Fasset Update
March 2013
Seta Funding Regulations
Fasset Update
March 2013
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’s Strategy 2013 / 2014
Fasset Update
March 2013
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.
Mandatory Grant
Fasset Update
March 2013
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
Combined Pivotal and Strategic Cash Grant
Fasset Update
March 2013
• 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 NQFregistered
• 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 Update
Learnership Cash Grant
March 2013
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
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
• 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
NSFAS Loan Repayment Grant
Fasset Update
March 2013
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
• Due date 15 February 2014 – to be submitted via hand delivery on Friday
NSFAS Grant Amounts
Length
12 (1 year)
Tariff
On registration
In month 12 of the learnership
24 (2 year)
36 (3 year)
On registration
Fasset Update
March 2013
Amount
R 5,000
R 25,000
R 5,000
In month 6 of the 24-month learnership
R 15,000
In month 18 of the 24-month learnership
R 25,000
On registration
R 5,000
In month 6 of the 36-month learnership
R 15,000
In month 18 of the 36-month learnership
R 20,000
In month 32 of the 36-month learnership
R 20,000
Assessor and Moderator Grant
Fasset Update
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
• Due date 15 February 2014 – to be submitted via hand delivery on Friday
March 2013
Fasset Update
Lifelong Learning
March 2013
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 events
This calendar is subject to change
Innovations in accreditation
Fasset Update
March 2013
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
Fasset Update
March 2013
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
Fasset Update
March 2013
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
Fasset Update
March 2013
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
Upcoming Research
Fasset Update
March 2013
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)
FET Funding Window
Fasset Update
March 2013
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
Career Guidance and Provincial Strategy
Fasset Update
March 2013
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
Stakeholder Engagement
Fasset Update
March 2013
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
Tools
Fasset Update
March 2013
• 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
Fasset Update
March 2013
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
Where is most of our tax collected?*
6%
5%
38%
30%
Income tax on persons and
individuals
Companies
Value-added-tax
General fuel levy
21%
Customs Duties
*Figures per Budget Review 2013
23
Detailed comparison of revenue – 2013 vs. 2012*
300,000
250,000
200,000
2013
150,000
2012
100,000
50,000
Individuals
*Figures per Budget Review 2013
24
Companies
Value-added-tax
General fuel levy
Customs Duties
Detailed comparison of revenue – 2013 Actual To Budget *
300,000,000
250,000,000
200,000,000
Actual
150,000,000
Budgeted
100,000,000
50,000,000
Individuals
*Figures per Budget Review 2013
25
Companies
Value-added-tax
General fuel levy
Customs Duties
Budget Proposals: Individuals
Budget – Individual Overview
• 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 Rates
Rebates
Rebates
2013/2014
2012/2013
R12 080
R11 440
Secondary
R6 750
R6 390
Tertiary
R2 250
R2 130
2013/2014
2012/2013
R67 111
R63 556
Age 65 and over
R104 611
R99 056
Age 75 and over
R117 111
R110 889
Primary
Thresholds
Tax thresholds
Below 65
28
Budget – Individual Fiscal Drag
Effect of fiscal drag
2012/2013
29
2013/2014
No adjustment
2013/2014
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
Budget – Individual Fiscal Drag
Effect of fiscal drag
Taxable income
30
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)
Budget - Tax-preferred savings and investment vehicles
• 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 - 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
Budget - Individuals
Discretionary 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
Beneficiary
Interest
Interest exemption
Capital gain (33% inclusion)
RNIL
Current
Proposed
R22 800
-R22 800
R6 667
Taxable income from trust
34
RNIL
R36 133
Taxable income in beneficiary
R6 667
R36 133
Tax @ 40%
R2 667
R14 453
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
Medical
• 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
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
• 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
55
Allowance amendments
• 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
56
Revision Of The Industrial Policy Project Incentive s12I
• 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
57
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
•
60
Certain adjustments to cover certain emerging avoidance gaps
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 reductions
Y/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 reductions
Y/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 in
production 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 buybacks) 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 twiceyearly
• 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
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
80
•
Will eliminate need for registration
•
Taxpayer may waive with SARS approval
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
•
88
Deemed reacquired at market value to establish new base cost.
