September 2013
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HRTorQue REPORTER

Table of Contents

1. New Requirements for Claiming Tax Rebate in Respect of Foreign Taxes
2. Simply Speaking - What is a fringe benefit?
3. Is a "late-joiner fee" for medical aid part of the contribution to a scheme?
4. Should notice pay be treated as an after tax deduction?
5. VET Levy in Namibia
6. Minimum Wage for Taxi Sector Amendment
7. PAYE - A Soft Target
8. Tanzania Tax Rate Changes
9. Employment Equity: Are you compliant?
10. Interim Submission to SARS - August 2013
11. Contact the HRTorQue Team

1. New Requirements for Claiming Tax Rebate in Respect of Foreign Taxes

Author: Dave Beattie
SARS recently confirmed a 60-day window for claiming back foreign taxes paid for local services rendered to a foreign based customer in order to qualify for a deduction against South African taxes due in respect on the income received.

In some instances where a South African tax resident renders services in South Africa to a foreign based customer, the foreign country in which the customer is based may levy a withholding tax on any payments made to the South African service provider. Subject to certain limitations, section 6quin of the South African Income Tax Act grants the South African service provider a deduction of these foreign taxes paid against the taxes payable in South Africa on this income.

This follows the insertion of a requirement in the 2011 Income Tax Amendments that the tax deduction can only be claimed if a declaration is submitted to SARS within 60 days from the date on which the tax is withheld by the foreign government. This amendment was to be implemented on a date determined by the Minister of Finance.

Notice has now been provided[1] confirming the implementation date from which the declaration needs to be submitted to SARS is 1 July 2013. The declaration form known as an FTW01, Declaration of Foreign Withheld Tax has also been issued.

Any client that renders services to foreign customers from South Africa, for example technical or management services, which is subjected to a withholding tax by that foreign country, would need to submit to SARS a declaration within 60 days of the taxes being withheld in order to be able to claim a deduction against their South African taxes payable in respect of that income.

[1] Government Gazette No. 463

2. Simply Speaking - What is a fringe benefit?

Author: Dave Beattie
In a payroll system there are payments made to employees in cash, however, many employees receive non-cash benefits as a result of their employment. In South Africa, there are specific rules for valuing such fringe benefits. The calculated value of the fringe benefits is then added to either the regular earnings or to the annual bonus tax totals and tax is calculated on the increased value.

Examples of fringe benefits that would be treated as regular earnings are the use of a company car, loans to employee at no or low interest rates and the taxable portion of the medical aid contribution paid by the company for the employee. Examples of fringe benefits that would be treated as an annual bonus are the acquisition of a company asset at less than market value and free or cheap holiday accommodation. There are also a number of fringe benefits that have been specifically excluded if certain conditions are met and your company policy and intention is clear to SARS.

When you outsource your payroll and you have told us about these benefits, we are able to ensure that they are taxed and reported correctly, but often structures change, new benefits are introduced and nobody thinks to mention it.

It is necessary to regularly review the payroll and company practices outside the payroll to determine whether all benefits are included and taxed. To examine if new benefits been introduced or, have remuneration structures changed as employees have been promoted or incentivised and to ensure that these changes been communicated to the payroll department properly, whether you run payroll in house or you outsource.

The ever increasing complexity of from legislative changes in this area make soft targets for the South African Revenue Service (SARS), as is evident by the recent marked increase in the number of PAYE audits conducted by the national revenue collector. Many business owners are under the impression that having their financials audited, reviewed or compiled by a firm of independent auditors and accountants minimises the risks relating to PAYE. This, unfortunately, is not the case as a review and compilation does not necessarily extend to the inspection of the underlying documents and policies for the treatment of salary components for PAYE. Even an audit does not extend to these items specifically.

Businesses must therefore be proactive and take full responsibility for their PAYE systems - even when the processing thereof is outsourced. With the threat of understatement penalties, business owners should ensure a proper and specific review of their PAYE systems.

David Beattie is a specialist who can help you with your PAYE reviews, he will determine whether current legislation is being applied, detect risk areas that must be addressed and assess what corrective steps, if necessary, can be taken to limit potential additional tax costs. Please contact him at [email protected] for professional advice in this regard.

3. Is a "late-joiner fee" for medical aid part of the contribution to a scheme?

Author: Karen van den Bergh
According to section 18 of the Income Tax Act, a contribution to a medical scheme includes:
"...any contributions made by that taxpayer in respect of the year of assessment in respect of that taxpayer, his or her spouse and any dependant, as defined in section 1 of the Medical Schemes Act, 1998 (Act No. 131 of 1998), of that taxpayer to any medical scheme registered under the provisions of that Act".

Since 1st April 2001, the Medical Schemes Act has allowed medical schemes to apply a late-joiner penalty to an applicant or to the dependant of an applicant who fits the definition of a late-joiner. Therefore the "late joiner" penalty fee forms part of the contribution to the medical scheme, and must be administered and taxed as a medical aid contribution.

4. Should notice pay be treated as an after tax deduction?

Author: Karen van den Bergh

Should the deduction of notice pay from an employee who left the company without serving the contractual notice period be treated as an after tax deduction from the final salary, or should it be a negative earnings that will result in a reduction of the taxable income?


The value of the notice pay should be administered as negative earnings and reported against the SARS source code used for salary (code 3601) so as to reduce the taxable income of the employee. The correct amount of (net) taxable income actually received by the employee will then be reflected on the IRP5. The value of the notice pay should not be processed as a deduction because this does not reflect the substance of what has happened.

The employee owes the employer the notice pay because he or she did not fulfil their contractual obligation and work the full period for which he was paid a salary. Therefore the salary amount for the year is reduced to compensate for the period of time that was not worked.

