The 2017 Draft Taxation Laws Amendment Bill (TLAB) and the 2017 Draft Tax Administration Laws Amendment Bill, have been released by National Treasury and the South African Revenue Service (SARS) for public comment.
But what do the amendments mean for you, the taxpayer?
The proposed amendments will see a number of changes to taxes that affect every day South Africans. These include amendments to Unemployment Insurance Fund (UIF) Contributions Act, as well as the Skills Development Levies (SDL) Act and pay-as-you-earn (PAYE) tax related legislation.
The main changes
According to Treasury, the main tax proposals in the draft TLAB include:
- A levy on bargaining councils to address non-compliance
- A higher fringe benefit exemption for bursaries to learners with disabilities
- Removing the foreign employment income tax exemption in respect of South African residents (See here for more information)
- Addressing the circumvention of anti-avoidance rules dealing with share buy backs, dividend stripping and contributed tax capital
- Strengthening anti-avoidance rules relating to mining environmental rehabilitation funds
- Extending the application of controlled foreign company rules to interposed foreign trusts and foreign foundations
- Changes in the tax treatment of banks due to IFRS9
- Tax amendments due to the SAM framework for long term insurers
The draft TALAB proposed amendments consist of:
- Assisting micro businesses transitioning into the small business corporation system
- Employees’ tax and reimbursement of travel expenses
- Application of the cap on deductible retirement fund contributions
- Taxation of interest payable in respect of normal tax by SARS
- Phased implementation of Tax Administration Act, 2011, interest rules by tax type
- Transitional arrangements regarding processes before commencement of the new
Treasury highlighted: “Together with the 2017 Draft Rates and Monetary Amounts and Amendment of Revenues Laws Bill (Rates Bill) published on 22 February 2017, these three draft Bills give effect to the tax proposals announced on Budget Day (22 February 2017), as published in the Budget Review.”
What the changes mean
Tarryn Atkinson, chairperson of the South African Institute of Chartered Accountants (SAICA) Employees Tax and Expatriate Sub-Committees, explained that the amendments to the UIF Contributions Act will see changes to the exemptions from UIF contributions.
Previously employers and employees who had entered into learnership agreements were exempt from UIF contributions “with logical consequence that these learners could not claim benefits as a result. The draft legislation seeks to remove this exemption, thus requiring contributions from the employer and employee (learner),” clarified Atkinson.
There is also a proposal that foreign employees/learners, and their employers should contribute towards UIF. At present, they do not have to contribute, as upon the termination of the contact, the foreigner is required to leave the country.
“While these parties will need to contribute if the legislation is promulgated as it stands, there is currently no corresponding amendment to the UIF Act that will allow them to claim benefits from the Fund. This amendment would need to be legislated by the Minister of Labour and not through National Treasury. Currently the thresholds in the legislation also differ after the Minister of Labour, earlier this year, promulgated an increase in the benefits threshold which was not matched by an increase in the contributions threshold,” added Atkinson.
Amendments to PAYE tax related legislation will see changes to reimbursive travel, bursaries for disabled learners, as well as changes to retirement deductions.
Currently, reimbursive travel is not “taxable on the payroll but only on assessment,” explained Atkinson. The amendments seek to create an obligation on the employer to tax reimbursive travel on the payroll where the rate reimbursed in higher than the SARS rate, to the value that exceeds the SARS rate for reimbursement.
Atkinson elaborated: “For example, if the employer reimburses at R3.55 per kilometre, the current SARS rate, then no amount will be taxable in payroll. If, however the employer reimburses at R4.00 per kilometre then the difference between the R4.00 and the R3.55 will need to be taxed as remuneration.”
Under the retirement reforms, the legislation did not specify how limits were applied to retirement contribution deductions, in other words, can the deduction be used in a single month, or spread out over a year?
Atkinson explained that the proposed amendments state that the monthly deduction will be limited to the annual limit divided by 12, however, the 27.5 % limit will continue to apply. “This creates certainty around the application of the deduction for payroll purposes, however, it may also create some disparity if in a particular month an employer has high remuneration (e.g. in a bonus month) and has not reached their limit in the preceding months, the application of the monthly limit will prevent the employee from utilising the unused deductions in that month.”
With regards to bursaries for disabled learners, Atkinson noted that the cost to educate disabled learners are higher than those to educate able-bodied learners. “The proposal provides for an exemption from a bona fide bursary or scholarships awarded to the relative, a limited definition is being applied, of an employee under the following conditions,” stated Atkinson.
- The employee must be earning R600 000 or less
- The tax free value that can be awarded is
- R30 000 for grade R to grade 12 or NQF 1 to 4, and
- R90 000 for NQF levels 5 to 10.
Lastly, Atkinson highlighted that the amendments propose a postponement of the annuitisation of provident funds. “As the legislation currently stands, the annuitisation of provident funds was to become effective on 1 March 2018, however the Draft TLAB proposes that this be further delayed to 1 March 2019 to enable further consultation with the Trade Unions regarding broader social security reform,” explained Atkinson.
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