Global Corporate Tax Changes: Advice Is More Crucial Than Ever

“Over the next few years, we are also implementing a global minimum corporate tax to limit the negative effects of tax competition.” (Enoch Godongwana, Minister of Finance, Budget 2024)

There have been significant shifts in the corporate income tax landscape in South Africa and globally. Recent trends noted by the OECD and The Tax Foundation include:

  • Statutory corporate income tax rate changes in 13 countries in 2023
  • A reversal of a two-decade downward trend in corporate tax rates
  • An increase in the average global CIT rate from 20% to over 21% in the last year.

Corporate tax rates have declined from the highs of an average 40% in 1980 and 28% in the early 2000s to around 21%. South Africa has also reduced its CIT rate over the years, from 30% in 2000 to 27% in 2022 – but it is still substantially above the international average.

A new global tax treaty

Dubbed “an historic step towards changing the financial landscape”, 110 UN Member States, including South Africa, recently voted in favour of the terms of reference for a new global tax treaty. The UN says that all 193 UN Member States could vote on a finalised UN global tax treaty as early as 2027.

In the meantime, more than 140 countries have already agreed to this global minimum tax, and some have already implemented this tax reform, including South Africa. Finance Minister Enoch Godongwana announced in his 2024 Budget Speech that South Africa will be implementing the global minimum tax with effect from years of assessment commencing on or after 1 January 2024.

Why a minimum global tax?

Multinational companies use tax planning strategies, like moving profits to low-tax jurisdictions, to minimise their tax liabilities. A global minimum tax aims to ensure that these multinationals pay their fair share of taxes, regardless of where they operate.

This limits the race to the bottom of effective corporate tax rates for large multinationals, with countries competing to attract income by offering low tax rates and tax incentives.

On a social responsibility level, it goes without saying that companies should contribute fairly to the financial stability of the countries they operate in.

Who is affected?

A global minimum tax will ensure that any multinational enterprise group with annual revenue exceeding €750 million (+-R15 billion) will be subject to an effective tax rate of at least 15%, regardless of where its headquarters, operations, sales or profits are located.

Implementation in South Africa

Government plans to introduce two measures to effect this change for qualifying multinationals:

  1. The income inclusion rule applies to multinational entities headquartered in South Africa and requires a tax top-up if the effective rate in the jurisdictions the multinational entity operates in is lower than 15%. This tax is payable to SARS as opposed to the relevant jurisdiction.
  2. The domestic minimum top-up tax applies in situations where the multinational entity’s effective tax rate in respect of its South African profits is lower than 15%. In such circumstances, the South African constituent entities of the multinational entity are jointly and severally liable for the top-up tax.
What is the expected impact?

A global minimum tax will ensure that multinational corporations contribute their fair share of taxes in jurisdictions where they operate, curbing tax avoidance and safeguarding countries’ tax bases. It’s expected to generate significant additional tax revenues for many countries, especially those in the Global South.

In South Africa, National Treasury predicts that implementing the global minimum tax will bolster our corporate income tax base by approximately R8 billion in 2026/2027.

Whether a global minimum corporate tax can deter corporate tax avoidance and evasion remains to be seen. Concerns have also been raised about the impact on companies’ competitiveness, likely increased compliance costs, and possible double taxation.

Will it affect SMEs?

In the long run, the changes should benefit smaller local companies. With a broadened tax base, there may be opportunities in South Africa to lower the personal income tax burden on individuals, or to consider more globally competitive corporate tax rates than the current 27%, which is well above the international average.

The change may also create a more certain and predictable global tax environment, which is conducive to long-term planning and investment decisions.

What needs to be done?

Qualifying multinationals should assess their effective tax rates for the income inclusion rule and domestic minimum top‐up tax from 1 January 2024. Their local and global tax planning, and financial structuring, may need to be reviewed and updated.

While this probably doesn’t apply to your business (yet), companies of all sizes should note the significant shifts in international and local tax policy. This makes our up-to-date, expert tax assistance a must-have for every company navigating the changing tax landscape.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Read more about the article Your Tax Deadlines for November 2024
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Your Tax Deadlines for November 2024

  • 07 November – Monthly PAYE submissions and payments
  • 25 November – Value Added Tax (VAT) manual submissions and payments
  • 28 November – Excise duty payments
  • 29 November – VAT electronic submissions and payments, Corporate Income Tax Provisional Tax payments where applicable.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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How To Avoid an eFiling Profile Hijacking

“…it is vital that all stakeholders in the digital ecosystem, including the taxpayers, SARS, and the banks, work together to prevent and combat profile hijacking.” (SARS)

The recent spike in the number of SARS eFiling profiles being hacked by cybercriminals should raise red flags for every taxpayer. It’s got so bad that the Minister of Finance has given the Office of the Tax Ombud (OTO) approval to conduct a review of SARS’ service failures in assisting taxpayers timeously with eFiling profile hijacking.

This is a type of cybercrime in which fraudsters use phishing, malware, or social engineering to access and modify your personal or professional profile on a digital platform like SARS’ eFiling without your knowledge or consent.

Has this ever happened to you?
  • You receive an email, SMS, or WhatsApp, seemingly from SARS, asking you to click on a link or attachment to update your profile, verify your information, or claim a refund. It appears legitimate, and not realising it’s a fake, you just do as the message says…
  • You receive a call from someone pretending to be a SARS official, asking you to confirm your personal details or to click on a link, and you do, not realising that it will install malware on your device…
  • You are contacted by someone pretending to be a SARS official, offering you tax assistance or advice, and asking you to share your login credentials, OTP, or personal information with them, and you do…

Fraudsters use methods like these to trick you into revealing your login credentials. An alarming number of taxpayers have fallen victim to these unscrupulous predators, despite continuous system enhancements to secure and strengthen the security of SARS’ channels.

What could happen if my SARS eFiling profile is hacked?

Fraudsters can access and modify your details (e.g. contact number, password) without your knowledge or consent – with serious consequences for your tax compliance and financial security.

They can then also change the bank details to divert a SARS refund due to you into their own accounts. And they can even submit fraudulent returns on your behalf to claim refunds!

How can I prevent profile hijacking?

Prevention is far better than cure. Here are a few pointers, direct from SARS.

  • Use a strong and unique password for your eFiling profile. Change it regularly.
  • Don’t use the same password for other online accounts or services.
  • Never share your login credentials, OTP, or personal information with anyone, even if they claim to be from SARS.
  • If you hear about a security compromise at any organisation you deal with, immediately log in to your account and update your password.
  • Always access eFiling through the official website (https://www.sars.gov.za) or the SARS eFiling mobi app.
  • Do not click on any links or attachments in emails, SMSes or WhatsApps that claim to be from SARS, and never “confirm” or submit your login details after clicking on a link.
  • Keep your computer and mobile devices updated with the latest security software and antivirus programs.
  • Activate multi-factor or “app” authentication on your eFiling profile. This will authenticate you every time you log in by sending an OTP message to your registered mobile number or email address or requesting you to authorise the action via your mobile phone.
We can help to keep you safe

As your accountants, we are well versed in avoiding these scams. Whenever you receive communications that seem to be from SARS, simply contact us.

  • We are alerted to all known scams claiming to be from SARS, so we can quickly help you to identify phishing attempts.
  • We can check your eFiling profile and tax information regularly and report any discrepancies or unauthorized changes to SARS immediately.
  • We constantly update our security details to ensure the safety of our profile and our clients’ profiles.
In summary

SARS itself recognises that profile hijacking is a serious crime that harms taxpayers. But prevention is always better than cure. Take proactive steps to protect your security and contact us whenever you receive communications that seem to be from SARS. 

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Read more about the article Ready to Submit Your Interim EMP501 Reconciliation By 31 October?
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Ready to Submit Your Interim EMP501 Reconciliation By 31 October?

“The interim reconciliation process has become an integral part of the employer reconciliation and assists employers…” (SARS)

Employers are assisted by the interim EMP501 reconciliation, says SARS, because it makes it easier to:

  • make more accurate annual reconciliation submissions
  • maintain an up-to-date employee database
  • register employees for income tax purposes

Of course, there are other benefits, such as maintaining your compliant tax status, and avoiding wasting money on stiff penalties and interest.

It goes without saying that you want to reap all these benefits for your business. Allow us to help you to understand what needs to be done. We will be able to assist in ensuring a smooth, hassle-free submission process – even with the next deadline right around the corner.

EMP501 Reconciliation fast facts
  • All employers are required to submit an EMP501 Reconciliation
  • There are two deadlines in each tax year. For the 2025 tax year the deadlines are:
    • 31 October 2024 – 2025 Interim Reconciliation (for the period 1 March 2024 – 31 August 2024)
    • 31 May 2025 – 2025 Annual Reconciliation (for the period 1 September 2024 – 28 February 2025)
Potential pitfalls

The EMP501 Reconciliation is an intricate process which creates many opportunities for errors:

  • Payroll information must be verified
  • Correct deduction of employees’ tax (PAYE), Skills Development Levy (SDL), and Unemployment Insurance Fund (UIF) contributions must be verified
  • Deductions must reconcile with IRP5 / IT3(a) tax certificates
  • Employment Tax Incentive (ETI) values claimed must be reconciled
  • EMP201 returns must be reconciled with actual payments made to SARS
  • EMP201 returns must be reconciled with EMP501 statements
  • Employee information needs to be updated on eFiling
  • Employees without tax numbers must be registered
  • Employer’s Reconciliation Declaration (EMP501) needs to be submitted via the eFiling website or the e@syFile application

This is an intricate and time-consuming process, and, as SARS puts it, “accuracy and timely filing are critical”.

Consequences of non-compliance

This is serious business. Inaccuracies or late submission can result in severe consequences.

  • Calculating PAYE liability incorrectly will result in the imposition of both penalties and interest. This includes corrections made on the EMP501 reconciliation, as any shortfall is attributed to the last month of the reconciliation period.
  • If an employer submits their EMP501 late, administrative penalties will be charged. The penalty will equal 1% of the year’s PAYE liability, increasing each month by 1% (up to a maximum of 10% of the year’s PAYE liability).
  • An employer who wilfully or negligently fails to submit an EMP201 or EMP501 return to SARS is guilty of an offence and could face a fine or imprisonment for a period of up to two years.
The bottom line

The penalties are stiff, and the submission process is fraught with opportunities for inaccuracies and errors. We understand the importance of tax compliance to your business. And we have the expertise and experience to help ensure a smooth and stress-free submission for you. 

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Tax Deadlines

  • 07 October – Monthly PAYE submissions and payments
  • 21 October – End of filing season for individual taxpayers (non-provisional)
  • 25 October – Value Added Tax (VAT) manual submissions and payments
  • 30 October – Excise duty payments
  • 31 October – VAT electronic submissions and payments, Corporate Income Tax Provisional Tax payments where applicable, and Personal Income Tax Top-up Provisional Tax payments.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Beware the Taxman When Accessing Your Three-Pot Retirement Savings!

“The two-pot system is meant to support long-term retirement savings while offering flexibility to help fund members in financial distress.” (National Treasury)

With two new pots added to what used to be the one-pot South African retirement system, fund members can now access a portion of their retirement savings before retirement, while still preserving savings for retirement. There are, however, immediate and long-term tax and other implications that should be carefully considered!

The three pots of the new retirement system

Tax and other issues

Withdrawing from any of the pots should be approached with caution. In addition to the fees that will be charged, and the potentially devastating impact on your eventual retirement savings, there are also tax implications that must be carefully considered.

  • It’s significantly more expensive from a tax perspective to withdraw retirement funds before retirement age (normally 55), because the Withdrawal Benefit Tax Table or Individual’s Tax Table will apply. Instead, waiting until retirement to access savings – when the Retirement Fund Lump Sum Benefits or Severance Benefits Tax Table applies – is a far better tax option.
  • Up to R550,000 drawn as a cash lump sum at retirement may be tax free. However, this R550,000 is a cumulative withdrawal total over your lifetime. That means this tax benefit could be eroded by pre-retirement withdrawals.
  • Transfers from the Vested and Savings pots into the Retirement pot are also tax-free.
  • Employer contributions are still treated as taxable fringe benefits.
  • Early withdrawals from your Savings pot are considered income and are subject to income tax as per the tax directive the fund manager will request from SARS. What’s more, any outstanding taxes you owe SARS will automatically be deducted if you make a withdrawal.
  • Depending on your annual income and the amount withdrawn, a pre-retirement withdrawal from your Savings pot – taxed at your individual marginal tax rate – could also push you into a higher tax bracket. This would mean paying more tax on all your income for the year. Here’s an example of the potential impact of withdrawing R80,000 from your Savings pot. Waiting until retirement age to withdraw the same amount could be tax-free.

Hidden costs of early withdrawals

Your full retirement fund contribution (one-third Savings pot; two-thirds Retirement pot) is still tax deductible up to 27.5% of annual income, up to a maximum R350,000 per tax year. This remains one of the biggest tax breaks out there, but is effectively cancelled out by the tax payable on an early withdrawal. Early withdrawals also have another cost – the loss of tax-free growth that could have been earned on your savings.

Continuing with the example above, if the R80,000 is not withdrawn, but instead left to grow at an average annual return of 10% for 25 years, the projected returns are R866,776 (equivalent to R201,958 in today’s terms assuming 6% inflation). This means you could lose tax-free growth of R121,958 by withdrawing just R80,000!

Help is at hand!

Understanding the tax and other implications of early retirement fund withdrawals in the short term and at retirement will help you to make better-informed financial decisions.

Early retirement fund withdrawals are likely to be more expensive in tax and lost investment growth compared to other options such as overdraft facilities, credit cards or home loans.

Please talk to us if you or any of your employees are considering retirement fund withdrawals. We’re here to help!

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Read more about the article How to Survive Trust Tax Season 2024
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How to Survive Trust Tax Season 2024

“A Trust is a ‘person’ for tax purposes and is therefore a taxpayer in its own right.” (SARS)

With Tax Season 2024 for trusts opening on 16 September, there’s no better time to draw trustees’ attention to SARS’ continued emphasis that all trusts must register for income tax purposes, including dormant trusts. Once registered, trusts are obligated to submit income tax returns that are aligned with other trust reporting requirements from SARS and substantiated by extensive supporting documents and information.

Trustees are held responsible for non-registration of trusts for income tax, and they will not be able to evade enforcement actions by blaming third parties for failing to file returns. “But I didn’t know I was meant to,” is not a valid excuse.

Trust tax returns can be filed from 16 September 2024 (much later than the usual June/July opening) until 20 January 2025.

Along with the new filing season dates, trusts also face several onerous compliance requirements – and some stiff potential penalties.

Onerous requirements
  • SARS introduced changes to the Income Tax Return for Trusts (ITR12T) last year, with additional probing questions, and even more mandatory supporting documents.
  • The range of mandatory and supporting documents that must be submitted with the ITR12T depends on the trust type, and may include:
    • All certificates and documents relating to income and deductions
    • Trust Deed and Letters of Authority
    • Resolutions/minutes of trustee meetings
    • Details of the ‘Main’ Trustee (the SARS registered representative)
    • Financial statements and/or administration accounts
    • Particulars of assets and liabilities
    • Confirmation of banking details
    • Proof of payment of any tax credits
    • Supporting schedules
  • Detailed disclosure of the beneficial ownership, including the submission of identity documents of all beneficial owners. This information will be checked against the beneficial ownership register lodged with the Master of the High Court. Non-compliance could result in a trustee receiving a fine of up to R10 million, a prison sentence of up to 5 years – or both.
  • To provide SARS with a clearer understanding of the assets, income and activities within trust structures, trust returns now feature additional questions such as any local or foreign amounts vested in the trust as a beneficiary of another trust.
  • Information reported on the trust tax return must also align with the IT3(t) reporting of prescribed information by trusts, now also mandated by SARS. It includes trust distributions and their beneficiaries, trust and beneficiary demographic information, trust financial flows, and amounts vested in a beneficiary, including net income, capital gains and capital amounts. The first IT3(t) certificates are due to be submitted at the end of September 2024 for the 2023/24 tax year, and then on an annual basis.
  • Despite the above reporting deadline, SARS confirmed that trust beneficiary income tax returns will not be pre-populated with IT3(t) data for the 2024 year of assessment. This means trustees must also provide details of trust beneficiaries’ 2024 trust earnings timeously to the beneficiaries for inclusion in their personal income tax returns, for which the submission deadlines remain unchanged despite the change in the trust tax filing season.
We can help you survive Tax Season 2024!

Without professional assistance, surviving trust Tax Season 2024 would be a tough ask. The complexity of the processes and the new requirements exponentially increase the risk of errors. And that’s before you factor in the significant time required to manually upload the extensive list of supporting documents – especially in light of SARS’ increased efforts to improve tax compliance and the severe penalties for non-compliance.

Luckily, you can rely on our friendly, professional assistance to ensure all the compliance boxes are ticked and penalties are avoided this trust Tax Season.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Your Tax Deadlines for September 2024

  • 06 September – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 16 September – Start of Filing Season 2024: Trusts
  • 25 September – Value Added Tax (VAT) manual submissions and payments
  • 27 September – Excise duty payments
  • 30 September – VAT electronic submissions and payments, Corporate Income Tax Provisional Tax payments where applicable, and Personal Income Tax Top-up Provisional Tax payments.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Do You Qualify for These Tax Rebates? Let Us Check!

“The hardest thing in the world to understand is the income tax.” (Albert Einstein) 

Tax rebates, deductions and incentives provide relief to taxpayers by reducing the amount of tax payable to SARS, resulting in welcome tax savings. But how do you figure out which rebates, deductions or incentives apply to you – and what’s the procedure for claiming them?

