit will be
extended to agents. The legislation
will be similarly amended to set a time
limit in which a credit or debit note
must be issued.
are exempt from VAT. This will be
amended to include the supply of
administration services for which the
bargaining council receives a separate
fee (the interest that it is entitled
to in terms of the main collective
agreement).
Zero-rating of goods for agricultural,
pastoral or other farming purposes
•
Agents
•
There has been uncertainty as to
which documentation is acceptable as
proof of payment to entitle a vendor to
deduct input tax in respect of VAT paid
on the importation of goods. Clarity
will be provided in this regard.
Four-monthly VAT category
•
Contract Prices
•
A supplier of goods or services is
able to recover from the recipient
an amount of VAT “imposed” on
the supply after the agreement is
concluded. The legislation will be
amended to exclude suppliers who
failed to register as VAT vendors.
Bargaining Councils
•
Goods and services provided by a
bargaining council to its members,
based on membership contributions,
The VAT Act provides for zero-rating
where a supply of goods is used or
consumed for agricultural, pastoral
or other farming purposes. This
concession was intended to provide
cash-flow relief to the agricultural
sector. This zero-rating provision will
be reviewed in consultation with
relevant stakeholders for possible
replacement with VAT at the standard
rate, as a result of past abuse of the
provision.
Government proposes to eliminate
this category and to bring registered
vendors under this category into the
bi-monthly VAT system.
VAT interest calculations
•
Interest is charged on late VAT
payments for a period in excess of the
actual number of days between the
due date and the date of payment. It is
proposed that the interest rules under
the Tax Administration Act (excluding
monthly compounding) be activated
for this circumstance, ensuring that
interest is imposed and paid on a fair
basis.
| 30
VAT Intelligence Solution
• Integrates with SAP systems
• Monitors data quality and process efficiency
• Exception reporting
• Identifies VAT improvement opportunities
Gains insight in status of VAT compliance
ANDRE MEYBURGH (Johannesburg)
Head of Indirect Tax
M: +27 82 851 6587
E: andre.meyburgh@kpmg.co.za
FERDIE SCHNEIDER (Johannesburg)
Value Added Tax
M: +27 82 771 4157
E: ferdie.schneider@kpmg.co.za
DI HURWORTH (Cape Town)
Value Added Tax
M: +27 82 719 2262
E: di.hurworth@kpmg.co.za
MADELEIN VAN ZYL (Johannesburg)
Systems
M: +27 82 718 8810
E: madelein.vanzyl@kpmg.co.za
31 | 2014/15 Tax Guide
Budget highlights
continued
INDIRECT TAX: CUSTOMS
Customs and excise
New Customs legislation expected
The Customs fraternity is looking forward
to the promulgation of two new Acts that
will replace existing Customs legislation,
and will fundamentally change the way
goods are imported into South Africa,
and the manner in which the customs
authorities engage with importers and
logistics providers to facilitate the customs
clearance and release of such goods.
General Fuel Levy and Road Accident
Fund Levy
The General Fuel Levy for 2014/2015 is
increased by 12c/li to 224.5c/li and 209.5c/
li for petrol and diesel, respectively. The
Road Accident Fund Levy will increase by
8c/li to 104c/li. Both increases will take
effect on 2 April 2014.
Specific customs and excise duties
With effect from 26 February 2014 specific
customs and excise duties are increased.
On most alcoholic beverages the rate
increased by between 6.2% and 12%
(excluding traditional African beer and beer
powder which remain unchanged). The rate
of duty on tobacco products and cigars
increased by between 2.5% and 9%.
KPMG Trade & Customs Practice
Driving compliance, efficiency and growth in cross-border trade.
VENTER LABUSCHAGNE
Director
Trade & Customs Practice
M: +27 83 677 7744
E: venter.labuschagne@kpmg.co.za
Unlocking Africa
Tax for a Diverse Continent
2014 KPMG AFRICA
TAX CONFERENCE, DAKAR
04 – 07 June 2014 | Radisson Blu, Dakar, Senegal
KPMG hosts the first Pan African Tax conference in Dakar
in June 2014.
Africa is a key strategic growth imperative for most global
corporates. But, it presents a diverse and complex
operating environment. This conference aims to provide
you with a thorough understanding of the legislative
and regulatory frameworks to help you enter into new
territories or expand into Africa.
KPMG will bring together key decision makers
including senior representatives from the Revenue
Authorities in various countries, senior business
leaders from KPMG clients across the world, senior
KPMG Tax Partners from across the globe and
the continent, as well as senior KPMG Industry
leaders to work together to help navigate your
investment and growth on the continent.
If your company does business across Africa,
or is thinking of expanding into or within
Africa, don’t miss this important opportunity
to shape the inputs into your corporate’s
growth ambitions within Africa.
For more information, contact
KPMGTaxinAfrica@kpmg.co.za