Ghana Changes to Tax Rates

An additional Personal Income Tax band of 35% for monthly income in excess of GHS10 000 was introduced during the Mid-year Budget Statement and came into effect 1 August 2018.

Following feedback from the public after the implementation of the new tax band, Government concluded that some relief from this tax measure is justified. Accordingly, Government reviewed this band to impact monthly income above GHS20 000 at a rate of 30%. The Income Tax Amendment (No. 2) Act, 2018 (Act 979) has since been amended to revise the rates for the taxation of income of resident individuals.

The Income Tax Rates came into effect on 1 January 2019.

Namibia Budget Speech

The Minister of Finance, Hon. Calle Schlettwein, presented the 2019 Budget Speech to Parliament on 27 March 2019.

  • The budget deficit is estimated at N$8.2 billion or 4.1% of GDP and averaging 3.4% over the Medium Term Expenditure Framework (MTEF).
  • Inflation remains stable at 4.4% in February this year, after averaging 4.3% over 2018.
  • Total revenue for 2019/2020 is estimated at N$58.4 billion, 3.0% better than the estimated outturn for 2018/19 and 29.7% of GDP.
  • Expenditure as a proportion of GDP reduced from 42% to 34.9% in FY 2018/19.
  • Old age pensions are increased by N$50 to a monthly grant of N$1300.

The main tax proposals include:

  • Phasing out the current tax incentive for manufacturers and exporters of manufactured goods, repealing the Export Processing Zone and introducing the Special Economic Zones, with a sunset clause for current operators with the EPZ status.
  • Introducing a 10 percent dividend tax for dividends paid to residents.
  • Subject income derived from commercial activities of charitable, religious, educational and other types of institutions under Section 16 of the Income Tax Act to normal corporate tax requirements.
  • Taxing all income earned from foreign sources. Namibian residents will have to declare such income in their annual tax returns.
  • Increase the tax deductibility of retirement fund contributions from the current N$40,000 per annum to 27.5% of income with a maximum of N$150,000 to encourage savings and provisions for retirement.
  • Disallow deductibility of fees and interest paid to non-residents for calculating taxable income until payment of withholding tax paid is proven.
  • Remove VAT zero-rating on sugar.
  • Disallow deductibility of royalties for non-diamond mining entities.
  • No changes in personal or corporate tax rates proposed.

Employee New PAYE Business Reporting for Employer Filing Season

Effective September 2019

SARS published the tax certificate specification document on 21 January 2019.

The document specifies the requirements for the generation of an import tax file for the annual as well as the interim submission. The requirements in this version of the BRS will become effective from September 2019 PAYE interim reconciliation period.

The details of the changes are highlighted in green in the BRS.

To access the new BRS, follow the link.

2019 Budget and Tax Highlights

We will be going through the budget in more detail and will hold our annual tax seminars in due course (dates to be announced) when we have had time to consider the practical application of new rules on payrolls and employers.

In the interim, the key highlights and overview of tax changes are obtainable from Treasury using the following links:
•  Budget Highlights
•  Tax Guide 2019
•  Tax Legislative Changes

One of the positive things to see is that SARS intends resurrecting the large business centre with a hope to start this again in April 2019. They have also emphasised their commitment to improving their IT infrastructure.

Other relevant highlights are the following:

Employment Tax Incentive
In 2018, Government extended the employment tax incentive by 10 years. In addition, the eligible income bands will be adjusted upwards to partially cater for inflation. From 1 March 2019, employers will be able to claim the maximum value of R1 000 per month for employees earning up to R4 500 monthly, up from R4 000 previously. The incentive value will taper to zero at the maximum monthly income of R6 500.

Medical Tax Credits
To generate additional revenue of R1 billion in 2019/20, there will be no change in the monthly medical tax credit for medical scheme contributions.

Fuel Taxes
South Africa has three main fuel taxes that apply to petrol, diesel and biodiesel: the general fuel levy, the customs and excise levy and the RAF levy. These levies fund general government expenditure, support environmental goals and finance the RAF. From 5 June 2019, a carbon tax of 9c/litre on petrol and 10c/litre on diesel will become effective. Diesel refunds cannot be claimed against this tax. The general fuel levy will be increased by 15c/litre for petrol and diesel from 3 April 2019. The increase is slightly below inflation. Government also proposes to increase the RAF levy by 5c/litre from 3 April 2019.