This is where we come in. Chances are we’ve already applied a number of these rebates, deductions or incentives to your tax returns. But here’s a list of some of the tax rebates, deductions and incentives that could make a substantial difference to your SARS bill for the 2024 Tax Season. Some of them are fairly wellknown, but others are pretty obscure.

If you think you qualify for additional rebates, deductions or incentives, please do get in touch. We are committed to ensuring that you don’t pay more tax than you should.

For individuals
  • Tax threshold: You only start paying tax when you earn more than R95,750 (under 65 years); or R148,217 (65 – 75 years); or R165,689 (75 and older).
  • Tax rebates: Taxpayers also qualify for a R17,235 primary rebate; an additional secondary rebate of R9,444 if over 65, and a further tertiary rebate of R3,145 if over 75.  
  • Medical tax credits for medical scheme contributions can be deducted from your tax payable at R364 each per month for you and your first dependent, and R246 for each subsequent dependant.
  • The additional medical expenses tax credit allows qualifying out-of-pocket medical expenses to be deducted from the normal tax payable. This applies to medical expenses that were not recovered from your medical aid. 
  • Retirement fund contributions to a locally-registered pension, provident, or retirement annuity fund are deductible subject to certain maximum limits.
  • Amounts received/accrued from tax-free investments are exempt from tax, subject to limitations.
  • Donations to certain approved public benefit organisations are allowed as deductions, up to a maximum of 10% of taxable income.
  • A solar energy tax credit of 25% of the cost of the solar PV panels (maximum R15,000) is available for new and unused solar PV panels acquired and used for the first time between 1 March 2023 to 29 February 2024.
  • Home office expenditure: Employees who have a dedicated area used regularly and exclusively for “trade” in their home may be allowed to deduct, pro-rata, certain expenses like rent, repairs, utilities, phones and internet. 
  • The foreign tax credit is a rebate against income tax for foreign taxes paid on foreign-sourced income. 
  • Taxpayers carrying on a business in their individual capacity or in partnership may deduct business expenditure or losses on the same basis as companies.
For businesses
  • Tax relief measures for small business corporations (SBCs) allows for a progressive tax rate, immediate write-off of new plant or machinery, and a wear-and-tear or accelerated allowance on depreciable assets.
  • Tax relief for qualifying micro businesses involves a simplified turnover tax, instead of the usual taxes (income tax, provisional tax and Capital Gains Tax) payable by companies.
  • Energy efficiency savings incentive provides a deduction for savings from implementing energy-efficient methods in the production of income at R0.95 for each kilowatt hour (or equivalent) saved.
  • The redesigned renewable energy tax deduction for certain machinery, plant, implements, utensils and articles used in production of renewable energy allows a 125% deduction of the cost incurred for eligible assets brought into use for the first time between 1 March 2023 and 28 February 2025. Machinery, plant, implements, utensils and articles used in production of renewable energy outside of the above-mentioned period may qualify for a separate deduction (which allows a 100% deduction of costs incurred).
  • Research and development (R&D) costs related to certain R&D activities are 150% deductible, while depreciation on R&D machinery and capital assets may be accelerated and buildings used in R&D may be written-off over 20 years. 
  • The learnership agreements tax incentive allows employers that train employees in a regulated environment an additional income tax deduction. (This is not the same as the Employment Tax Incentive (ETI) that encourages the employment of young people by reducing employees’ tax due by the company).  
  • Donations to certain charitable organisations approved as public benefit organisations are tax deductible, up to a maximum of 10% of taxable income.  
  • A depreciation (wear and tear) allowance may be deducted on movable assets used for the purpose of trade. There’s also an allowance for assets disposed of or scrapped during a year of assessment.
  • Interest expenses incurred in the production of non-exempt income and for the purposes of trade are generally deductible. 
  • Bad debts are tax deductible under certain circumstances and a tax allowance is also provided for doubtful debts. 
  • The foreign tax credit is a rebate against income tax for foreign taxes paid on foreign-sourced income or a deduction against income of foreign taxes paid on SA-sourced income. 
  • There’s an allowance for new commercial buildings or improvements used by a business during the assessed year, equal to 5% of the cost to the taxpayer. 
  • There’s an allowance for certain residential units, equal to 5% of the cost to a taxpayer of new units or improvements. 
  • Deductions in respect of erection or improvement of buildings in Urban Development Zones have been extended until 31 March 2025.  
  • A Special Economic Zones (SEZ) incentive in certain SEZs includes a reduced corporate tax rate of 15%; a 10% allowance on the cost of new buildings or improvements; and an employees’ tax reduction for the employer by virtue of the ETI (with SEZs eligible for the ETI to apply irrespective of the employee’s age). 
Tip of the iceberg

These are just some of the tax rebates, deductions or incentives available to taxpayers. Our expertise in correctly identifying and applying the relevant rebates, deductions or incentives to your tax matters can significantly reduce your tax burden this tax season. Please get in touch if you think you might qualify for any of the rebates listed in this article!  

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Top Tips for a Hassle-Free Tax Season 2024

“We urge taxpayers to be transparent and accurate when filing their tax returns to enable a constructive relationship with SARS.” (Edward Kieswetter, SARS Commissioner)

July 15 marked the start of the 2024 Filing Season for provisional and non-provisional taxpayers who were not subjected to auto-assessments, covering the tax period 1 March 2023 to 29 February 2024.

As part of our quest to simplify your life, we’ve compiled a list of the timelines and the changes since last year. But first, here are five ways we can help you this tax season.

5 ways we’ve got your back
  1. We can help you avoid non-compliance. SARS has warned that the use of technology and data has enhanced its ability to detect non-compliance such as, for example, not including rental income in a return, which could potentially make you guilty of fraud.
  2. Our team is up to date with the many changes in tax legislation introduced each year and our understanding of the complexities and intricacies will streamline your filing season.
  3. We ensure all the boxes are ticked on every tax return you need to submit. This will help you to avoid a SARS audit where possible, and to ensure any verification or audit can be concluded quickly and cost-effectively.
  4. We make sure that you claim every tax rebate, deduction or incentive available to you, so you don’t under-claim and pay more tax than required.
  5. We protect you from scams. Sadly, filing season is also scamming season. We are alerted about all the latest scams and keep your information with SARS updated to prevent fraud and identity theft.
Dates to diarise

Changes to take note of

Various changes have been made since last year – the quickest way to find out if any of these apply to you or your business is simply to contact us.

  • The pool of auto-assessed taxpayers increased to about 4.8 million this year, compared to around 3.8 million taxpayers last year.
  • A solar energy tax credit of 25% of the cost of the solar PV panels (maximum R15,000) is available for new and unused solar PV panels acquired and brought into use for the first time by individuals between 1 March 2023 and 29 February 2024.
  • Pro rata retirement fund contribution deductions are now allowed if an individual taxpayer’s year of assessment is less than 12 months.
  • Exemption of tax-free investment amounts received or accrued: if your year of assessment is less than 12 months, the applicable contribution limit (currently R36,000) will be applied pro rata.
  • Deductions in respect of buildings in Urban Development Zones – the allowable deduction has been extended until 31 March 2025.
  • There’s a redesigned renewable energy tax deduction for certain machinery, plant, implements, utensils and articles used in production of renewable energy.
  • ITR12 Form changes affecting the foreign employment income exemption and Beneficial Owner (BO).
The bottom line

If this is all a tad confusing, fret not! Our team of seasoned tax professionals will make all the difference this filing season. We are familiar with all the requirements and up to date with all the changes. Allow us to make your 2024 tax season hassle free.  

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Your Tax Deadlines for August 2024

  • 07 August – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 23 August – Value Added Tax (VAT) manual submissions and payments
  • 29 August – Excise duty payments
  • 30 August – VAT electronic submissions and payments, Corporate Income Tax Provisional payments where applicable, and Personal Income Tax Provisional payments.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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How to Breeze Through a SARS Audit

“The aim of a tax audit is to determine if the taxpayer has complied with the relevant legislation administered by SARS.” (SARS)

During a tax audit, SARS examines financial statements, accounting records and supporting documents to check if you or your business correctly declared your tax position on a tax return. If you didn’t submit a return, an audit will investigate if your actions complied with tax law.

Either way, being selected for an audit – whether for income tax, VAT, employees’ tax or capital gains tax – poses significant risk.

What are the risks of an audit?

A substantial amount of time, cost and effort can be required to collate the information, documents and clarifications needed to complete an audit … Especially if the audit spans several years.

If you don’t submit the requested audit information, SARS will raise a revised assessment, determining the amount of your tax liability or refund, based on an estimate from information readily available or obtained from a third party, even if this information is incomplete.

What’s more, an audit can lead to the levying of understatement penalties of up to 200% of the shortfall where an understatement occurred. The 200% penalty is levied in instances where the taxpayer is either a repeat offender or is being obstructive and  is also guilty of intentionally evading taxes.

Worst case scenario

An audit can even result in criminal proceedings. It’s a criminal offence to refuse or neglect to supply relevant material requested by SARS without just cause. And remember: SARS is no longer required to prove that a taxpayer wilfully committed a tax crime – taxpayers can now be found guilty of a tax crime if a mistake was made, or in cases of negligence.

The risk is intensifying

SARS audits are increasingly common. Any taxpayer can be selected for audit, based on any consideration, including on a random or cyclical basis, or on a risk assessment basis. Even tax-compliant companies and individuals that get clean audits every year are regularly audited.

Taxpayers are flagged for audit through SARS’ sophisticated case selection methodology. The taxpayers most likely to be audited include those who earn additional income and those whose tax returns do not align with information from other sources, for example, where there is a mismatch between the annual turnover and the VAT declarations for the year.

The audit process
  1. A Notification of Audit letter provides the initial scope of the audit, documents required, and details of the SARS auditor.
  2. SARS can request additional material at any time, and they can obtain information from third parties.
  3. SARS prefers to receive audit documents electronically via eFiling or for them to be submitted at a SARS branch, but collection or delivery of documents can be arranged.
  4. An audit can take between 30 business days and 12 months to complete – or even longer in some cases. The time taken to complete an audit depends on the complexity of the specific case.
  5. SARS will provide progress reports on the audit every 90 days.
  6. If SARS agrees with your tax position, it will issue a Finalisation of Audit Letter to conclude the audit.
  7. Alternatively, SARS will issue an Audit Findings Letter which details the grounds of the assessment, amounts due, and payment deadlines.
  8. If you disagree with SARS’s findings, you have 21 days to respond. You must provide evidence to support your dispute.
  9. Refunds will only be paid once the audit concludes.
Breezing through the audit process

Luckily most audits we deal with end happily. Here are a few pointers to ensure yours does too.

  • Keep correct and accurate records: Speak to our team today to ensure you’re up to date with all legislative requirements.
  • Act immediately: If you receive a Notification of Audit letter, contact us immediately. We can provide advice and manage the ongoing communications with SARS on your behalf, while collaborating with the auditor to avoid penalties.
  • Rely on expertise: Our team will guide you through the audit process – from clarifying what documents are required, to submitting these documents in the required format, and managing the next steps in the process, we’ll do what it takes to ensure a successful audit.
  • Protect your rights: SARS is legally required to follow the audit process by the book. We will ensure you receive fair tax treatment and audit outcomes.
SARS audits are here to stay. But they’re nothing to worry about if you have all your ducks in a row.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Your Tax Deadlines for July 2024

  • 05 July – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 25 July – Value-Added Tax (VAT) manual submissions and payments
  • 30 July – Excise Duty payments
  • 31 July – Corporate Income Tax (CIT) Provisional Tax payments
  • 31 July – Value-Added Tax (VAT) electronic submissions and payments.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Use This SARS Incentive to Bring Young People into Your Business

“The employment tax incentive is aimed at encouraging employers to hire young and less experienced work seekers.” (SARS Employers ETI Guide)

With Youth Day celebrations around the corner, business owners have an opportunity not only to consider unlocking the benefits of having young workers in their teams, but also to make a difference to South Africa’s dismal youth employment rate.

What are the benefits of hiring young employees?
  • More likely to be technologically savvy, younger employees have a positive impact on the adoption and use of new software and technology in a company.
  • They also give companies that target the millennial market an advantage, as they can reach and communicate with their peers.
  • Wages for young employees are lower, making them the cost-effective choice for entry-level positions, freeing up experienced workers for strategic level work.
  • Younger people are better equipped to respond to sudden change and unexpected circumstances.
  • Companies have an opportunity to develop a workforce specifically trained to meet their business needs and culture.
  • Young workers bring paradigm shifting ideas, fresh perspectives and different ways of thinking and working to their organisations.
  • Youthful energy, enthusiasm and creativity are great for team building, productivity and workplace morale.
  • Used to formal learning, young people tend to absorb training more readily.
  • Most young workers are eager to learn, build their experience and apply their skills.

Source: Unicef

One option businesses should consider to enable them to take on more young workers into their companies is to use the ETI incentive from SARS.

What is ETI?

The Employment Tax Incentive (ETI) is a tax concession encouraging employers to hire more young people aged between 18 and 29 years. It reduces the employer’s cost of hiring young people through a cost-sharing mechanism with government while leaving the earnings received by the employee unaffected.

This incentive offers a wide benefit. Employers are financially incentivised to hire more young people, and young people gain valuable work skills and experience, benefiting the wider economy.

It complements existing government programmes with similar objectives e.g. learnership agreements, and it will be available until 28 February 2029.

Who qualifies for ETI?
  • Employers who:
    • are registered for Employees’ Tax (PAYE)
    • are tax compliant
    • meet these qualifying criteria on an ongoing basis.

It is however important to note that certain employers (e.g. those in the national, provincial or local sphere of government and certain public entities) are specifically excluded from utilising the ETI.

  • Employees who:
    • have a valid South African ID or permit
    • are aged between 18 and 29 years old
    • earn between minimum wage or R2000 and R6500 for a 160-hour month
    • who are not domestic workers or “connected persons” to their employers
    • meet these qualifying criteria on an ongoing basis.

Employers operating within a Special Economic Zone will, provided they meet certain criteria, not be subject to the age limitation highlighted in the second bullet.

How does ETI work?

ETI can be claimed for a 24-month period for all employees who qualify. The monthly value for the ETI reduces the amount of Pay-As-You-Earn (PAYE) due by the company and is claimed by correctly completing the ETI field on the employer’s monthly EMP201.

The value of the incentive amount is not static but depends on the value of the monthly remuneration paid to the qualifying employee and must be calculated each month for each qualifying employee using the table below.

Source: SARS

Examples of ETI savings 

The amount of the rebate reduces in the second 12-month period. In addition, as the monthly remuneration increases, the amount of the rebate reduces: at the upper limit with a monthly remuneration of R6400, the monthly rebate is just R75 per month.

The ETI can only be claimed in the months in which the employee was a qualifying employee (i.e. the employee may, due to the remuneration paid to them, be a qualifying employee in the first three months but not in the fourth and fifth months. If the employee is a qualifying employee in the sixth month, the sixth month is month number four as far as the 12-month period is concerned). Further to the above, should the number of hours worked by the employee in the relevant month be less than 160 hours, the ETI claimed is to be apportioned accordingly.

However, there is no limit to the number of qualifying employees for which a company can claim ETI, and especially in labour-intensive environments, these rebates will add up on a monthly basis, and certainly stack up over two years.

Claiming the incentive may however not result in the employer’s EMP201 monthly declaration reflecting a negative amount. Should this be the case, the employer should reflect a net PAYE amount of R Nil.

ETI pitfalls
  • If an employer claims ETI for any employee who does not qualify, penalties equal to 100% of the ETI claimed will apply.
  • Penalties imposed will result in under-payment of PAYE, which will attract interest and penalties.
  • Companies cannot displace existing employees to employ a worker who qualifies for the ETI – a penalty of R30 000 will be levied for each employee so displaced.
  • Meticulous recordkeeping is required by the ETI Act.
  • Companies may face time-consuming and costly verifications and audits of their ETI claims.
How to take advantage of this incentive

When correctly calculated and administered, ETI is a significant opportunity for businesses, especially smaller companies, and those with large labour forces, to scale their activities at potentially lower costs.

Sadly, many small companies are not taking advantage of this incentive, and according to research done by Sage, the top reasons include concerns surrounding increased admin and a fear of claiming ETI incorrectly.

We are ready and able to assist you to determine whether ETI is suitable for your business and to correctly calculate and administer this tax benefit for you, ensuring your business can enjoy all the benefits of young workers as well as a potentially substantial tax reduction over the next two years.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Your Tax Deadlines for June 2024

  • 07 June – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 25 June – Value-Added Tax (VAT) manual submissions and payments
  • 27 June – Excise Duty payments
  • 28 June – Corporate Income Tax (CIT) Provisional Tax payments
  • 28 June – End of the 1st fiscal quarter
  • 28 June – Value-Added Tax (VAT) electronic submissions and payments.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Read more about the article Your Employer Annual Declaration is Due by 31 May
May 31 written on a calendar to remind you an important appointment.

Your Employer Annual Declaration is Due by 31 May

“Failure by an employer to comply with its obligations does not only harm that employer and the fiscus, but also employees. SARS vigorously pursues employers that fail to comply.” (SARS)

Employers must submit their annual reconciliation declarations (EMP501) with accurate and up-to-date payroll information about their employees by 31 May this year.

This is among the requirements imposed on employers by the Fourth Schedule to the Income Tax Act:

  • deducting or withholding employees’ tax from remuneration,
  • paying the above to SARS monthly before the 7th of the following month,
  • reconciling employees’ tax during the annual and the interim reconciliation, and
  • issuing tax certificates (IRP5s/IT3(a)s) to employees timeously.
A SARS focus area

The employer-reconciliation process is a focus area for SARS, not only to ensure compliance among employers, but also because it enables SARS to issue individuals with income tax auto-assessments.