5. VET Levy in Namibia

Author: Karen van den Bergh

The purpose of this notice is to advise that the VET Levy in Namibia will no longer be effective from 1 September 2013.

 
Namibia Vocational Education and Training
The Namibian Training Authority issued Media Statement MS.02/13 dated 15 August 2013 informing employers that the Vocational Education and Training Levy will no longer be implemented at the beginning of September. A statement from the Board of Directors of the NTA says, the Minister of Education will announce a new implementation date in accordance with the VET Act. The media release explains that the Minister is expected to announce through a notice in the Government Gazette the final framework for the implementation of the VET Levy.

6. Minimum Wage for Taxi Sector Amendment

Author: Karen van den Bergh
The Minister of Labour has announced the prescribed minimum wage for the Taxi sector which is effective 1 July 2013 by notice no. 455 in Gazette 36619. Corrections to this notice have been made. A copy of the notice is in number 618 in Gazette 36753.

7. PAYE - A Soft Target

Author: Dave Beattie
It has become evident that the ever-increasing complexity resulting from legislative changes makes PAYE a soft target for the South African Revenue Service (SARS). This statement is supported by the recent increase in the number of PAYE audits conducted by SARS.

We often ask organisations when last they reviewed their payroll to determine whether all benefits are included and taxed? In cases where additional benefits have been provided to employees, or new remuneration structures implemented, have the various departments liaised effectively to ensure that the structures are legislatively compliant and then correctly implemented into the payroll? The most common answer received is that the organisations are satisfied with their position because they have audited financial statements. This belief is a common misconception as the 'audit review process' very seldom dedicates any time to salary and PAYE issues. Where a limited review is done, it is often done by an inexperienced first year auditor unable to do a manual tax calculation, never mind interpret complex legislative issues.

With the provisions in the new Tax Administration Act making 'lack of due care and attention' regarding tax issues subject to additional penalties of 50%, it certainly provides an incentive for business owners to invest more time and resources to ensuring legislative compliance. These reviews will determine whether current legislation is being applied, identify areas of risk and then provide the options that are available in terms of corrective action which will limit potential additional tax costs.

At HRTorQue Outsourcing, we have an Employees Tax specialist who can assist you in performing these suggested reviews. Should you have any questions in this regard please refer them to Dave Beattie on
031 582 7410 or [email protected].

8. Tanzania Tax Rate Changes

Author: Karen van den Bergh
The Minister of Finance announced in the 2013/2014 Annual Budget Statement in June 2013 that the individual income tax rates have been amended for the 2013 year of assessment effective from 1 July 2013. The documentation we have received contains limited tax rules and amendments, therefore, if there are any discrepancies it would be appreciated if you would provide us with the official documentation for the changes not catered for in this document.

The tax-free income band has been increased from Shs 1 620 000 to Shs 2 040 000 per annum. All other income bands and percentages remain unchanged.

9. Employment Equity: Are you compliant?

Author: Nicky Hardwick
Employers failing to comply with the Employment Equity Act can be liable of a fine of up to R900 000!!

Services Offered
•  Completion and submission of EEA2 and EEA4 forms
•  Monitoring and evaluation in line with EE requirements
•  Completion and/or updating of equity plan
•  Employment equity forum training

DEADLINE: 1st October 2013


The Act requires that any person who employs 150 or more employees is required to submit to the Act.

As a designated employer you're required to comply with the following in terms of the Employment Equity Act:
1. Submit Employment Equity Reports and Income Differential statement by 1 October.
2. Assign a Senior Manager to manage and implement Employment Equity in the company
3. Establish a Consultative Forum
4. Prepare an Employment Equity Plan
5. Monitor and Review your Employment Equity Plan

For further information or assistance please contact Nicky Hardwick: [email protected] or 083 788 6999.

10. Interim Submission to SARS - August 2013

Author: Karen van den Bergh
In 2010 SARS implemented a Bi-annual EMP501 reconciliation for all employers. The Bi-Annual submission period for 2013 is upon us. Together with the EMP501 reconciliation for salaries and wages paid from March 2012 to August 2012, SARS requires that you prepare and submit Bi-Annual IT3a's and IRP5's. The certificates are merely for reconciliation purposes and are not to be issued to the employees.

If you are a payroll client of HRTorQue's, we will be extracting your files to submit to SARS during the course of September and submitting them on your behalf.

Please contact Karen van den Bergh on 082 8911 722 or email on [email protected] if you wish to know more about our outsourced payroll services.

11. Contact the HRTorQue Team

Head Office (Durban)
 
Phone: 031 564 1155
Fax: 031 564 1228
 
Email: [email protected]
Website: www.hrtorque.co.za
 
Address: 163 Umhlanga Rocks Drive
Durban North, KwaZulu-Natal
 
FB
 
Sales
Melany Bydawell: 031 582 7425 / 083 441 5618
[email protected]

Payroll & HR Administration
Karen van den Bergh: 031 582 7413 / 082 891 1722
[email protected]

Human Resources / Employee Relations
Melany Bydawell: 031 582 7425 / 083 441 5618
[email protected]
 
Employment Equity & Skills Development
Melany Bydawell: 031 582 7425
[email protected]
Nicky Hardwick: 031 582 7418
[email protected]
 
Tax
Dave Beattie: 031 582 7410
[email protected]

Executive Coach and Team Interventions
Melany Bydawell: 031 582 7425
[email protected]
 
Payroll Third Party Administrator

Kacey Chetty: 031 582 7409
[email protected]
 
Accounts
Cheryl Naidoo: 031 582 7408
[email protected]

Dispatch
Karl van der Merwe: 031 582 7407
[email protected]