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
Resident definition section 1
• 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 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
Chapters in the act
Chapter
Chapter
1
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
103
© 2012 Deloitte Touche Tohmatsu Limited
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
Returns and records – Chapter 4
• 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
Returns and records – Chapter 4
•
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
Information Gathering – Chapter 5
• 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
Information Gathering – Chapter 5
• 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
Information Gathering – Chapter 5
• 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
What doesn’t kill you makes you stronger!
117
Information Gathering – Chapter 5
• 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
Information Gathering – Chapter 5
• 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
• 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
120
© 2012 Deloitte Touche Tohmatsu Limited
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 selfassessment system to cater for future modernisation of the tax
system
122
Assessments – Chapter 8
•
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
Assessments – Chapter 8
•
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).
•
124
In terms of s96(2) if contrary to return must include grounds
Assessments – Chapter 8
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
Assessments – Chapter 8
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
Assessments – Chapter 8
Old
127
New
s77
Assessment and recording
thereof
s91
s97
Original assessments
Recording 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
s97
Recording of assessments
s94
Jeopardy assessments
s96
Notice of assessment
Inspection of record of
assessments
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
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
Part B
Objection and
appeal
s 107—Appeal
against
assessment or
decision
Chapter 9
Dispute
resolution
Part B
Objection and
appeal
s 107—Appeal
against
assessment or
decision
s 83A Appeals to tax board
130
© 2012 Deloitte Touche Tohmatsu Limited
Income Tax Act to Tax Administration Act
OLD
131
NEW
s 86A
Appeals
against
decisions of a
tax court
s 88
Payment of
tax pending
appeal
Part E
ss 133–141
Appeal
against tax
court decision
Chapter 10
Tax liability
and payment
Part B
Payment of
tax
s 164—
Payment of
tax pending
objection or
appeal
© 2012 Deloitte Touche Tohmatsu Limited
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
Penalties Overview
Penalty system across
taxes
TAA
A: Administrative
non-compliance
Penalty
Targets
administrative noncompliance
Chapter 15
136
B:
Understatement
penalty
Targets serious
non-compliance &
tax evasion
Chapter 16
C: Criminal
offences
General offences
across taxes
Chapter 17
© 2012 Deloitte Touche Tohmatsu Limited
Penalties – Chapter 15 & 16
Old
New
s 75B
Administrative penalty in respect of noncompliance
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
137
© 2012 Deloitte Touche Tohmatsu Limited
Penalties - Chapter 15: Administrative non-compliance
penalties
Administrative noncompliance
Reportable
arrangement
Percentage based
penalty
138
• Fixed amount penalty
• Based on assessed loss or taxable income
• Participant failing to disclose information in respect of a
reportable arrangement as required by section 37
• Fixed penalty amounts for promoter and participant
respectively
• 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
© 2012 Deloitte Touche Tohmatsu Limited
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
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
142
© 2012 Deloitte Touche Tohmatsu Limited
Penalties - Chapter 16: Understatement penalty
1 Item
2 Behaviour
(i)
Substantial understatement
25%
5 Voluntary
disclosure
after
notification of
audit
50%
5%
(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%
143
3 Standard
Case
4 If
obstructive,
or if it is a
‘repeat case’
6 Voluntary
disclosure
before
notification of
audit
0%
© 2012 Deloitte Touche Tohmatsu Limited
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
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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
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Miscellaneous Budget Proposals
Budget – Miscellaneous Proposals
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
148
sswanepoel@deloitte.co.za
149
Thank You
For more information
please contact the
Fasset Call Centre
on 086 101 0001
or visit www.fasset.org.za