SARS uses the IRP5/IT3(a) certificate information submitted by employers through the annual reconciliation process to prepopulate the employees’ annual income tax returns (ITR12), and employees cannot change this information.

This means the employer-reconciliation process is also a key phase in the Income Tax Filing Season, because incomplete or incorrect information will make it difficult for employees to fulfil their tax obligations and because employees require IRP5 and IT3 certificates to file their income tax returns in time during tax season.

As such, SARS says it vigorously pursues employers that fail to comply and, where necessary, aims to make tax non-compliance hard and costly through hard enforcement, for example, court action, asset seizure and criminal prosecution.

What needs to be done?
  • Register employees who are not registered for income tax.
  • Review the year’s EMP201 declarations that declare the total tax liability for each tax period for:
    • Employees’ Pay-As-You-Earn (PAYE) tax,
    • Unemployment Insurance Fund contributions (UIF),
    • Skills Development Levy (SDL)
    • Employment Tax Incentive (ETI) amounts (if applicable).
  • Submit any outstanding monthly declarations (EMP201) and settle all payments due to avoid administrative penalties for non-compliance or late submission, and to reduce interest charges on delayed or outstanding amounts.
  • Ensure the values on the EMP201 declarations and on the tax certificates balance to the actual payments made to SARS.
  • If any discrepancies are identified in the EMP201 declarations, these must be corrected when submitting the EMP501.
  • The EMP501 Annual Reconciliation Declarations must include:
    • Monthly employer declarations (EMP201).
    • Information about payments made (excluding penalties and interest paid).
    • Employee tax certificates (IRP5/IT3(a) generated) covering the tax year from 1 March 2023 to 29 February 2024.
  • Monitor the status of your submission to ensure the EMP501 has been successfully filed with SARS – a submission rejected as incomplete or due to a data error is considered not to have been submitted, and the taxpayer will be liable for non-compliance penalties.
  • Keep accessible employer records with a register that contains each employee’s personal details and financial records as prescribed by the Commissioner for at least five years.
  • Also complete the interim reconciliation process in September/October each year to enable an easier and more accurate annual reconciliation submission and an up-to-date employee database.
Consequences of non-compliance
  • ETI refunds (unused ETI amounts) can only be claimed by submitting interim and annual reconciliations (EMP501s). Failure to do so will result in ETI refunds being forfeited.
  • Submitting an incomplete EMP501 or submitting an EMP501 after the due date will result in administrative penalties, amounting to 1% of the year’s PAYE liability. This penalty increases by 1% monthly, reaching up to 10% of the year’s PAYE liability. A penalty assessment notice (EMP301) will be issued. It is possible to incur two penalties for the same period i.e. both a PAYE late payment penalty and PAYE administrative penalties.
  • In addition, it is a criminal offence for an employer wilfully or negligently to:
    • Fail to submit full and complete EMP201 or EMP501 returns to SARS by the due date.
    • Fail to issue an IRP5 or IT3(a) certificate to an employee within the specified periods.
    • Fail to deduct or withhold PAYE or UIF, or not to pay any PAYE or UIF deducted or withheld over to SARS as required by law.
    • Use or apply PAYE deducted or withheld for any purpose other than to pay that amount to SARS.

Any person found guilty of one of these offences is liable, on conviction, to a fine or imprisonment for up to two years.

We can help!

Let us help you review your employees’ tax obligations and prepare for submission of the Annual Reconciliation Declaration. Similarly, if penalties and interest have already been imposed on your business, we can assist in requesting remission from SARS.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Your Tax Deadlines for May 2024

  • 07 May – PAYE submissions and payments
  • 24 May– Value-Added Tax (VAT) manual submissions and payments
  • 30 May – Excise duty payments
  • 31 May – VAT electronic submissions and payments, & Corporate Income Tax (CIT) Provisional Tax payments where applicable.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Donating to a PBO? Check SARS’ New Requirements (and PBOs Note Your New 31 May Deadline)

“[The new requirements] enable… a more efficient process to make deductions available to qualifying donor taxpayers and to help prevent section 18A claims abuse.” (SARS)

Public benefit organisations (PBOs) are engaged in public benefit activities for example religious institutions, day care centres, disaster relief organisations, health clinics, etc.

Many are dependent on donations and, to encourage the public’s generosity, a tax deduction for certain donations made by taxpayers is provided.

Qualifying PBOs (i.e. section 18A-approved organisations) may issue tax certificates – called section 18A receipts – to donors.    This tax certificate – or section 18A receipt issued by a section 18A-approved organisation – entitles you or your company to a deduction from taxable income for bona fide donations in cash or of property.

While approved section 18A institutions were previously required to keep records of all section 18A receipts issued, the requirements have changed, affecting both PBOs and their private and corporate donors.

PBOs: New requirements, and a 31 May 2024 deadline

Previously, the information that had to be provided by a PBO for a valid section 18A certificate was limited to the details of the PBO; details of the date, amount or nature of the donation; confirmation of how the donation would be used; and the name and address of the donor.

Last year, SARS issued further requirements for more detailed information to be included on all section 18A certificates issued from 1 March 2023. This includes the nature of the donor; the donor’s identification or registration number; donor trading name (if different from the registered name); donor income tax reference number; donor contact number and e-mail address; and a unique receipt number.

In addition, this year – like other third parties such as the banks, medical schemes and fund administrators required by law to send data to SARS – all PBOs are now also required to submit bi-annual reports – called an IT3(d) – to SARS. The first deadline for PBOs in this respect is 31 May 2024.

From this date, approved section 18A tax exempt institutions must submit data on section 18A tax deductible receipts issued, which includes information on the S18A approved tax exempt institution, donation information and donor information for the 2023/2024 year of assessment (i.e. S18A receipts data from 01 March 2023 to 28 February 2024) by submission of IT3(d) data via efiling.

Professional assistance is essential

While it has always been best practice to check with your accountant first before making a donation and relying on the tax break, it is now more crucial than ever for companies and individuals to ensure that the PBO being supported, as well as the tax certificate – or section 18A receipt – issued to obtain a tax deduction, meet SARS’ new requirements. Also remember to check the limits: the amount of donations which may qualify for a tax deduction is limited to up to 10% of taxable income.

We can also help PBOs to ensure they can meet the new requirements and deadlines, to ensure compliance and that their donors can enjoy the tax breaks that will encourage generous giving.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Your Tax Deadlines for April 2024

  • 05 April – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 25 April – VAT manual submissions and payments
  • 29 April – Excise Duty payments
  • 30 April – Value-Added Tax (VAT) electronic submissions and payments & CIT Provisional payments where applicable.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Budget 2024: How It Affects You and Your Business

“Our bigger challenge… is that our pie is not growing fast enough and this limits our ability to generate sufficient revenues to distribute among our priority areas.” (Finance Minister Enoch Godongwana – Budget 2024)

Finance Minister Enoch Godongwana’s third Budget Speech in an election year contained few surprises, but also little in the form of good news, especially for South Africa’s personal income tax payers.

The Minister quoted dismal local average expected real GDP growth of 0.6% for 2023, which is projected to reach 1.6% between 2024 and 2026. This poor economic performance is ascribed to the persistent constraints in electricity supply and freight, rail and ports, as well as a high sovereign credit risk.

And the result? A sharp drop in tax revenue collection for 2023/24 which, at R1.73 trillion, is R56.1 billion lower than estimated!

To make up the shortfall, Budget 2024 contains tax measures that will raise an additional R15 billion in 2024/2025, mainly through income tax raised by not adjusting personal tax brackets, rebates and medical tax credits for inflation, as well as above-inflation increases in alcohol and tobacco excise duties.

Other main proposals included no increase to the general fuel levy for 2024/25, a global tax on multinational companies in South Africa with an annual revenue exceeding €750 million and the R150 billion withdrawal from SA’s Gold and Foreign Exchange Contingency Reserve Account.

These announcements are briefly detailed below, along with some of the other announcements that will impact individuals and businesses.

Budget proposals that will impact you
  • Addressing the Budget shortfall, personal income tax brackets are not adjusted for inflation – so individuals who received a salary increase this year are likely to pay more tax as they could fall into a higher tax bracket.
  • No inflation adjustments to the tax rebates.
  • Medical tax credits per month are not increased by inflation.
  • A one-year extension in the R350 Social Relief of Distress (SRD) grant and increases ranging from R20 to R100 per month in other social grants.
  • Above-inflation increases in the excise duties on alcohol and increases of between 4.7 and 8.2% on tobacco products. This means that the duty on:
    • a 340ml can of beer increases by 14c,
    • a 750ml bottle of wine goes up by 28c,
    • a 750ml bottle of fortified wine goes up by 47c,
    • a 750ml bottle of spirits will increase by R5.53,
    • a 23g cigar goes up by R9.51,
    • a pack of 20 cigarettes, rises by 97c,
    • vaping products increase to R3.04 per millilitre.
  • Two-pot retirement reform to be implemented on 1 September 2024, allowing individuals access to a portion of their retirement savings before their retirement date.
Budget proposals that will impact your business
  • A global minimum corporate tax will be implemented from 1 January 2024, with multinational corporations with an annual revenue exceeding €750 million subject to an effective tax rate of at least 15%, regardless of where their profits are located. This will broaden the corporate tax base, enabling more tax revenue collection without increasing existing corporate taxes for local businesses. This new tax is expected to increase corporate tax collection by R8 billion in the 2026 tax year.
  • An increase in the limit for renewable energy projects that can qualify for the carbon offsets regime, from 15 megawatts to 30 megawatts.
  • An electrical and hydrogen-powered vehicle tax incentive introduced for manufacturers in 2026, enabling them to claim 150% of qualifying investment spending.
  • An increase in the carbon tax from R159 to R190 per tonne of CO2 equivalent from 1 January 2024.
Budget proposals that will impact all
  • The general fuel levy and the Road Accident Fund levy will not be increased this year, providing tax relief of R4 billion.
  • However, the carbon fuel levy will increase to 11c per litre for petrol and 14c per litre for diesel effective from 3 April 2024.
  • Plastic bag levy to increase to 32c per bag from 1 April 2024.
  • The R150 billion withdrawal from SA’s Gold and Foreign Exchange Contingency Reserve Account to pay down government debt.
How best to manage your taxes going forward?

In addition to the announcements detailed above, other technical amendments proposed in the Budget 2024 may also require professional tax advice.

Furthermore, as tax collection remains government’s main source of income, you would be well-advised to rely on our expertise and advice as we determine the impact of the Budget 2024 announcements on your tax affairs.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Budget 2024: Your Tax Tables and Tax Calculator

Budget 2024 effectively brought an increase in personal income tax by not adjusting the tables for tax rates, rebates and medical tax credits, while also implementing substantial increases in ‘sin’ taxes and introducing a proposed global tax on multinational companies.

This selection of official SARS Tax Tables and other useful resources will help clarify your tax position for the new tax year. Then follow the link to Fin 24’s Budget Calculator (just follow the four-step process) to perform your own calculation.


Individual taxpayers – tax tables unchanged

Source: SARS

Source: SARS

Source: SARS

Businesses – Corporate tax rates – extended

Sources: SARS’ Budget Tax Guide 2024Budget Speech 2024

Sin taxes increased

Source: Budget 2024 People’s Guide


How much will you be paying in income, petrol and sin taxes?

Use Fin 24’s four-step Budget Calculator here to find out the monthly and annual impact on your income tax, as well as what you will pay in future in terms of fuel and sin taxes, bearing in mind that the best way to fully understand the impact of the announcements in Budget 2024 on your own and your business affairs is to reach out to us for professional advice.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Your Tax Deadlines for March 2024

  • 07 March – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 25 March – VAT manual submissions and payments
  • 27 March – Excise duty payments
  • 28 March – End of the 2023/24 Financial year, Value-Added Tax (VAT) electronic submissions and payments, & CIT Provisional payments where applicable.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Provisional Tax: Are You Ready for the Crucial 29 February Deadline?

“Provisional tax is merely a mechanism to pay the normal income tax liability during the tax year… an advance payment of a taxpayer’s normal tax liability.” (SARS)

To provisional taxpayers, especially those who are liable for provisional tax in both their personal capacities and as business owners, it may well seem that there are endless provisional tax deadlines and payments to be made every year.

There are indeed numerous income tax provisional and final declarations and payments that overlap across tax years, which is certainly confusing, and yet non-compliance is met with some of the harshest penalties imposed by SARS, most notably in respect of the second provisional tax declaration and payment, due by the end of February for individuals, and for companies with a February financial year end.

In this article we find out who are provisional taxpayers, what they need to pay and when and how to avoid the penalties for non-compliance.

What is provisional tax?
  • Provisional tax is not a type of tax, but a cash flow mechanism to collect pre-payments of taxes that must be made in respect of individual provisional taxpayers’ and company taxpayers’ normal annual income tax prior to a final determination of the annual tax liability.
  • At least two amounts are paid in advance during the year of assessment, based on estimated taxable income for the year of assessment. A third optional payment can be made.
Why must provisional tax be paid?
  • Ensures government collects cash more evenly during the year and not just in bulk amounts following final tax assessments which are annual and usually in similar time periods e.g. end of December or February.
  • Spreads the payment of a taxpayer’s year’s income tax liability over two or even three provisional payments.
  • Prevents taxpayers facing large income tax liabilities that are only revealed at the end of the year of assessment when the annual personal income tax (PIT) return ITR12 or the annual corporate income tax (CIT) return ITR14 is filed.
  • The first, second and third provisional payments are credited against any tax owing after the final income tax return is filed, and any further tax liability will then become due.
  • Reduces the risk and amount of interest accruing between the time when a tax liability is determined and when it is paid.
Who must pay provisional tax?
  • Provisional tax is paid by individuals who earn income other than, or in addition to, a salary or traditional remuneration paid by an employer from which PAYE deductions are made – including those who earn income from conducting a business, such as members of CCs, sole proprietors and company owners.
  • Companies and trusts.
  • Any person notified by the Commissioner of SARS.
  • Exceptions and thresholds apply in every instance, so be sure to check with your accountant.
When is provisional tax due?

Below is an example of the provisional and final income tax due dates for:

  • The 2024 year of assessment (1/03/23-29/02/24) and
  • The 2025 year of assessment (1/03/24-28/02/25)

for a company with a February financial year (FY) end.

It shows how the due dates for different years of assessments overlap to create both seemingly endless provisional tax deadlines and much confusion.

The company provisional tax due dates shown in the table above are the same for individual provisional taxpayers, but individuals who are provisional taxpayers will be due to file their annual personal income tax (PIT) returns in January at the end of the tax season as announced by SARS.

How much are the provisional tax payments?

Individual provisional taxpayers

  • During every period, individual provisional taxpayers must submit an estimate of their total taxable income in the year of assessment, excluding any retirement fund lump sum or withdrawal benefit or any severance benefit. The taxpayer’s estimate must be informed by a reasonable calculation.
  • The taxable portion of the aggregate capital gain for the current year of assessment must be included.
  • The estimate may not be less than the ‘basic amount’ which is the taxpayer’s taxable income assessed for the preceding year of assessment, less any taxable capital gain; the taxable portion of a retirement fund lump sum or withdrawal benefit or severance benefit, and other amounts specified by SARS, unless SARS approves a lesser amount. SARS can still adjust an estimate upwards that is more than the basic amount but less than a reasonably calculated amount.
  • The calculations provided by SARS below show why professional assistance is optimal.

Source: SARS

Company provisional taxpayers

  • Company provisional taxpayers must submit a return of an estimate of the total taxable income for the year of assessment.
  • It cannot be less than the basic amount, which is the taxpayer’s taxable income assessed for the latest preceding year of assessment, less the amount of any taxable capital gain in that year of assessment.
  • The basic amount for all taxpayers must be increased by 8% if the estimate is made more than 18 months after the end of the latest preceding year of assessment.
  • The calculations provided by SARS below reveal why the assistance of your accountant is invaluable.

Source: SARS

Top tips

  • SARS can ask for the estimate to be justified and can increase the estimate if they are dissatisfied with the amount, and this is not subject to an objection or appeal.
  • SARS provides the following advice: ‘the calculation must be one which has been carefully considered and is thoughtful, earnest and sincere…” and the amount of the estimate must be determined “sensibly and by careful reasoning and judgment, in a mathematical manner, and using experience, common sense and all available information”.
  • Keep accurate records of all the calculations and source documents used.

How is provisional tax declared and paid?

  • A provisional return or IRP6 return must be submitted by all provisional taxpayers for the first and second periods.
  • Even if you or your company owes no tax, a ‘nil’ return showing taxable income is equal to zero must still be filed on time.
  • If an IRP6 is filed more than four months after the deadline, SARS considers a ‘nil’ return to have been submitted – unless the actual taxable income is really zero, this will result in penalties.

What are the penalties for non-compliance?