Applying for an Exemption from the National Minimum Wage

On 19 December 2018, the Minister of Labour gazetted the process for companies to apply for an exemption from the National Minimum Wage.

It is important to note the following:

  • The exemption, if granted, is only for 12 months.
  • The applicant needs to show it cannot afford the minimum wage and must have consulted all applicable unions and bargaining councils.
  • Even if granted, the company will still need to pay a minimum of 90% of the minimum wage (R18 per hour currently).

Changes to the Labour Relations Act

The Labour Relations Amendment Act, 2018 was amended in November 2018 to include provision to:

  • Increase the period the Minister has to extend a collective agreement to non-parties from 60 to 90 days and the agreement shall only be extended if parties are sufficiently represented within the scope of the council;
  • Provide criteria for the Minister before the Minister is compelled to extend the collective agreement;
  • Provide for the renewal and extension of funding agreements;
  • Provide for picketing by collective agreement or by determination by the Commission in terms of picketing regulations;
  • Provide for the classification of a ratified or determined minimum service, where minimum service refers to the minimum number of employees in a specific essential service who may not strike;
  • Extend the meaning of ballot to include any voting by members that is recorded in secret with regard to registered trade unions and employer’s organisations;
  • Make way for the establishment of an advisory arbitration panel to deal with long and violent strike action in the interest of labour stability.

It will be interesting to see whether the amendments will improve the position of smaller businesses. In the past many unrepresented businesses have been forced to apply collective bargaining arrangements which have at times entrenched the positions of larger businesses better able to afford the collective conditions.

Change in Official Rate of Interest

The Official Interest Rate for calculating Fringe Benefits increased by 0.25 % effective 23 November 2018.

Where an employer gives an employee a loan that is less than the official interest rate or interest free, the difference between the two must be treated a taxable Fringe Benefit.

This Fringe Benefit should be processed via the payroll and reported on the Employees IRP5 against SARS Code 3801.

The Official Interest Rate is defined in the Seventh Schedule as the rate of interest that is equal to the Repo Rate, plus 100 basis points (1%).

The repo rate increased to 6.75% on the 23 November 2018, and the official interest rate therefore became 7.75% effective 23 November 2018.

Please note that HRTorQue Outsourcing have updated all their payroll outsourcing clients effective 1 December 2018.

Legislative Updates – Recent Changes

  1. Binding class ruling (BCR 065) that an intra-fund transfer of funds from an employer’s surplus account to the credit of an individual member is a taxable fringe benefit. This relates to post-retirement medical aid lump sum benefits on retirement (including ill-health retirement) or death.
  2. Issued in August – extension of bargaining council agreements to non-parties for the following bargaining councils:
    a. Motor Industry Bargaining Council
    b. Metal and Engineering Industries Bargaining Council
    c. Furniture Manufacturing Industry KZN
    d. National Bargaining Council for Electrical Industry of South Africa
    e. South African Road Passenger Bargaining Council
  3. Labour Relations Act – official list of accredited Bargaining Councils by the CCMA (GeN 508)
  4. Occupational Health & Safety – Construction – application for construction work permit for grade 7, 8 or 9 (Construction Industry Development Board)for periods exceeding 365 days or 3,600 man-hours.
  5. Compensation for Occupational Industry and Diseases Act – definition of active vs inactive employers.

Compensation Fund Earnings Threshold – Incorrect Notice

On the 13 June 2018, the Minister of Labour gazetted a notice in relation to the Compensation for Occupational Injuries and Diseases Act that (sic) “the increase in the minimum earnings amount of R60,336 per annum and the maximum amount of R430,944 per annum with effect from the 1 April” would apply.

The Payroll Authors Group of South Africa has contacted the Department of Labour to question this on the basis there is no minimum and that the announcement in January 2018 reflected a change from 1 March and not 1 April.

The Department of Labour has confirmed PAGSA are correct and that the maximum earnings amount of R430,944 should apply form the 1 March 2018.