  • A 10% penalty will be levied on late payments, along with interest at the prescribed rate.
  • Harsh penalties for under-estimation are levied when the actual taxable income is more than the taxable income estimated on the second provisional tax return. The penalty amount depends on whether the actual taxable income is more or less than R1 million.
  • Where taxable income is more than R1 million – if the taxable income estimate for the second provisional tax payment is less than 80% of actual taxable income declared on the annual tax return, a 20% penalty will be levied on the difference between: the amount of tax payable on 80% of actual taxable income after taking into account rebates, and employees’ tax and provisional tax already paid.
  • Where taxable income is less than R1 million – if the taxable income estimate for the second provisional tax payment is less than 90% of actual taxable income, and is also less than the basic amount, a penalty is levied of 20% of the difference between: employees’ tax and provisional tax paid in the year of assessment, and the lesser of (a) the normal tax payable on 90% of actual taxable income (after deductible rebates) or (b) the normal tax payable for the year of assessment on the basic amount.
  • Interest at the prescribed rate (7.75% pa subject to change) will also be levied on the underpayment of provisional tax as a result of under estimation.
Rely on tax expertise

Provisional taxpayers, whether individuals or companies, should consider relying on the expertise of their accountant to assist them in preparing and/or reviewing their provisional tax and income tax returns prior to submission. Similarly, where penalties and interest have already been imposed and levied, taxpayers may need expert assistance to successfully make a request for the remission of such penalties and interest to SARS.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Your Tax Deadlines for February 2024

  • 07 February – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 23 February – Value-Added Tax (VAT) manual submissions and payments
  • 28 February – Excise Duty payments
  • 29 February – CIT Provisional Tax payments
  • 29 February – PIT Provisional Tax payments
  • 29 February – Value-Added Tax (VAT) electronic submissions and payments

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Read more about the article How to Achieve Tax Compliance Throughout 2024
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How to Achieve Tax Compliance Throughout 2024

“SARS is willing and ready to assist taxpayers who want to be compliant. Where taxpayers willfully and intentionally ignore their legal obligations, SARS will act sternly.” (SARS Commissioner Edward Kieswetter)

Businesses are often required to share their tax compliance status, for example for a tender application, bidding process or prequalification as a supplier; to confirm that their tax affairs are in order with SARS; to receive payment; or for foreign investment allowances.

This is because proof of tax compliance is accepted as an indicator of how well a company is managed and its good standing in terms of its legal obligations. Tax compliance also saves time and money.

SARS provides clear advice to owners of small, micro and medium enterprises (SMMEs) on how to achieve tax compliance, both in the business and in their personal capacity, including a recommendation to seek the advice of an accountant.

Which tax types apply to you and your business?

This handy table from SARS details the tax types that generally apply to SMME businesses and their owners.

Source: SARS

Compliance life cycle

The “compliance life cycle” as SARS calls it, applies to each one of the tax types for which the business and the owner are liable.

It involves completing these steps in your tax relationship with SARS from beginning to end: 

  • Registration on SARS’ system for each tax type applicable;
  • Timely and correct declarations or returns for each tax type, including submitting relevant supporting documents;
  • Timely payments where a tax liability exists; and
  • Deregistration from tax types if the business is liquidated or closed.

To meet these requirements consistently across all the relevant tax types over the tax year, in an always-changing tax landscape, taxpayers should consider professional assistance.

Consequences of non-compliance

Non-compliance is a costly choice, generally involving penalties and interest, as well as additional fees to rectify, and potentially further losses, such as losing a business opportunity or the confidence of clients, stakeholders and investors, or suffering reputational damage.

In addition, not registering for a tax type to evade paying taxes, as well as the non-submission of tax returns are criminal offences, which may result in a fine, imprisonment or both.

Outstanding returns will also negatively affect tax compliance status, and administrative penalties that will attract interest may be incurred for non-submission.

Where tax liabilities have not been paid, and no payment arrangement has been made, penalties and interest will also apply, tax compliance status will be affected, and SARS may appoint third parties, such as a registered bank, to recover the outstanding tax. 

Ensuring compliance

Human errors and simple mistakes are common given the complex tax types, rules and strict deadlines. Nevertheless, a taxpayer can be found guilty of an offence without SARS having to show that the taxpayer committed it wilfully, deliberately and knowingly. It means that even unintentional or administrative errors can be penalised with a maximum penalty and, in some cases, criminal sanctions.

This makes it essential to rely on your accountant, who is not only well-versed in the requirements and deadlines of the various tax types applicable to your business but is also up to date with the latest rules and processes, and how it affects your tax compliance.

“Employing an accountant, tax practitioner, or other tax professional to complete returns, or from whom to obtain advice before completing a return with entries that are not understood or adopting a position with tax implications” is among SARS’ recommended ways to ensure reasonable care has been taken by a taxpayer.

It is our best advice too for tax compliance throughout 2024.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Read more about the article Your Tax Deadlines for January 2024
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Your Tax Deadlines for January 2024

  • 05 January – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 24 January – End of Filing Season for Provisional taxpayers
  • 24 January – End of Trusts Filing Season for taxpayers liable for provisional tax
  • 30 January – Excise Duty payments
  • 31 January – Value-Added Tax (VAT) electronic submissions and payments & CIT Provisional payments where applicable.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Read more about the article Corporate Gifting: How to Boost Your Business This Festive Season
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Corporate Gifting: How to Boost Your Business This Festive Season

“A real gift comes attached with ribbons, not strings.” (Raymond C Nolan)

Most clients, suppliers and business associates will appreciate a thoughtful gift from your company, and the Festive Season is the most appropriate time to send such a gift.

The challenge lies in selecting a gift that conveys genuine intentions to thank the recipients for the role they play in the success of your business, to strengthen the relationship and to stand out from the competition.

Here are some great tips to ensure your corporate gifts achieve these objectives.

  • Keep it simple: Choose gifts that are relevant and useful to the recipient, and also align with your business values and goals, for example, sending locally sourced gifts made and packaged with sustainable materials.
  • Stick to the popular choices: For good reason, certain gifts are most popular among recipients – with gift baskets, food and gift cards the most popular choices, along with handy tech gifts like portable speakers, headphones and tablets.
  • Allow a choice: Gift cards and vouchers are particularly popular because recipients can choose their own gifts.
  • Edible gift baskets: Gift baskets filled with delicious treats are very popular, because they can be shared with others. Chocolates and baked goodies like brownies are the favourites.
  • Don’t send these items: Avoid gifts like candles, soaps or magazine subscriptions, useless trinkets, office supplies, keychains, magnets and t-shirts.
  • Avoid over- and under-spending: A corporate gift does not have to be expensive, but it should be thoughtful and useful, as well as durable and long-lasting. Rather send great gifts to a few top clients, than worthless trinkets to all your business associates.
  • Presentation: The gift should be attractively packaged, with a personalised note or card included.
  • Personalise: Gifts that are specific to a certain industry, or – even better – to a particular client, will be much more appreciated. Customised products and personalised gifts are also gaining popularity.
  • Avoid in-your-face advertising: While part of a company’s marketing strategy, corporate gifts should come across as tokens of appreciation, not merely as billboards for your company’s advertising. Gifts should be branded with your company name, logo and contact details, but keep it elegant, professional and low key.
  • Experiences: Recipients may prefer experiences to things, for example, tickets to sporting events, theatre performances or even spa treatments, but be sure to allow a choice, unless you know the recipients’ preferences.
  • Host an end of year party: Another example of gifting an experience is hosting a party (a “Christmas party” if that terminology is appropriate to your guests) to thank business associates, creating an opportunity to get to know each other better.
  • Send an office lunch party: A favourite food gift is one sourced from well-known local establishments in quantities that can feed the whole office.
  • Charitable donations: A donation made to a charitable organisation on behalf of a client or supplier can also make a thoughtful corporate gift but allow the recipient to select the cause.
Mind the tax implications

Gifts could be tax deductible as marketing expenses or as cost of sales expenses, but the onus will rest on your business to prove that these expenses were incurred “in the production of income”.

When hosting an end-of-year or Christmas function for clients, expenses such as the venue, meals and entertainment can be claimed as a tax deduction, if your company can prove that expenses were incurred in pursuit of business. Check with your accountant that you will meet all the criteria before you rely on this tax deduction.

Similarly, before making a donation, ask your accountant if it will attract donations tax, which will be payable in the month following the donation date. Only donations made to a registered PBO (Public Benefit Organisation) approved by SARS are not subject to donations tax.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Read more about the article Festive Season Gifts for Employees? Here’s How SARS Will Tax Them
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Festive Season Gifts for Employees? Here’s How SARS Will Tax Them

“Think of giving not as a duty but as a privilege.” (John D. Rockefeller Jr.)

Most businesses want to show appreciation to their employees at the end of a long year’s work, and the “Season of Giving” is the ideal time. A thoughtful gift will make any employee feel more recognised and appreciated, and this will improve morale and enhance perceptions about the company and could even increase employee satisfaction and loyalty.

SARS, however, considers almost any kind of gift to employees as a taxable fringe benefit, and therefore companies need to check with their accountants before giving, to ensure the tax implications are fully understood and taken into consideration.

What does SARS regard as gifts?

Any asset, commodity, goods or property of any nature provided by the employer to the employee at no cost, or a cost which is less than the market value of that item, is regarded as a taxable benefit in the hands of the employee, as per Paragraph 2(a) of the Seventh Schedule to the Income Tax Act.

This means that any gift that can be regarded as an asset will be subject to employees’ tax – whether physical or intangible, and regardless of the value, because there is also no minimum value below which gifts from an employer are exempt from tax.

Furthermore, the gift will be taxable even if the gift is given to an employee’s family member, such as a partner or a child.

Also remember that the onus of proof lies with your company should SARS challenge the tax treatment of any gifts to your employees.

Tax on common employee gifts

Tangible gifts, such as watches or electronic devices, will be taxed in the hands of the employee based on its market value, or on the cost to the employer.

Intangible gifts such as flights, bus tickets or accommodation are also considered as taxable benefits to the employee and the cost to the employer is the taxable amount.

Gift cards and vouchers are among the most popular gifts for employees, but beware!  These are taxed at the same rate as if it the employee received cash. In some cases, it may be better to gift cash instead of a card or voucher that would limit the employee to a single retailer or outlet.

Similarly, bonusses are taxed at the same rate as other remuneration. This means that the amount of the bonus will be added to an employee’s annual salary when the rate of tax payable for the year is determined. The danger here is that the bonus amount might push some employees into a higher tax bracket.

How must the tax be deducted?

Depending on the nature of the gift, employers will need to determine the cash equivalent, or the market value, or the cost to the company to calculate the employee tax that must be deducted.

This can be quite complex, for example, the value of a benefit where accommodation is provided depends on whether the company owns the property or rents it, as well as whether or not the employee pays towards the accommodation.

The taxable amount calculated must then be reflected as a fringe benefit on the employee’s payslip, and PAYE must be determined and deducted. The benefit must also be declared on the employee’s IRP5/IT3(a) certificate.

Some exceptions?

There may be some possible exceptions, for example, if a gift to an employee does not involve any cost to the employer or where the employee gifts are used for business purposes.

An end-of-year function – whether a lunch celebrating the year’s achievements, or a team-building experience with snacks and refreshments, or a Festive Season office party with employees and their partners – is also a great way to treat your team with a delicious meal and complimentary drinks in a fun and social setting. The food and drinks will be tax-deductible expenses, regarded as a non-taxable occasional meal.

Paid time off work may also be an option that does not have tax implications for the employee.

An employer could also make a donation on an employee’s behalf as a gift. If an employer agrees to process a donation to a S18A-approved organisation through its payroll, such a donation can reduce the employee’s PAYE liability.

Professional advice is vital!

Whichever way your company decides to gift your employees, check with your accountant first to ensure it is both tax compliant and tax efficient.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Your Tax Deadlines for December 2023

  • 7 December – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 28 December – Excise Duty payments
  • 29 December – End of 3rd Financial Quarter
  • 29 December – Value-Added Tax (VAT) electronic submissions and payments & CIT Provisional payments where applicable.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Read more about the article SARS Admin Penalties: What Taxpayers Can Do
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SARS Admin Penalties: What Taxpayers Can Do

“…imposing administrative non-compliance penalties is to ensure the widest possible compliance with the provisions of a Tax Act … they are imposed impartially, consistently and proportionately to the seriousness and duration of the non-compliance.” (SARS)

The Tax Administration Act stipulates that SARS can issue administrative penalties for outstanding tax returns.

In previous years, penalties were only imposed on taxpayers with more than one tax return outstanding. Since December, due to changes in the Tax Administration Act, SARS can apply administrative penalties to taxpayers who have a single outstanding return.

As a result, hundreds of thousands of South African taxpayers have received administrative penalties from SARS this year, many of them facing tax debt of tens of thousands of rands, accumulated over many years.
When are penalties incurred?

SARS can raise administrative penalties if a taxpayer is non-compliant in a specific area of their tax affairs, including Personal Income Tax (PIT) and Corporate Income Tax (CIT), Pay as You Earn (PAYE) or value-added tax (VAT).

A percentage-based penalty is imposed when a payment is received late. To prevent a payment from being received late, the payment must be received into the SARS bank account on or before the due date.

SARS also imposes fixed amount administrative non-compliance penalties for outstanding returns and/or non-compliance for PIT or CIT. These include the once off PIT penalty imposed where the taxpayer submitted a return late as from 2020 year of assessment onwards.

There is also a recurring penalty for the failure to submit a return for PIT and CIT. The fixed amount penalty is based on a taxpayer’s taxable income and can range from R250 a month (where there is an assessed loss or no taxable income) up to R16,000 a month (where the taxable income exceeds R50 million) for each month that the non-compliance continues.

For PIT, the recurring penalty is imposed where the taxpayer failed to submit an income tax return for years of assessment from 2007 onwards, when that person has one or more income tax returns outstanding.

For CIT, the recurring penalty is imposed where the company has failed to submit an income tax return for years of assessment from 2009, where SARS has issued the company with a final demand and the company failed to submit the return within 21 business days of the final demand.

As such, penalties are now applied monthly for tax returns dating back many years.

Companies also face administrative penalties for PAYE. If an employer has failed to submit an EMP501 reconciliation declaration on time, an admin penalty of 1% per month over 10 months, based on the employer’s liability over 12 months, is levied.

What are the costs of the penalties?

Percentage-based penalties are often steep, such as the 10% late payment penalty on VAT or PAYE, or the penalty of 1% over 10 months where an EMP501 was not submitted in time.

But it is the recurring penalties levied every month that really snowball. This is because SARS will keep penalising non-compliant taxpayers month after month until the outstanding returns are submitted, or up to a maximum of 35 months, if the taxpayer’s address is known, or 47 months if the taxpayer’s address is unknown.

Even at the lowest monthly admin penalty of R250, just one return outstanding for 35 months will have already racked up a tax debt of almost R9,000, not including interest.

Remember, unpaid penalties will also attract interest for each month they remain outstanding.

If you ignore Admin Penalty notifications from SARS, it will keep levying these penalties. In addition, the individual or company will have a non-compliance tax status. If a tax refund is due to the taxpayer, SARS will not pay the refund until any outstanding penalties are paid. Penalties can also only be offset against a refund after approval of a formal request to SARS.

Ultimately, if the admin penalty is not paid, SARS also can appoint an agent, such as a bank or employer, to collect the money on its behalf.

What should you do if you already have admin penalties?

If you have admin penalties, you need to do two things immediately:

  1. Correct the non-compliance by filing the outstanding return/s; and
  2. Pay the penalty on time or submit a request for remission of penalties.

Your accountant will be able to assist you with remedying the outstanding returns, including finding the outstanding documents, and the penalty payment. For example, if you are unable to pay any outstanding tax and penalties immediately, your accountant will help you enter into a repayment plan with SARS to pay it off.

However, if there were legitimate reasons for not filing an outstanding return, a taxpayer can dispute an administrative penalty through a request for remission to SARS for the penalty to be waived.

If you want to request a remission of the penalty from SARS, it is a good idea to rely on your accountant’s assistance. This is because a remission is only considered once the non-compliance has been remedied and where the taxpayer can show certain reasonable grounds, such as a first incidence non-compliance or if the duration of the non-compliance is less than five business days. Certain exceptional circumstances such as serious illness or accident, social disturbance or natural disasters will also be considered.

SARS says that administrative penalties will be “imposed impartially, consistently and proportionately to the seriousness and duration of the non-compliance,” so requests for remission are not always successful – or may result in only part of the penalties being reversed.

Avoiding penalties going forward

It has never been more important for individuals and companies to achieve and maintain tax compliance.

Taxpayers need to submit returns even if they are not earning an income and even if a company is dormant. In these cases, individuals and companies must submit zero returns to SARS or face mounting penalties. Where a company will remain dormant, consider deregistering the company with the Companies and Intellectual Property Commission (CIPC) and with SARS for the various types of tax.

When facing admin penalties now or in the future, the expertise and experience of your accountant or tax practitioner will be a key success factor in achieving and maintaining tax compliance.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Read more about the article Dispute with SARS? Here are the New Rules…
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Dispute with SARS? Here are the New Rules…

“The importance of the ability of taxpayers to challenge the legality of actions and decisions within the tax system is internationally recognised.” (Taxpayers’ Rights: Theory, Origin and Implementation)

In South Africa, taxpayers have the right to dispute tax assessments, interest, late payment penalties, and administrative penalties for various taxes, including Personal Income Tax (PIT), Corporate Income Tax (CIT), Value-Added Tax (VAT), and Pay-As-You-Earn (PAYE). This is done by submitting requests such as Request for Reason, Request for Late Submission (Condonation), Request for Remission (RFR), Notice of Objection (NOO), Notice of Appeal (NOA), and Suspension of Payment.

Recent changes to the procedures to lodge an objection and appeal against an assessment or decision aim to enhance the efficiency and effectiveness of tax dispute resolution. Here are the key changes:

  • Taxpayers now have 80 business days to file a Notice of Objection against a SARS assessment or decision, a significant increase from the previous 30-day window. Taxpayers are not obliged to wait the full 80-day period.
  • All substantiating documentation must now be submitted within the extended 80-day objection period, making it crucial to request reasons for an assessment before objecting. Previously taxpayers were only required to list the substantiating documents. 
  • Taxpayers can request an additional 30-day extension beyond the 80-day period for valid reasons and, in exceptional cases, an extension up to three years.
  • Taxpayers and SARS can agree on shorter periods for dispute resolution, not just extensions as per the old rules.
  • Taxpayers can appeal the outcome of an objection on new grounds not raised in the NOO, if it doesn’t pertain to a previously unchallenged part of the assessment.
  • Alternative Dispute Resolution (ADR) changes now require facilitators to have appropriate tax experience and to be acceptable to both parties. A senior SARS official must appoint the facilitator within 15 days of the ADR commencement. Interim ADR reports must be delivered within five days after the meeting, and final reports within 10 days following the end of ADR proceedings.
  • SARS must now issue assessments within 45 days of a settlement being reached in a dispute and/or after receipt of the Tax Court’s decision from the Registrar.
  • SARS must provide a statement explaining why they made an assessment and why they oppose an appeal to the tax court. SARS can now add new grounds for disallowing objections or appeals, unless it changes the assessment basis significantly or requires a new assessment.
  • Changes to the Tax Board and Tax Court processes include the issuance of subpoenas by the Tax Board clerk or Tax Court registrar, with parties having the right to challenge these if they find them irrelevant or unreasonable.
  • An email address is now expressly included as an ‘address for delivery’.
What’s still the same?
  • SARS must inform taxpayers of assessments, notifications or communications issued by also sending a message to the taxpayer’s last known number or email. Keep your contact details updated and check your compliance status regularly, especially when receiving emails or SMSs from SARS.              
  • Submitting an objection or appeal does not suspend the payment of a tax debt. To prevent SARS from instituting collection proceedings, taxpayers must file an objection as well as a “Request for Suspension of Payment.” If granted, SARS cannot commence collection proceedings pending the outcome of the objection or appeal, but interest will accrue on the unpaid debt. 
  • The importance of involving a qualified tax advisor early in the process cannot be overstated, especially where penalties and interest have already been imposed, and particularly if the objection is submitted after the prescribed due date.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Your Tax Deadlines for November 2023

  • 7 November – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 29 November – Excise Duty payments
  • 30 November – Value-Added Tax (VAT) electronic submissions and payments & CIT Provisional payments where applicable.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Read more about the article The Risky New Trust Landscape – What Trustees Need to do Now
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The Risky New Trust Landscape – What Trustees Need to do Now

“The common assumption is that trusts are some kind of tax panacea…Then, conversely, from a South African Revenue Service (SARS) perspective, trusts are viewed with a degree of suspicion and mistrust. [T]he truth lies somewhere between these positions.” (Broomberg on Tax Strategy)

The legal and tax landscape in which South African trusts operate has changed substantially over the last few months, thanks to changes to the Trust Property Control Act (“Trust Act”) and the Financial Intelligence Centre Act (“FICA”) by the General Laws (Anti Money-Laundering and Combating Terrorism Financing) Amendment Act, as well as new rules and requirements from SARS.

These changes impose new duties on trustees, and apply to all trustees, not only independent trustees.

1. Disclosure to Accountable Institutions you engage with, and record-keeping

Changes to the Trust Act impose two specific new requirements on trusts to combat money laundering and crime-financed terrorism, and failure to comply is an offence. If convicted, trustees face a fine of up to R10 million, or imprisonment for a period of up to five years, or both. These requirements became effective on 1 April 2023, leaving most trustees already non-compliant.

The first new requirement is that a trustee must disclose to any “accountable institution” (see here for the full list of what comprises an accountable institution, but the definition includes banks, attorneys, estate agents, long term insurers and brokers, trust companies and the like) that he/she engages with it in his/her capacity as a trustee, and that the relevant transaction or business relationship relates to trust property. The trustee must also record the details of the accountable institution the trust is engaging with.

2. Compiling and registering beneficial ownership

The second requirement imposed by the changes to the Trust Act is to establish and record the beneficial ownership information of a trust; to keep an up-to-date record of this information; and to lodge a register of the beneficial ownership information prescribed with the Master of the High Court.

This second requirement recently doubled, as SARS issued notice that trusts will now also be required to submit beneficial ownership details when completing a trust tax return, among a number of other tax changes affecting trusts, as discussed below.

3. Filing third-party returns – the IT3(t)

A further onerous obligation was imposed by SARS:

Most trusts are now also required to file third-party returns, in the same way banks report interest income and medical aids report medical aid tax information to SARS, which it uses to, for example, pre-populate tax returns.

While trust distributions were not previously reported to SARS by third parties, the new requirements oblige trusts to file third-party returns to SARS to declare distributions and vesting amounts to beneficiaries.

This must be done via an IT3(t) report which contains prescribed information relating to trust distributions and their beneficiaries and requires trusts to report on demographic information of the trust, demographic information of trust persons/beneficiaries, trust financial flows, and any amounts vested in a beneficiary, including net income, capital gains and capital amounts.

The ITR3(t) must be submitted by 31 May of each year. The first submission will be for the 2024 year of assessment, with the first ITR3(t) due by 31 May 2024. This is the same as the due date for IT3(b) and IT3(c) returns for trusts, which report interest, dividends, and capital gains or losses to SARS, and will certainly present practical difficulties in meeting the deadlines.

4. Completing more probing trust tax returns

With the trust filing season now open, SARS has also reminded trustees that ALL trusts are required to register for income tax purposes and that the representative taxpayer – most often the trustee/s – must submit a trust return.

SARS also recently introduced changes to the Income Tax Return for Trusts (ITR12T) with additional questions, and more mandatory supporting documents.

As mentioned, SARS has added a Beneficial Ownership Declaration page to the trust return to record all beneficial owners, and has indicated this information will be reconciled with the information reported to the Master’s Office to identify any discrepancies.

The changes also include additional questions to determine if any local or foreign amount(s) were vested in the trust as a beneficiary of another trust, or deemed to have accrued; and the number of trusts from where these amounts were received.

In addition, beneficiaries and donors (where deeming provisions apply) of a trust must declare their income that was vested in a beneficiary by the trust during the year of assessment in their income tax returns.

A range of mandatory and supporting documents must be submitted with the ITR12T. Depending on the trust type, this includes the Trust Deed and Letters of Authority, details of the ‘Main’ Trustee who is the registered representative to SARS; Annual Financial Statements, confirmation of banking details, and resolutions/minutes of trustee meetings that document significant decisions and actions taken by the trustees.

5. Registering as an “accountable institution”

Due to amendments to FICA, trustees, trust accountants and trust administrators may – in certain instances – have to register as “accountable institutions” with the Financial Intelligence Centre (FIC). See the link and comments in paragraph 1 above for the full definition of “accountable institution” but, if in any doubt, be sure to confirm with your accountant whether you need to register as an “accountable institution” in terms of the new rules, and to obtain assistance in doing so where required.

Professional assistance strongly recommended

Given all these new laws and requirements, the complexity of the processes necessary to comply, the impossible deadlines – some of which have already passed – and the hefty penalties involved, if you are a trustee you should urgently seek assistance from your accountant to ensure you can successfully navigate this new trust landscape.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Your Tax Deadlines for October 2023

  • 6 October – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 30 October – Excise Duty payments
  • 31 October – Value-Added Tax (VAT) electronic submissions and payments & CIT Provisional payments where applicable.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Common Tax-Related Criminal Offences, and How to Avoid Them…

“The difference between tax avoidance and tax evasion is the thickness of a prison wall.” (Denis Healey, former British prime minister)    

Section 234 in Chapter 17 of the Tax Administration Act (TAA) sets out a list of criminal tax offences. If prosecuted and convicted of a tax criminal offence, taxpayers will – at the least – be subjected to a substantial fine and may even face the maximum penalty of imprisonment for up to two years. There are also other harsh consequences of a criminal conviction under section 234, such as a negative impact on the eligibility of individuals to hold certain positions and to emigrate from South Africa, as well as reputational damage and a loss of both shareholder value and stakeholder trust for corporate taxpayers.

These tax criminal offences range from serious offences, such as intentional tax evasion and frustrating SARS in carrying out its duties, to relatively minor breaches, such as failing to notify SARS of a change in registered particulars.

Common tax criminal offences
  • Not registering for tax purposes to evade paying taxes due.
  • Not submitting returns to SARS as and when required to evade paying taxes.
  • Not truthfully responding to SARS’ questions.
  • Not declaring income to evade paying tax on that income.
  • Lying about expenses, like business mileage or medical contributions, to reduce tax payable or obtain an undue refund.
  • Submitting fraudulent invoices to reduce Income Tax and VAT payable or obtain fraudulent refunds.
  • Employers deducting tax from employees (PAYE) and never paying it over to SARS.
  • Vendors, whether registered for VAT or not, charging VAT and never paying it over to SARS.
  • Not notifying SARS of a change in registered particulars.
  • Not retaining records as required under the TAA.
  • Issuing an erroneous, incomplete or false document required to be issued under a tax Act.
  • Neglecting to disclose to SARS any material facts which should have been disclosed.
  • Obstructing SARS officials in doing their duties.
How SARS views taxpayer behaviour

While taxpayers were previously merely penalised for human errors and simple mistakes – which are common given the complex tax processes and strict deadlines – a taxpayer can now be found guilty of an offence without SARS having to show that the taxpayer wilfully, deliberately and knowingly committed the offence.

This means even inadvertent or administrative errors can be penalised with a maximum penalty and that a substantially expanded range of taxpayer behaviours – and a greater number of taxpayers – are now open to criminal sanctions.

How to avoid committing tax criminal offences

SARS notes that among the steps that a reasonable person may take to avoid committing tax criminal offences is “employing an accountant, tax practitioner, or other tax professional to complete returns, or from whom to obtain advice before completing a return with entries that are not understood or adopting a position with tax implications.”

Be sure to choose a specialist who is appropriately qualified and experienced, as well as a member of a professional controlling body that enforces strict standards, such as SAICA (South African Institute of Chartered Accountants).

Advice from a professional can ensure that an appropriate tax strategy is formulated to proactively manage tax risk in the long term, which will save time and money and avoid expensive tax mistakes while keeping in line with the ever-changing tax obligations.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Corporate Taxpayers: Hello Tougher SARS Verifications

“Any taxpayer can be selected by SARS for verification for the purpose of proper administration of tax, including on a risk basis.” (SARS)

Companies must, within 12 months of their financial year-end, submit to SARS an Income Tax Return for Companies (ITR14), as well as supporting documents, declaring their full income tax responsibility to SARS. This declaration, return and supporting documents may be selected for verification by SARS.

A verification involves the comparison of the information declared on the return to the taxpayer’s financial and accounting records and other supporting documents. The purpose of a verification is to ensure that a declaration or return represents a taxpayer’s tax position fairly and accurately.

Previously, when companies were identified for a verification, SARS required them to submit the Supplementary Declaration for Companies or Close Corporations or IT14SD form. This is no longer required by SARS, but it will increase the scrutiny companies face when selected for verification.

What has changed?

The requirement to submit an IT14SD in a verification case is replaced by a letter requesting specific relevant documents based on the reason for verification.

SARS also says that as of September last year, companies are no longer required to submit any outstanding IT14SDs and that should taxpayers receive any further notification or final demand letter to submit an IT14SD, such request should be ignored. However, taxpayers should always check with their accountant before disregarding correspondence of any kind from SARS.

What’s still the same?
  • The requirement to submit relevant documents upon submission of the ITR14.
  • All correspondence will still be issued as before.
  • The process of dealing with the verification case will remain the same.
  • The submission of specific relevant documents will be required during the verification process.
  • The verification of a company always requires the submission of a signed set of Annual Financial Statements (AFS), as well as a detailed Tax Computation and the underlying supporting documentation/schedules (e.g. Tax pack).
  • When requested to submit specific relevant documents based on the reason for the verification, companies are still required to submit the documents within 21 working days.
How does this affect your company?

When a company is now identified for verification, it will be notified of the verification, as is the current practice and will be requested to:

  1. Submit specific relevant documents based on the reason for the verification, or
  2. Submit a revised Corporate Income Tax ITR14 return.

To comply with a request to submit specific relevant documents, the requested documents must be uploaded using eFiling, or any other submission channel, including SARS Online Query system (SOQS).

Once the relevant documents are uploaded, a SARS verifier will be able to action the case. If the relevant documents are deemed insufficient, or additional documents are required, this will be requested. The relevant documents must still be provided within 21 working days. If a company does not comply with the request for relevant documents, SARS will raise a revised assessment to resolve the verification case, and will add back the related expenses, dependent on the specific relevant documents requested.

Companies can comply with a request to submit a revised Corporate Income Tax ITR14 return through a request for correction (RFC). Companies have the option of submitting one correction, which may or may not resolve the verification. However, the revised ITR14 will also be subjected to a risk evaluation.

Seek professional assistance

Being selected for a verification entails significant risk to any business. In addition to the time, cost and effort to collate the information, documents and clarifications required, the taxpayer could still be referred for audit as part of the SARS compliance process, even if the verification process has been completed.

Whether submitting a Corporate Income Tax ITR14 return or facing a SARS verification with a request to submit documents or to file a correction, you would be well-advised to rely on the expertise of your accountant to ensure compliance.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Your Tax Deadlines for September 2023

  • 7 September – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 28 September – Excise Duty payments
  • 29 September – End of the 2nd Financial Quarter, Value-Added Tax (VAT) electronic submissions and payments, CIT Provisional payments where applicable.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Read more about the article Tax Season 2023 Now Open – What’s New and What’s Not
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Tax Season 2023 Now Open – What’s New and What’s Not

“The submission of accurate personal income tax returns on time is important for a seamless filing season. Taxpayers must take control of their own tax affairs to ensure they are aware of their obligations and remain compliant.” (SARS Commissioner Edward Kieswetter)

SARS recently announced the dates and changes for the 2023 Tax Season, which opened on 7 July 2023 for individuals (non-provisional taxpayers and provisional taxpayers), as well as for trusts.

The deadline dates are as follows:

  • Non-provisional taxpayers who were auto assessed have until the normal filing season deadline, 23 October 2023, to file an amended return. Individuals who were auto assessed will receive an SMS or email from SARS.
  • Non-provisional taxpayers who are required to file a return and did not receive a notification from SARS that they were auto assessed must submit a Personal Income Tax Return (ITR12) before 23 October 2023.
  • Provisional taxpayers as well as trusts can file a return until 23 January 2024.
What’s still the same?

Much stays the same as last year, including that SARS will again issue auto assessments to taxpayers whose tax affairs are less complicated, usually non-provisional taxpayers who are formally employed.

SARS will send an SMS and/or email to inform taxpayers of the auto assessment, which can be viewed on eFiling or the SARS MobiApp. The auto assessments are based on the data SARS collects from employers, financial institutions, medical schemes, retirement annuity fund administrators and other third-party data providers.

If you agree with your auto-assessment – and have confirmed with your accountant that everything is in order – you are not required to file a tax return and you do not need to do anything further. Where your assessment shows that you owe tax to SARS, payment must be made on or before the payment due date displayed on the “Notice of Assessment” (ITA34). If a refund is due, simply wait for the refund, which can be expected within approximately seventy-two (72) hours if your banking details with SARS are correct.

If you are not in agreement with the auto-assessment, you can edit the declaration by completing and filing a tax return, along with the necessary supporting documents, before 23 October 2023, to enable SARS to consider a revised assessment.

What’s new this year?
  • Extended auto assessment deadline – this year SARS will allow taxpayers, who did not agree with the auto assessment outcome, to file an amended return until the normal filing season deadline, 23 October 2023. This is a change from the 40 days allowed last year. Where an auto-assessment is issued after 23 October 2023, the 40 business days will start on the date of the notice of the assessment
  • The payment due datesfor non-provisional eFilers will be adjusted to:
    • 30 days after a notice of assessment has been issued for taxpayers who have not been auto-assessment; or
    • 30 days post Filing Season 2023 closing date for auto-assessed taxpayers.
  • Spouses married in community of property assessment – this filing season SARS has retrieved “Married in community of property” status from taxpayer’s previous declaration and collaborated with the Department of Home Affairs to confirm marital status. Where the spouses are successfully matched and have interest investments, SARS will replicate the interest investment certificate on both spouses’ return and they will each be taxed 50% upon assessment.
  • Automated Section 93 reduced assessment process – the new automatedprocess of requesting Reduced Assessment in terms of section 93 of the Tax Administration Act will use a form called RRA01, which can be completed on e-Filing to increase efficiency and reduce costs for taxpayers.
  • Statement of assets and liabilities provisional taxpayers with business interests are required to declare their assets and liabilities, based on cost, in their tax returns each year. Taxpayers who fall within this category, and with assets above R50 million, are now required to declare specified assets at market values on their 2023 tax returns.
  • Foreign income disclosure – new fields on the return andappropriate source codes have been created for taxpayers who must declare worldwide foreign income from a foreign employer while working in South Africa and/or abroad.
How to ensure a successful 2023 Tax Season

SARS has warned taxpayers to not inflate their expenses and/or under-declare their income to obtain impermissible refunds, as this will make them potentially guilty of fraud. In addition, taxpayers who do not adhere to the deadlines of this year’s Filing Season will face administrative non-compliance penalties.

So, even if you have been auto assessed, it is important to make sure that your return is 100% correct and truthful, and that payments, returns and supporting documents are submitted on time.

You need to make sure that you have received your latest IRP5/IT3(a) and other tax certificates like medical aid, retirement annuity fund, and any other third-party data relevant to determining your tax obligations, and that these are correctly reflected on your auto-assessment or return.

Failing to do so may result in paying more tax than necessary as you might lose on deducting amounts in the determination of your taxable income such as home-office expenses, donations to charities, trade travel expenses, medical expenses paid and contributions to retirement funds and medical schemes.

Given this responsibility, as well as the deadlines and changes that have been introduced this year, obtaining advice and assistance from your accountant is highly recommended for a successful 2023 Tax Season.

Provisional Taxpayers – your first Tax Season 2024 deadline

If you are a provisional taxpayer, your first provisional payment for 2023/4 is due by 31 August 2023.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Read more about the article SARS Warning: Beware Scam Emails!
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SARS Warning: Beware Scam Emails!

“The backbone of any successful phishing attack is a well-designed spoofed email or spoofed website, which is why it pays to have a healthy level of scepticism when it comes to opening emails and visiting websites.” (Phishing.org)

With Tax Season 2023 upon us, expect an upsurge in scam emails, seemingly from SARS but actually clever attempts by online criminals to swindle you.

“Phishing” is a cyberattack that uses fraudulent emails made to look as if they come from a reputable source – such as SARS – to trick people into disclosing sensitive personal information or taking an action such as clicking on a link that installs malware on their systems.

While fraudulent SMSs “smishing” and phone calls or “vishing” are also used, email “phishing” is the preferred method.

Examples from SARS include emails that appear to be from returns@sars.co.za or refunds@sars.co.za, notifying taxpayers that they are eligible to receive tax refunds or owe SARS money.

One of the most recent scams involves an email titled ‘eFiling Credit Request’ that asks the email recipient to click on a link to view the amount. Another scam email titled ‘Debt Management – Final Demand’ guides the email recipient to download a ‘statement of account’. New scams are popping up all the time – for examples see SARS’ Scams and Phishing webpage.

These emails contain attachments, icons or links to false forms and fake websites made to look like the SARS website, to fool people into entering personal information or sharing one-time pins (OTPs).

Those caught by phishing often suffer financial loss as well as psychological trauma, while some may be unaware that they are victims of crime. It may also result in a breach of a company’s data security, as employees often use their work email addresses to sign up to websites and email lists.

SARS’ advice to safeguard yourself
  • Do not open or respond to emails from unknown sources. Beware of false SMSs.
  • Beware of emails that ask for personal, tax, banking or eFiling details such as login credentials, passwords, pins, and credit or debit card information.
  • SARS will not send you any hyperlinks to other websites – not even those of banks.
  • SARS will never request your banking details in any communication that you receive via post, email, or SMS. However, for the purpose of telephonic engagement and authentication purposes, SARS will verify your personal details.
  • SARS does not send *.htm or *.html attachments.
  • SARS will never ask for your credit card details.

Remember never to click on links in a suspicious email from SARS. You can email suspicious SARS correspondence to phishing@sars.gov.za. You can also check here to see all current legitimate SARS surveys, emails and SMSs.

Check with your accountant

While protecting yourself against scammers, it remains crucial to ensure that all legitimate SARS correspondence to you is still promptly attended to. If you are in any doubt, it is best to check with your accountant, who will be able to verify if the request is from SARS or report fraudulent emails to the relevant authorities. That way, you are certain you are complying with your tax responsibilities, without ever falling prey to scams and fraudsters.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Your Tax Deadlines for August 2023

  • 7 August – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 30 August – Excise Duty payments
  • 31 August – Value-Added Tax (VAT) electronic submissions and payments, CIT Provisional payments where applicable, first provisional tax payment (individuals).

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Is Your Information Safe With SARS?

“Confidentiality of taxpayer information has always been a fundamental cornerstone of tax systems… taxpayers need to have confidence that the often-sensitive financial information is not disclosed inappropriately, whether intentionally or by accident.” (Organisation for Economic Co-operation and Development – OECD)

The confidentiality of taxpayers’ information has recently come under the spotlight in South Africa. This was first sparked by a public statement from SARS earlier this year on the tax compliance status of President Cyril Ramaphosa and two related entities.

“In taking this exceptional step to disclose the tax status of the President, with his written consent, SARS would also encourage other high profile political office bearers and leaders in society to consider taking this proactive step as part of their commitment to transparency,” SARS Commissioner, Edward Kieswetter, said at the time.

This was followed by a recent Constitutional Court ruling concerning tax confidentiality and the right of access to information, relating to a request under the Promotion of Access to Information Act (PAIA) to access certain tax records of former President Jacob Zuma (Arena Holdings and others v SARS and another).

The court found that certain provisions of PAIA, as well as the Tax Administration Act (TAA), are constitutionally invalid, and ordered SARS to reconsider the request to disclose taxpayer information, taking into account certain issues.

While this re-evaluates the previous absolute confidentiality of tax records – and affects every taxpayer in South Africa – SARS says that the judgment does not set aside the tax confidentiality provisions for the information it collects.

What information can SARS collect?

SARS has access to a wide array of sensitive information about both businesses and individuals, and it has long been accepted that the confidentiality of this information is paramount.

Taxpayer information is defined in the TAA as any information provided by a taxpayer or obtained by SARS in respect of the taxpayer, including biometric information. SARS draws on available data from statutory declarations by taxpayers, data from third party providers as well as other sources.

In addition, not providing sensitive financial – and even extremely personal – information to SARS is not an option.

According to the TAA, it is a criminal offence for a person to wilfully and without just cause refuse or neglect to:

  • furnish, produce or make available any information, document or thing, excluding information requested under section 46(8)
  • reply to or answer truthfully and fully any questions put to the person by a SARS official
  • take an oath or make a solemn declaration
  • or attend and give evidence

as and when required in terms of the Act.

Furthermore, taxpayers are legally obliged to disclose the information required to discharge the burden of proof, and to ensure access for SARS to certain records at all times.

By not complying with these provisions, a taxpayer is guilty of an offence and, upon conviction, is subject to a fine or to imprisonment for a period not exceeding two years.

What about POPIA and PAIA?

The Protection of Personal Information Act (POPIA) gives effect to the constitutional right to privacy and protects citizens from harm by protecting their personal information. However, POPIA does not apply to an obligation imposed by law or where legislation is enforced concerning the collection of revenue. A taxpayer is thus legally obliged to disclose relevant information requested by SARS.

So, for example, SARS may request medical history information or details about retirement funding contributions to allow a rebate claimed by a taxpayer. Similarly, SARS may have to exchange taxpayers’ information with other tax authorities where double taxation treaties apply.

PAIA creates a framework for the mandatory protection of records that generally contain information “deserving of protection”. Section 35 of PAIA protects all taxpayer information and provides mandatory protection for certain SARS records from third party requests.

However, this will change following the Constitutional Court ruling that sections of PAIA providing absolute taxpayer confidentiality are constitutionally invalid. Until this is remedied, mandatory disclosure in the public interest must be considered by SARS where: the disclosure will reveal evidence of a substantial contravention of or failure to comply with the law; or reveal evidence of an imminent and serious risk to public safety or the environment; and if the public interest in making the disclosure clearly outweighs the harm.

What protection is available for taxpayers’ information?

To protect taxpayer information, every SARS official takes an oath or makes a solemn declaration to comply with the statutory confidentiality provisions and is legally required to treat taxpayer information with the utmost confidentiality and not to disclose it. A breach of these confidentiality provisions is a criminal offence in terms of the TAA.

In addition, the TAA prohibits SARS from releasing taxpayer information unless the disclosure falls within an exception to the general rule that safeguards taxpayer information, expressly provided for in the TAA, which includes divulging taxpayer information:

  • to certain persons and entities identified in the TAA like the South African Police Service or the National Prosecuting Authority
  • to administer a Tax Act
  • to comply with a court order
  • where a taxpayer gives written consent [as in the case with President Ramaphosa]
  • or if another act expressly overrides the TAA confidentiality provisions, such as the Financial Intelligence Centre Act and the Prevention of Organised Crime Act.

In addition, while the Constitutional Court decision declared sections of the TAA and PAIA unconstitutional, it does not set aside the tax confidentiality provisions. It does, however, limit absolute confidentiality.

A high threshold must still be met when access is requested to the tax records of a taxpayer and there are “formidable substantive and procedural hurdles” to overcome before a taxpayer’s information may be disclosed. Even where permitted by law, before divulging taxpayer information, SARS must consider the purpose for which the information is being requested, how it will be used and how it will be protected.

Subsection 70(5) of the TAA further provides that such disclosure may be made only to the extent that it is necessary, relevant and proportionate to exercise a legislative function or duty.

A taxpayer distressed by a decision that grants access to tax records has recourse available, such as an internal appeal, a complaint to the Information Regulator, or an application to the High Court.

Ensure compliance, while only providing relevant information

The information that can be requested by SARS is not limited to what is requested during a formal investigation or audit – it could be a request for information for any purpose related to the administration of a tax act.

However, SARS may only request relevant information related to and within the ambit of the administration of tax acts. So, for example, information requested about income tax must be related to the Income Tax Act. Existing case law further indicates that relevancy is tested by whether the information directly proves or disproves the issue at hand.

Disputing a request from SARS for relevant information will be costly and futile, however, taxpayers can contest an unreasonable request for information.

This means that the advice and assistance of your accountant is indispensable when dealing with requests for information from SARS, and in ensuring that only necessary, relevant and proportionate information is provided, as well as to ensure your information is protected as dictated by law.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Read more about the article Your Tax Deadlines for July 2023
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Your Tax Deadlines for July 2023

  • 7 July – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 28 July – Excise Duty payments
  • 31 July – Value-Added Tax (VAT) electronic submissions and payments & CIT Provisional payments where applicable.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Can the R&D Tax Incentive Benefit Your Business?

“The government expects that, by encouraging companies to undertake R&D in South Africa, local companies will strengthen their capabilities of developing value-added products, technologies and services.” (Department of Science and Innovation (DSI) – South Africa)

Research and development (R&D) is essential to boost innovation in the business sector, as it improves the capability to develop new products and processes and to improve existing ones. This is crucial for improving competitiveness and growth of the South African economy.

Section 11D of the Income Tax Act offers a R&D tax incentive to promote private sector R&D investment in South Africa. In the following paragraphs, you will find out what the incentive offers, which companies qualify, and the terms and conditions that apply.

What does the R&D incentive offer businesses?

Section 11D allows R&D spending to be considered when determining taxable income in two ways:

  1. A deduction equal to 150% of expenditure incurred directly for R&D; and
  2. An accelerated depreciation deduction (50:30:20) for capital expenditure on machinery or plant used for R&D.

According to the DSI, the tax deduction will help to reduce the cost of R&D, which will enable companies to finance their R&D and scale up or undertake R&D activities sooner than otherwise.

Which companies can benefit from the R&D incentive?

To be eligible, a company must be an incorporated entity and recognised as a company under the Income Tax Act. Individuals, non-profit organisations and trusts are not eligible.

As the aim is to encourage South African companies to invest in R&D, the incentive is available to businesses of all sizes and in all economic sectors.

Companies can also claim a deduction of R&D it outsources to another company, or to a South African university or science council. Companies in joint ventures (JVs) can claim to the extent that they fund the R&D. Prototypes and pilot plants created solely for purposes of R&D are also eligible.

However, where a company receives funding from government, a public entity or a municipality towards its R&D activities, this funding will be excluded when the R&D tax deduction is calculated.

What are the terms and conditions?
  • The R&D activities must be approved by the Minister of Science and Innovation on recommendation by the R&D Tax Incentive Adjudication and Monitoring Committee that evaluates applications and reviews the annual progress reports that must be submitted.
  • The R&D expenditure claimed should be incurred directly and solely for R&D undertaken in South Africa, and in the production of income and the carrying on of any trade.
  • R&D expenditure claimed should be incurred after the date the application is submitted to the DSI.
  • Applications awaiting approval should not be included in provisional tax calculations to avoid penalties. Where approval is received after a tax assessment has been finalised, a Request for Correction can be made.
  • There is an extensive list of exclusions and limitations.
  • Since last year, applications and progress reports can only be submitted via the new online automated system.
  • According to the 2023 Budget Review, government is refining the R&D incentive to make it simpler to understand and administer.

Before claiming the R&D tax incentive against taxable income, and certainly before commencing any R&D activities in reliance on the tax incentive being allowed, ask your accountant to confirm that you can benefit optimally from this substantial incentive, while meeting all the requirements.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Read more about the article Your Tax Deadlines for June 2023
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Your Tax Deadlines for June 2023

  • 7 June – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 29 June – Excise Duty payments
  • 30 June – End of the 1st Financial Quarter
  • 30 June – Value-Added Tax (VAT) electronic submissions and payments & CIT Provisional payments where applicable.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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How You and Your Business Can Benefit from SARS’ Solar Tax Breaks

“The lack of reliable electricity supply is the biggest economic constraint… I am pleased to announce two tax measures to encourage businesses and individuals to invest in renewable energy and increase electricity generation.”(Finance Minister Enoch Godongwana – Budget 2023)

In the 2023 Budget, the lack of a reliable electricity supply was highlighted as the country’s biggest economic constraint. South Africans have been subjected to loadshedding every day of 2023, often at stage four, five or six. Recent research by the Bureau for Economic Research revealed more load-shedding in the first two months of 2023 than in all of the previous four years. It is a situation expected to deteriorate even further as demand rises with the winter months approaching.

To encourage businesses and individuals to invest in renewable energy and to increase electricity generation, government announced two tax measures in the 2023 Budget in February. The first will provide R5 billion in tax relief to companies through an expansion of the renewable energy incentive, and the second will provide R4 billion in tax relief for households that install solar panels. Both entail a number of conditions and requirements, as well as tight timelines, which are summarised below.

The expanded tax incentive for businesses

To encourage rapid private investment to alleviate the energy crisis, this is a temporary expansion of the existing tax incentive Section 12B of the Income Tax Act, which provides for capital expenditure deductions for assets used in the production of renewable energy.

It originally allowed businesses to deduct 50% of the costs in the first year, 30% in the second and 20% in the third for qualifying investments in wind, concentrated solar, hydropower below 30 megawatts (MW), biomass and photovoltaic (PV) projects above 1 MW, and provided an accelerated capital allowance of 100% in the first year for solar PV energy projects of less than 1MW.

This incentive has now been temporarily expanded as outlined below.

Highlights of the expanded incentive

  • Under the expanded incentive, businesses will be able to claim a 125% deduction.
  • Moreover, that deduction can now all be claimed in the first year.
  • Businesses will be able to reduce their taxable income by 125% of the cost of renewable energy assets used for electricity generation.
  • The adjusted incentive will only be available for investments brought into use for the first time between 1 March 2023 and 28 February 2025.
  • The deduction applies to all renewable energy projects.
  • There will be no thresholds on the generation capacity size of the projects that qualify.
  • The expanded incentive is only available for two years from 1 March 2023 to 28 February 2025 to stimulate investment in the short term.

Example: business renewable energy tax incentive

For businesses with a positive taxable income, the deduction will reduce tax liability. For example, a renewable energy investment of R1 million would qualify for a deduction of R1.25 million against taxable income.

Using the current corporate tax rate (27%), this deduction could reduce the corporate income tax liability of a company by R337,500 in the first year.

Tax rebate for individuals

This is a new tax incentive available for a very limited period to encourage individuals to install rooftop solar panels to increase electricity generation and reduce pressure on the grid. Individuals can claim the rebate against their personal income tax liability.

Highlights of the individual tax rebate
  • This incentive will be available for one year between 1 March 2023 and 29 February 2024.
  • Individuals who install rooftop solar panels will be able to claim a rebate of 25% of the cost of the panels, up to a maximum of R15 000 per individual.
  • The rebate can be used to reduce tax liability in the 2023/24 tax year. PAYE taxpayers can claim the rebate on assessment during the 2023/24 filing season, while provisional taxpayers can claim the rebate against provisional and final payments.
  • There is no ownership limitation, so installations by either landlords or renters are eligible, but only the party that pays for the solar panels can claim the rebate.
  • The rebate applies only to new and unused solar PV panels with a minimum capacity of 275W per panel (design output), installed as part of a new system, or as an extension of an existing system, which must be connected to the mains distribution of the residence (i.e. no off-grid installations qualify).
  • The rebate is only available for solar PV panels (excluding portable panels), and not for other components of a system such as batteries, inverters or fittings. Installation costs do not qualify.
  • The solar panels must be purchased and installed at a private residence used mainly for domestic purposes (i.e. dual-use residences such as a guest house or Airbnb used more than 50% for trade, will be excluded).
  • A certificate of compliance for the installation must be issued between 1 March 2023 and 29 February 2024 and the certificate must confirm the date the solar panels purchased were brought into use for the first time.
  • To claim, taxpayers will need a VAT invoice that indicates the cost of the solar PV panels separately from other items, along with proof of payment.
  • There will be no recoupment if the residence is sold after claiming the rebate, but there will be a claw-back if the panels themselves are sold within one year.
  • SARS has issued draft third-party regulations for comment that will require solar installers to report to SARS the complying installations they have completed together with the details of the purchaser.
  • Like other rebates, it may only be claimed against tax payable and only to reduce the tax payment to nil. If the tax payable is less than the rebate, the balance is forfeited.
Example: tax rebate to individuals

An individual who purchases 10 solar panels at a cost of R40,000 will be able to claim 25% of this R40,000 cost – or R10,000 as a rebate. This means that the individual’s personal income tax liability that is payable for the 2023/24 tax year can be reduced by R10,000.

Another individual who buys 20 panels at a cost of R4,000 per panel, will have invested a total of R80,000. The calculation of 25% of R80,000 amounts to R20,000, but only R15,000 can be claimed against income tax liability for the 2023/24 tax year, as the deduction is limited to R15,000 per individual. If the tax payable is less than R15 000, the rebate is reduced to the amount of tax payable. The balance of the rebate is thus forfeited.

Given the many conditions and requirements, as well as the tight timelines, professional tax advice is recommended before installing solar power or renewable energy alternatives, to ensure the full benefit of these time-limited tax incentives can be realised.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Happy Tax Freedom Day!

“In 2022 South Africa had the 12th highest income tax burden, the 9th highest company income tax burden, and the 14th highest non-resource tax burden worldwide.” (Garth Zietsman, South Africa’s Tax Freedom Day statistician)

 Tax Freedom Day marks the day in the year when South Africans stop giving all their money to their government for the year and finally start working for themselves. In 2023, Free Market Foundation statistician Garth Zietsman has worked out that this day will be the 14th of May, two days later than in 2022, which in turn fell 10 days later than predicted in 2021.

In 2023, the average South African taxpayer has had to work for a predicted 133 days to pay their taxes. Back in 1994, South Africans took 101 days. The usefulness of the metric is now clear – South Africans are now spending a full month longer every single year working for their government.

According to Zietsman, the actual date may be far worse: “The prediction is based on the intended level of tax collection for central government mentioned in the Budget Speech. Typically, the actual figure, which is the general government revenue as a percentage of GDP from the Reserve Bank Quarterly, turns out to be 30% more than the intended figure for central government”.

The Freemarket Foundation is a Johannesburg based, classical liberal think tank, who have adapted the concept of Tax Freedom Day from Florida businessman Dallas Hostetler who developed and trademarked the idea in America in 1948.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Read more about the article Your Tax Deadlines for May 2023
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Your Tax Deadlines for May 2023

  • 5 May – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 30 May – Excise Duty payments
  • 31 May – Value-Added Tax (VAT) electronic submissions and payments & CIT Provisional payments where applicable.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Read more about the article UDZ Tax Incentive Extended: Could Your Business Benefit?
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UDZ Tax Incentive Extended: Could Your Business Benefit?

“…governments internationally have increasingly used tax measures to support efforts aimed at regenerating urban areas.” (SARS Guide to the UDZ Allowance)

The urban development zone (UDZ) tax incentive, provided for in section 13quat of the Income Tax Act (the Act), was introduced 20 years ago in 2003, as an accelerated depreciation allowance for property investments in certain central business districts. It aims to promote investment by the private sector in the construction or improvement of commercial and residential buildings, including low-cost housing units, situated within demarcated UDZs.

In the most recent 2023 Budget, this incentive was extended for another two years, to allow for the completion of a review of the incentive, which has yielded some successes, by motivating investment in South Africa’s cities. We briefly overview below what the tax incentive entails and the criteria that must be met, where it applies and other issues to take note of when deciding if it could benefit your business before it expires at the end of March 2025.

What the UDZ tax incentive entails

Individuals and companies investing in residential or commercial property in South Africa’s urban zones from which to carry on a trade, should carefully consider the UDZ tax incentive before deciding where to buy.

This tax allowance, when deducted, can substantially reduce the taxable income of a taxpayer, and – because the allowance is not limited to the taxpayer’s taxable income – can create an assessed loss.

However, five specific criteria must all be met before the allowance is granted. In addition, only certain costs can be considered for the purposes of the allowance. These are listed below, along with the UDZs listed by SARS, and some further issues to take note of.

Five criteria to be met
  1. Building requirement – The building must meet certain requirements, and only the cost of the erection, extension, addition to or improvement of the building, covering either the entire building or a floor area of at least 1,000m2 qualifies. Land costs are excluded.
  2. Urban development zone requirement – The building must be located within a UDZ.
  3. Trade requirement – A taxpayer will qualify for the allowance only if the relevant commercial or residential building or part of the building is used by the taxpayer solely for the purposes of trade, and only once the building has been brought into this use.
  4. Owner requirement – The building or part of the building that was erected, extended, added to or improved must be owned by the taxpayer deducting the allowance. Where the building or part of a building was purchased directly from a developer within three years after completion, an allowance may be deducted, provided the developer did not deduct any allowance, among other criteria.
  5. Date requirements – There are specified dates to which the allowance applies, including a commencement date requirement and a trade date requirement.
Costs that may be considered – and those that are not
  • Construction work
  • Architect and approval fees
  • Sidewalks
  • Parking for the building
  • Landscaping as part of the development (including earthworks, greenery and irrigation)
  • Drainage
  • Security (fences, cameras and surveillance equipment)

Costs specifically excluded are the purchase price of the land, VAT and transfer duty, financing charges, agent’s commission and transfer and related legal costs.

Where does the UDZ tax incentive apply?
  • Buffalo City
  • City of Cape Town
  • Ekurhuleni
  • Emalahleni
  • Emfuleni
  • eThekwini
  • Johannesburg
  • Mangaung
  • Matjhabeng
  • Mbombela
  • Msunduzi
  • Nelson Mandela Bay
  • Polokwane
  • Sol Plaatje
  • Tshwane Metro

Source: SARS

Other issues to take note of
  • Depending on the type of development involved – new, improved or low-cost – the allowance is calculated at a different rate of depreciation, providing for 20 – 25% of the costs allowed to be deducted in the first year, and the remainder over one to ten years
  • When purchasing a building or part of a building from a developer, 55% of the purchase price of a new building, or 30% of the purchase price of a building improved will be allowed as costs for purposes of the UDZ incentive
  • The UDZ incentive is an accelerated depreciation allowance, and not an additional tax allowance. A taxpayer claiming a UDZ deduction may not claim any other deductions on that building or part of the building.
  • For each building or part of a building on which the allowance is being deducted, you will need the necessary UDZ forms (UDZ 1, 2, 3 and 4 forms), as well as a location certificate and, where applicable, a certificate of occupation.

Taking advantage of this tax incentive, if it applies to you, could mean a difference of millions of rands to your future tax bill. However, this is a very complex tax incentive and there are many issues to be considered.

It is highly recommended that business owners consult with their accounting and tax practitioners to find out if they would qualify for the maximum allowance when investing in a UDZ, and to do so while still ticking all the compliance boxes.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Your Tax Deadlines for April 2023

  • 1 April – Start of the 2022/23 Financial Year
  • 6 April – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 26 April – Excise Duty payments
  • 28 April – Value-Added Tax (VAT) electronic submissions and payments & CIT Provisional payments where applicable.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Budget 2023: How It Affects You and Your Business

“This is not an austerity budget. It is a budget that makes tough trade-offs in the interests of the country’s short and long term prosperity.” (Finance Minister Enoch Godongwana – Budget 2023)

Finance Minister Enoch Godongwana’s second Budget contained no major tax proposals, thanks to an improvement in revenue from higher collection in corporate and personal income taxes, and in customs duties.

Instead, the focus of Budget 2023 was firmly on the current energy crisis, which has resulted in a State of Disaster being declared. It announced that government will take over R254 billion of Eskom’s debt over the next two years, subject to stringent conditions.

Of the tax relief amounting to R13 billion to be provided to taxpayers in 2023/24 announced in the Budget, R9 billion is earmarked to encourage households and businesses to invest in renewable energy. More specifically, R4 billion in relief is provided for households that install solar panels and R5 billion to companies through the expansion of the existing renewable energy incentive.

These incentives are briefly detailed below, along with some of the other announcements that will impact individuals and businesses.

Budget announcements that will impact you personally
  • A new tax incentive to install rooftop solar panels: For one year from 1 March 2023, individuals will be able to claim a rebate of 25% of the cost of installing rooftop solar panels, up to a maximum of R15,000, to reduce their tax liability in the 2023/24 tax year.
  • The personal income tax brackets will be fully adjusted for inflation, increasing the tax-free threshold from R91,250 to R95,750.
  • Medical tax credits per month will be increased by inflation to R364 for the first two members, and to R246 for additional members.
  • The retirement tax tables for lump sums withdrawn before retirement and at retirement, will be adjusted upwards by 10%, increasing the tax-free amount at retirement to R550,000.
  • Revised draft legislation on the ‘two-pot’ retirement system will be published, including the amount immediately available at implementation from 1 March 2024. Withdrawals from the accessible “savings pot” would be taxed as income in the year of withdrawal.
  • Social grants will increase in line with CPI inflation. The R350 grant will continue until 31 March 2024.
  • Increases in the excise duties on alcohol and tobacco of 4.9%, in line with expected inflation. This means that the duty on:
  • a 340ml can of beer increases by 10c,
  • a 750ml bottle of wine goes up by 18c,
  • a 750ml bottle of spirits will increase by R3.90,
  • a 23g cigar goes up by R5.47,
  • a pack of 20 cigarettes, rises by 98c.
Budget announcements that will impact your business
  • Expanding the existing section 12B tax allowance for renewable energy, businesses will now be allowed to reduce their taxable income by 125% of the cost of an investment in renewables for two years from 1 March 2023. There will be no thresholds on the size of the projects that qualify. According to National Treasury, where a renewable energy investment of R1 million is made by a business, that business will qualify for a deduction of R1,25 million, which could reduce the corporate income tax liability of a company by R337,500 in the first year of operation.
  • The existing Bounce Back Loan Guarantee Scheme will be updated to become the Energy Bounce Back Scheme, to be launched in April 2023. Government will guarantee solar-related loans for small and medium enterprises on a 20% first-loss basis.
  • The research and development tax incentive will be extended for 10 years and will be refined to make it simpler and more effective.
  • The urban development zone tax incentive will also be extended, by two years.
  • Manufacturers of foodstuffs will for two years (from 1 April 2023) also qualify for the refund on the Road Accident Fund levy for diesel used in the manufacturing process, such as for generators, to ease the impact of the electricity crisis on food prices.
Budget announcements that will impact all
  • Providing tax relief of R4 billion, the general fuel levy and the Road Accident Fund levy will not be increased this year. However, the carbon fuel levy will increase by 1c to 10c/l for petrol and 11c/l for diesel from 5 April 2023.
  • The health promotion (sugar) levy will remain unchanged for the following two fiscal years.
  • The brackets of the transfer duty table will also be increased by 10%, allowing properties below R1.1 million to avoid any transfer duty payments.
How best to manage these changes and their impact?

In addition to the announcements detailed above, there were other technical amendments proposed in the Budget review that will require professional advice.

As tax collection remains government’s main source of income, you and your business would do well to rely on the expertise and advice of tax professionals as you determine the impact of the Budget 2023 announcements on your tax affairs.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Budget 2023: Your Tax Tables and Tax Calculator

The big Budget Speech 2023 tax news was the introduction of tax incentives for investing in rooftop solar and renewable energy. The Budget also detailed tax relief in the form of adjusted tables for tax and rebates for individual taxpayers, adjusted tables for retirement tax and transfer duty, and the expected increases in ‘sin’ taxes. How will these changes affect you directly?

To better understand the impact of the Budget on you and your business, here is a selection of official SARS Tax Tables, then follow the link to Fin 24’s Budget Calculator to do your own calculation.

Businesses – corporate tax rates unchanged*

Source: SARS’ Budget Tax Guide 2023

Individual taxpayers – tax tables adjusted

Source: SARS

Source: SARS

Source: SARS

Transfer duty table – adjusted 

Source: Budget 2023 People’s Guide

Sin taxes raised

Source: Budget 2023 People’s Guide

How much will you be paying in income, petrol and sin taxes?

Use Fin 24’s four-step Budget Calculator here to find out the monthly and annual impact on your  income tax, as well as what you will pay in future in terms of fuel and sin taxes, bearing in mind that the best way to fully understand the impact of the announcements in Budget 2023 on your own and your business affairs is to reach out for professional advice from your accountant.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Read more about the article Your Tax Deadlines for March 2023
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Your Tax Deadlines for March 2023

  • 7 March – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  •  30 March – Excise Duty payments
  •  31 March – End of the 2022/23 Financial Year
  •  31 March – Value-Added Tax (VAT) electronic submissions and payments & CIT Provisional payments where applicable.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Read more about the article Maximise Your Business Travel Tax Deduction
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Maximise Your Business Travel Tax Deduction

“Without a logbook, you will not be able to claim a travel deduction.” (SARS Travel Logbook 2022/23)

Even while recovering from the economic impact of COVID and facing the challenges of power blackouts, businesses and their employees are also contending with the costs of travel that have reached historic highs. Thankfully, expenses related to business travel can be deducted from taxable income – reducing the tax liability for taxpayers, including businesses, employees, commission-earners and independent contractors. All these taxpayers should prioritise maximising the available tax deductions by ensuring they can claim for every actual business travel-related expense.

This is increasingly important given the rapidly rising costs of travel, fuel and vehicle ownership. Fuel prices have more than doubled over the last five years and continue to set new records. In addition, Wesbank recently reported that the monthly cost of vehicle ownership for an average entry-level vehicle is 33% higher than five years ago and has increased 32% between November 2021 and November 2022.

To claim any business travel expenses, it is compulsory to keep an accurate and up-to-date SARS-compliant logbook for each vehicle. In addition, there are other tax implications related to travel expenses, travel allowances and travel reimbursements, some of which are briefly highlighted below.

Claiming the business travel deduction – fast facts
  • Businesses can claim business travel expenses incurred in the production of income.
  • Employees who receive a travel allowance can claim a deduction for the use of their private vehicles for business purposes.
  • Employees may also be entitled to claim a reduction on the fringe benefit in respect of business kilometres travelled in a company car.
  • To claim any travel deduction, an accurate, up-to-date logbook detailing all business kilometres travelled is required. SARS accepts electronic logbooks.
  • There is no deduction allowed for private travel, which is any travel not for business purposes, such as travelling between home and work.
  • In addition to a logbook, taxpayers who want to claim actual travel expenses should keep accurate records and proof of all travel expenses, such as fuel and maintenance, incurred during the year.
  • A separate logbook and records must be kept for each vehicle used for business purposes.
  • SARS reserves the right to query and audit the content or information recorded in any logbook by the taxpayer.
  • Logbooks and other records must be kept for at least five years as taxpayers may be required to submit them to SARS for verification of travel claims.
How to claim a business travel tax deduction
  1. Record the vehicle’s odometer reading on the first day of a tax year (1 March for individuals and also for companies).
  2. Maintain the logbook all year – SARS requires the following minimum information for every single business trip: date of travel; kilometres travelled; and travel details including where the trip started, the destination and the reason for the trip. It is not necessary to record details of private travel.
  3. Keep records of all related travel expenses such as fuel, oil, repairs and maintenance, car licence, insurance, vehicle tracking costs, wear-and-tear, and finance charges or lease costs to claim the actual travel costs incurred.
  4. Record your motor vehicle’s closing odometer reading on the last day of the applicable tax year (end of February for individuals and also for many companies). The difference between the opening odometer reading and the closing odometer reading equals the total kilometres (business and private) travelled for the full year.
  5. Calculate the total business kilometres for the year using the detailed logbook.
  6. The travel deduction can then be calculated in one of two ways:
    • Use the cost scale table supplied and updated annually by SARS, if you have not kept an accurate record of all travel expenses – the table simply provides a rate per kilometre based on the value of the vehicle, or
    • Calculate the claim based on actual costs incurred, determined by the accurate records and proof of all business travel expenses during the year, in addition to the logbook.
Tax implications to beware of
  • If an employee receives a travel allowance as part of his/her remuneration, 80% of the travel allowance must be included when calculating PAYE. This percentage is reduced to 20%, where the employer is satisfied that at least 80% of the motor vehicle use during the tax year will be for business purposes.
  • However, if there is any underpayment of PAYE on the travel allowance due to incomplete or incorrect information, the employer is liable for any shortfall, so obtain professional advice before providing travel allowances and ensure employees with travel allowances keep detailed logbooks.
  • Fuel costs can only be claimed if the employee pays the full cost of fuel used in the vehicle, and similarly, maintenance costs can only be claimed if the employee carries the full cost of maintaining the vehicle, for example, if the vehicle is covered by a maintenance plan.
  • Where a travel allowance or advance is based on the actual distance travelled by the employee for business purposes (reimbursive travel allowance), it is non-taxable (i.e. no  employee’s tax must be deducted) provided that two criteria are met: the rate per kilometre is not higher than the rate published by SARS, and no other compensation in the form of an allowance or reimbursement (except parking or toll fees) is received in respect of the vehicle.
  • If the two criteria mentioned above are NOT met, the reimbursive travel allowance is taxable and employees’ tax must be deducted from any amount that exceeds the prescribed rate per kilometre.

To maximise the tax deductions related to business travel, make sure that an accurate and up-to-date SARS-compliant logbook is kept current for each vehicle and each employee with a travel allowance, and that you consult with your accountant to understand the many tax implications for all concerned before making decisions regarding business travel.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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How the New Assessed Loss Tax Limitation Works

“People who complain about taxes can be divided into two classes: men and women.” (Unknown)

The assessed loss rules have always allowed companies to deduct from their taxable income each year any assessed losses from previous years. The remaining assessed loss balances could be carried forward indefinitely. This meant that a company would only pay income tax once it made a taxable profit and all previous assessed losses had been deducted from the taxable income.

These rules have changed and may affect your next income tax bill.

What’s new?

Under the new rules, assessed losses brought forward from a previous year of assessment can only be offset against a maximum of 80% of the current year’s taxable income or R1 million, whichever is higher.

This means that many companies will now pay income tax on up to 20% of the taxable income for the year if it exceeds R1 million, even if the assessed loss balance carried forward from previous years far exceeds the taxable income. Adjust your cash flow forecasts accordingly. 

What you should know
  • The new rules apply to any year of assessment that began on 1 April 2022 onwards and that ends on or after 31 March 2023.
  • The new limitation applies to a company’s assessed loss balance as at 1 April 2022, and not only to assessed losses accumulated after this date.
  • Companies do not lose the balance of an assessed loss that could not be utilised in one tax year, it is just carried forward to the next tax year.
  • If a company does not trade for a full year of assessment and no income is earned from such trade, the assessed loss balance will be lost.
  • Further complex rules may apply in certain circumstances, for example, the 3-out-of-5-years rule and the ring-fencing of losses if a business carries on one of the listed “suspect trades”, which means professional advice is essential when deducting an assessed loss against taxable income.
Will your tax bill be affected?

Some companies will not be affected immediately, for example:

  • Companies that made a loss during the year and therefore have no taxable income to reduce;
  • Companies that do not have an assessed loss balance brought forward; and
  • Smaller companies with a taxable income below R1 million are not affected by the new rules and can still deduct the full balance of an assessed loss against 100% of their taxable income. 

However, the changes will have tax cash flow implications for other companies. The examples below illustrate this.

Both the old and the new rules are complex. In addition, some of the wording in the legislation still needs to be clarified, so speak to your accountant about the impact the new rules will have on your next tax bill.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Budget 2023: The Minister of Finance Wants to Hear from You!

“Finally, we pay tribute to the millions of South Africans, whose resilience and courage during these times of pandemic and economic hardship, is an inspiration to all of us who have the privilege to serve in the public sector.” (From the 2022 Budget Speech)

Finance Minister Enoch Godongwana has invited the public to share suggestions on the 2023 Budget he is expected to deliver on Wednesday 22 February 2023.

Go to National Treasury’s “Budget Tips for the Minister of Finance” page and fill out the online form.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Read more about the article Your Tax Deadlines for February 2023
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Your Tax Deadlines for February 2023

  • 7 February – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 27 February – Excise Duty payments
  • 28 February – Value-Added Tax (VAT) electronic submissions and payments & CIT Provisional payments where applicable.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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The Importance of Maintaining Your Tax Compliance Status in 2023

“Being tax compliant… is not just good for you, but also contributes to the positive growth of our country’s economy which in turn benefits all South Africans.” (SARS)

Businesses are often required to provide, confirm or share tax clearance information to another entity. This is because proof of tax compliance is an indicator of a company’s good standing in terms of its legal obligations and how well it is managed. There may be instances when an individual, another company, or a government entity needs to verify your tax compliance status, for example, during a prequalification as a supplier; for a tender application or bidding process; to confirm good standing and that your tax matters are in order with SARS; or for foreign investment allowances.  

Tax clearance information is no longer confirmed via Tax Clearance Certificates – these have been replaced by SARS’ Tax Compliance Status (TCS) system, which verifies your tax status online and in real-time, and makes it very important to ensure you and your company are always compliant.

How it works now

Instead of a manual tax certificate being issued as in the past, SARS’ new system allows individuals and businesses to obtain a TCS PIN (personal identification number).

Your accountant will be able to assist with the process of applying to SARS to obtain this PIN through eFiling which requires, for example, activating the TCS for the business or individual, merging all the tax types into one registered profile, completing the Tax Compliance Status Request and selecting the correct type of TCS: good standing, tender, or – for individuals only – emigration and foreign investment allowance. 

If all your tax affairs are in order, your PIN should be issued immediately via SMS or email. A unique PIN is issued for each TCS request submitted to SARS.

This PIN, along with your tax reference number is then sent to the third-party that requires confirmation of your or the company’s tax compliance status. To verify tax compliance status, the third-party will go to eFiling and submit your tax reference number and PIN under “New Verification Request.”

Your current tax compliance status will appear and will be colour-coded, indicating if your tax affairs are currently in order or not:

 – green indicates that all tax affairs are in order and the taxpayer is tax compliant;

 – red means the taxpayer is not tax compliant.

Click here to see full size screenshot

Source: 
SARS

It is important to note that the PIN is valid for a year and will reflect the current tax status at the date and time the PIN is entered into the TCS system (not the compliance status at the time the PIN was issued).

This means your tax compliance status on the system can change during the year in line with your tax behaviour, which might include, for example, an inadvertent late submission or missed payment. For this reason, it is crucial to continuously monitor your tax compliance status to ensure a non-compliant tax status does not impact business and other opportunities.

What is required to be tax compliant?

SARS says that the compliance status displayed reflects the following compliance requirements:

  • Registration for all required tax types
  • Submission of all required tax returns on time
  • All tax debt settled on time
  • Relevant supporting documents submitted.

To meet these requirements consistently across all the relevant tax types over the tax year, taxpayers should consider professional assistance.

Why it is so important to maintain compliance all year round?
  • Remember that a TCS PIN is valid for a year and third parties with whom you share the PIN will always see your current tax compliance status, so it is crucial to ensure that status is continuously monitored and is compliant at all times during the year, to avoid a negative impact on reputation and opportunities.
  • A non-compliant status can affect the confidence of potential clients, stakeholders and investors, as well as competitiveness in the market.
  • Continuous compliance does involve costs or resources but will never be as expensive as the costs associated with non-compliance, which generally involve both penalties and additional fees to rectify.
  • Non-compliance exposes taxpayers to wide and harsh collection or enforcement measures such as the confiscation of property, business closure, garnishee orders and agency notices. Some tax offences are also subject to custodial sentences.
  • Ongoing and consistent compliance all year means that when there is an instance of non-compliance, SARS will likely be more accommodating, because a taxpayer’s track record is one of the factors SARS considers when making determinations.
  • Maintaining a compliant tax status prevents tax surprises and enables lawful tax planning as well as the ability to take advantage of relevant rebates and incentives.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© CA(SA)DotNews

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Read more about the article Your Tax Deadlines for January 2023
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Your Tax Deadlines for January 2023

  • 6 January – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 30 January – Excise Duty payments
  • 31 January – Value-Added Tax (VAT) electronic submissions and payments & CIT Provisional payments where applicable.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© CA(SA)DotNews

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Your Tax Deadlines for December 2022

  • 7 December Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 23 December Value-Added Tax (VAT) manual submissions and payments
  • 29 December Excise Duty payments
  • 30 December End of the 3rd Financial Quarter
  • 30 December Value-Added Tax (VAT) electronic submissions and payments & CIT Provisional payments where applicable

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© CA(SA)DotNews

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Read more about the article Selling Your Business – Plan Well, with a Tax Benefit When You Retire
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Selling Your Business – Plan Well, with a Tax Benefit When You Retire

“A diligent buyer will want up to five years’ worth of profit and loss statements, bank statements, tax returns, leases, supplier and vendor contracts, and customer data.” (Barbara Findlay Schenck – Author “Selling Your Business for Dummies”) 

The reasons why a business owner might decide to sell their business are many – perhaps to pursue a new or more exciting business opportunity, relocation, health reasons or retirement. Selling a business to family, to the other partners, to a loyal employee or a group of employees could also be part of a succession plan; or the business owner’s exit strategy may involve selling to an outside buyer, perhaps a competitor, a supplier, or a customer, or even an investor. 

Whatever the reason for selling, a smooth transition requires:

  • Planning well and in advance,
  • Determining a fair value for the business,
  • Getting books, accounting records and financial reports in order,
  • Collating the required paperwork, 
  • Managing stakeholder relations, and
  • Exercising a legal duty of care. 

The outcome of this approach is a business sale to the right buyer at the right price, with little to no disruption to business operations and no negative impact on staff morale or other stakeholder relationships. 

Plan well and far ahead, and beware the tax implications 

Planning well and ahead provides more control over the process, as well as time and opportunity to strategically enhance the business to ensure its full value is realised when you sell, and also ensures financial and tax implications are well understood. 

As just one example, the disposal or deemed disposal of assets, including the sale of a business, will attract capital gains tax (CGT), levied at a stiff 18% for individuals. 

Planning to Retire? Do you know about this CGT relief?

There is fortunately some CGT relief – little-known but very advantageous – if you are older than 55 (or in situations where the disposal is “in consequence of ill-health, other infirmity, superannuation or death”) of up to R1.8 million on the disposal of an interest in a small business; or of active business assets of a small business; or the sale of a small business. Of course, many conditions apply, including that the total active business assets of the taxpayer do not exceed R10 million and that the R1.8 million exclusion is cumulative over the taxpayer’s lifetime. 

Such a single tax implication can make all the difference between a profitable sale and one that is not. For example, let’s say you bought shares in a company 7 years ago for R2 million, and have since been actively involved in running the business. You decide to sell your share for R4 million, triggering a capital gain of R2 million. At 18%, the CGT liability would be R360,000. If you are over 55 years of age and meet all the other conditions, applying the R1.8-million exclusion would mean only the remaining R200,000 is taxed at 18%, reducing the tax liability to R36,000.

Seek professional advice

Consult with your accountant to ensure that you understand all the potential financial and tax implications of selling your business and ensure that the necessary legal documents are in place, such as non-disclosure agreements for potential buyers and a legal sales agreement. Ask your accountant whether you should consider employing a business broker. 

Finding fair value 

As the seller, you want to ensure that you get the best possible return for the money, time and effort invested in your business. Similarly, all potential buyers want a business that is financially stable and profitable and that will deliver a good return on their investment. 

To set a fair price, you will need to determine the value of the business, and the expertise of an accountant or a professional valuer is highly recommended. This is because there are different ways of valuing a company, as well as many factors – mostly intangible – that affect the valuation beyond simply the financial reports. 

This means choosing the right method for valuing your business is important because it will influence the price you can ask for it. The three common methods used to evaluate a business are asset-based valuations (difference between assets and liabilities, also called the book value, net asset value or equity); market-based valuations (considers comparable sale prices for businesses sold in the industry); and income-based valuation (average profit year-on-year for at least the last three years), together with a profit forecast for three or more years ahead. 

All of these valuations will be influenced by factors such as location, the condition and age of equipment and fittings, new competitors in the market, branding and goodwill, reputation and customer loyalty. 

Get your financials in order

To determine a fair value for your company, you will need a comprehensive picture of the company’s financial situation. Potential buyers, too, will want to see full financial records.

  • A minimum of 3 years – but preferably 5 years – of financial statements, audited where necessary 
  • Monthly management accounts covering the period since the most recent financials 
  • Profit and loss statements 
  • Balance sheets
  • Tax returns and assessments    
  • Tax clearance certificate 
  • A complete detailed list of plant and machinery, furniture and fittings, and equipment 
  • Complete inventory if the company holds stock 
  • Three-year financial plan.
Paperwork required

In addition to the above, prospective buyers will likely request records to assist them in conducting a due diligence, which is an investigation or review of factors that influence value or market price, some of which are listed below. 

  • Formal contracts with suppliers and clients 
  • Organisational charts and employee records   
  • Material agreements such as property lease agreements, credit agreements, and joint venture agreements 
  • Details of crucial advisors, such as accountants, attorneys and insurance brokers 
  • An up-to-date business plan, with growth projections, overheads and working capital 
  • Marketing and sales strategies, profit margins and sales targets 
  • SWOT analysis evaluating the business in the current market environment and identifying areas to increase the company’s value 
  • Statutory documents such as memorandum of incorporation (MOI), shareholder agreements and regulatory authorisations. 
Managing stakeholders

Selling a business can take months – if not years – and during this time, business owners should maintain ‘business as usual,’ while also making the business more attractive to potential buyers by establishing a clean and friendly working environment, keeping equipment well-maintained, and improving processes. 

It will also be important to manage relationships with stakeholders when it becomes known that the company is up for sale. Employee morale may be impacted if they are fearful of losing their jobs or of a change in working conditions or status. Clients may feel uncertain about receiving the same level of service, while suppliers and creditors may be concerned that the business will continue to honour its commitments. It is advisable to be upfront and honest with everyone concerned before announcing the sale or engaging with prospective buyers.

Duty of care

Among the responsibilities of business owners is the duty of care – a legal duty to take reasonable care not to cause harm when it could be reasonably foreseen. 

This duty is certainly relevant when selling a business and creates a legal responsibility or obligation not to omit any information, procedure or activity when it can cause harm to others or the business, including physical harm or financial ruin, and intangible damages such as reputational damage.

In line with this, if you are thinking of selling your business, you are well advised to enlist professional assistance from your accountant to ensure the best possible outcome for all concerned.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© CA(SA)DotNews

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Read more about the article SARS Can Take Money from Your Account! Here’s How to Prevent It…
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SARS Can Take Money from Your Account! Here’s How to Prevent It…

“[Taxpayers] should give at least the same priority to tax obligations as their other responsibilities.” (SARS’ Short Guide to the Tax Administration Act)

SARS has wide powers when it comes to the collection of tax debts and just one of these is the power to collect money owed by taxpayers from third parties who hold money for those taxpayers, such as a bank. This means that SARS can indeed take outstanding tax amounts from a personal or business bank account without your consent, by instructing the bank to pay the amount outstanding over to SARS through a process called Third Party Appointment (TPA). The same instruction can be issued by SARS to other third parties that hold money on behalf of a taxpayer, such as an employer, a customer, an insurance company, or an attorney. 

Given the  significant negative implications this could have for a taxpayer, whether an individual or a company, there are certain procedures SARS must follow before it can collect tax debt via a third party appointment or another collection method, and individual and business taxpayers are well advised to understand how a tax debt can arise without their knowledge, and how to prevent SARS from collecting such tax debt from their bank accounts without their consent.  

What is a tax debt? 

While filing correct returns and making payments on time will protect taxpayers from tax debts, penalties and interest, taxpayers may not be able to meet these requirements on time for a range of reasons. 

As such, administrative penalties on late or non-submission of tax returns, failure to submit tax returns, the submission of returns without payment, or partial payment of a tax liability can all result in a tax debt, which can also arise from a SARS assessment, or from an audit.

How can a tax debt be collected? 

SARS’ powers to collect tax debt are extensive, and include: 

  • Recovering tax debt through third parties who hold money on taxpayers’ behalf, such as banks, employers, customers, insurance companies or attorneys. If such a third party fails to adhere to the appointment, the third party can be held personally liable to SARS and may be convicted of a criminal offence.
  • Issuing a judgement and having a taxpayer blacklisted. 
  • Obtaining a preservation order in respect of taxpayer assets. 
  • Attaching and selling taxpayer assets.
  • Bringing sequestration or liquidation proceedings against a taxpayer.
  • Holding directors, members or related parties liable for the company’s tax debt.
When can SARS collect tax debt? 

If you cannot pay a tax debt to SARS and do not follow the correct procedures, SARS is legally allowed to exercise its powers of collection as detailed above, even if you are disputing the debt! 

Fortunately, SARS must also follow the correct procedures. These include that the taxpayer must have received an assessment from SARS detailing how much is due and by when, as well as a final demand for payment that states available debt relief mechanisms contained in the Tax Administration Act (TAA); and recovery steps that SARS may take if the tax debt is not paid. 

Only 10 business days after delivery of the final demand, if no response has been received from the taxpayer, can a senior SARS official authorise a third party to collect the tax debt. 

If SARS does not follow these steps detailed in the TAA, collection proceedings may be regarded as illegal and in contravention of the TAA and the taxpayer will have recourse against SARS via its Complaint Management Office (CMO), the Tax Ombud or legal action.

But, of course, prevention is far better than cure. 

How to prevent SARS from taking money from your account 
  • Keep tax affairs up to date – SARS says that when deciding the most appropriate way to deal with outstanding tax obligations, it will give considerable weight to the tax debtors’ individual circumstances and compliance history of, for example, lodging correct returns and documents, and paying taxes on time. 
  • Update your details with SARS – SARS is required to inform taxpayers of assessments, notifications or communications issued by also sending a message to a taxpayer’s last known number or email address. This makes it crucial to keep your contact details updated at SARS to ensure you receive these communications timeously. Many taxpayers miss pertinent notifications and letters of demand because they did not receive notifications or discovered these too late in an unattended mailbox. 
  • Proactively monitor for unexpected tax liabilities – A tax debt can arise for many reasons as explained earlier and can also be due to errors or omissions made by the taxpayer, a tax practitioner, or even SARS itself, or could be caused by missed communications or incorrect payment allocations. For this reason, individuals and businesses should check their compliance status with SARS and obtain a statement of account on the various taxes payable from their accountant, both proactively and on a regular basis, and certainly every time an email or SMS is received from SARS.
  • React professionally and swiftly to communications – All communications from SARS should be prioritised for immediate action, particularly those informing a taxpayer of a tax liability or demanding payment, even in the case of an obvious mistake. Whether the tax debt is disputed or not, SARS must be engaged legally, and it is crucial that the correct procedures are followed.
  • Understand the options – There are, fortunately, ways to make arrangements with SARS to settle a tax debt and to avoid the debt collection process that can include money being taken from your bank account. 

    For example, taxpayers who can prove serious financial hardship can apply to SARS for a reduction of the amount within 5 business days of receiving the final demand or extend the period over which the amount must be paid. If the debt is to be disputed, taxpayers can apply for a suspension of payment. Where the tax debt is not disputed, but cannot be settled immediately, taxpayers can either apply for a payment arrangement over time; or can request a debt compromise.
  • Beware the “pay-now-argue-later” principle – Objecting to a tax debt does not suspend the obligation to pay it. The only way to prevent SARS’ collection process from continuing when formally lodging an objection is to also formally request a suspension of payment. SARS collection procedures are suspended between the dates that SARS receives the request until 10 business days after SARS’s decision to grant the Suspension of Payment request. However, interest will accrue on the unpaid debt. If SARS denies the Suspension of Payment request, the taxpayer can apply to SARS for a payment plan. 

In all these instances, professional assistance is strongly recommended. 

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© CA(SA)DotNews

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Your Tax Deadlines for November 2022

  • 7 November – Monthly PAYE submissions and payments
  • 25 November – VAT manual submissions and payments
  • 29 November – Excise Duty payments
  • 30 November – Value-Added Tax (VAT) electronic submissions and payments & CIT Provisional payments.
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