Capital gains tax (CGT) is not a separate tax but forms part of income tax. A capital gain arises when you dispose of an asset on or after 1 October 2001 for proceeds that exceed its base cost. The relevant legislation is contained in the Eighth Schedule to the Income Tax Act 58 of 1962. Capital gains are taxed at a lower effective tax rate than ordinary income. Pre- 1 October 2001 CGT capital gains and losses are not taken into account. Not all assets attract CGT and certain capital gains and losses are disregarded. A withholding tax applies to non-resident sellers of immovable property (section 35A). The amount withheld by the buyer serves as an advance payment towards the seller’s final income tax liability.
CGT applies to individuals, trusts and companies. A resident, as defined in the Income Tax Act 58 of 1962, is liable for CGT on assets located both in and outside South Africa. A non-resident is only liable to CGT on immovable property in South Africa or assets of a “permanent establishment” (branch) in South Africa. Certain indirect interests in immovable property such as shares in a property company are deemed to be immovable property. Some persons such as retirement funds are fully exempt from CGT. Public benefit organisations may be fully or partially exempt.
Donations tax is tax payable at a flat rate on the value of property disposed of by a donation (sections 54 to 64 of the Income Tax Act, 1962). Donations tax is levied at a flat rate of 20% on the value of the property donated A donation includes property disposed of for an inadequate consideration (section 58).
Section 56(1) contains a list of exempt donations which include amongst others donations between spouses and donations to approved public benefit organisations.
A donation will be exempt if the total value of donations for a year of assessment does not exceed:
Donations tax applies to any individual, company or trust that is a resident as defined in section 1 of the Income Tax Act, 1962. Non-residents are not liable for donations tax. The person making the donation (donor) is liable for the tax but if the donor fails to pay the tax within the set period the donor and donee are jointly and severally liable for the tax (section 59). Public companies and public benefit organisations amongst others are exempt from donations tax (section 56(1) (h) and (n)). How does Donations Tax work in relation to an inheritance?
After making a donation you should fill in form IT144 (Declaration by donor / donee) and send it to SARS with your payment.
Donations tax must be paid within three months of the donation taking effect or such longer period as SARS may allow (section 60(1)). Payment must be accompanied by form IT144 (section 60(4)). A donation takes effect when all legal formalities for a valid donation have been complied with (section 55(3)).
Employees’ tax refers to the tax required to be deducted by an employer from an employee’s remuneration paid or payable. The process of deducting or withholding tax from remuneration as it is earned by an employee is commonly referred to as PAYE. An employer who is registered or required to register with SARS for PAYE and/or Skills Development Levy (SDL) purposes, is also required to register with SARS for the payment of Unemployment Insurance Fund (UIF) contributions to SARS.
The amounts deducted or withheld must be paid by the employer to SARS on a monthly basis, by completing the Monthly Employer Declaration (EMP201). The EMP201 is a payment declaration in which the employer declares the total payment together with the allocations for PAYE, SDL and/or UIF. A unique Payment reference number (PRN) will be pre-populated on the EMP201, and will be used to link the actual payment with the relevant EMP201 payment declaration.
PAYE must be paid within seven days after the end of the month during which the amount was deducted. If the last day for payment falls on a public holiday or weekend, the payment must be made on the last business day prior to the public holiday or weekend. The following payment methods are available:
Note: Employers who pay, or are likely to pay Employees’ Tax exceeding R10 million in any 12-month period, must submit Employees’ Tax declarations and make payments electronically.
Tax deductible, provided:
the policy is a term policy or personal accident policy;OR
the policy conforms to the State President’s Regulations, premiums limited to 10% of the employee’s or director’s remunerations. To conform to the State President’s Regulations, the policy contract must have: a prescribed minimum element of life cover (lesser of the maturity term or 20 year x 80% of lowest net premium); only one life assured; regular premium payment periods
As from 1 March 2012, any premium paid by an employer to any insurer under an employer-owned insurance policy (Group life or disability plan) directly or indirectly, for the benefit of the employee, spouse, child, dependant or nominee will be taxed in the hands of the employee as a fringe benefit. The premium may, however, qualify as an income protection insurance contribution deduction by die employee. If the employer makes a lump sum payment for all employees the fringe benefit is determined in accordance with a formula, which will have effect of apportionment amongst all employees concerned
Any premiums disallowed as a deduction may be offset against the taxable proceeds. If no premium was ever tax deductible, the proceeds will normally be tax free.
Policy loans from the insurer are also taxable if premiums are tax deductible.
Tax deductible for the employer if incurred in the production of income, as evidenced by the payment over to the employee in terms of: a service agreement; or established employer practiceEmployee:
As from 1 March 2011, employer provided severance payments for reasons of age, ill health and retrenchment are aligned with the taxation of lump sum benefits, including the R315 000 (2011:R300 000) exemption. This exemption does not apply to directors/members if they at any time held an interest of more than 5% in the entity Prior to 1 March 2011, a once off exemption of R30 00 applied where an employee had reached the age of 55 or the termination of services was due to ill health or the employee was retrenched because of the employer had ceased to operate or because of a reduction in personnel.
Estate Duty is charged, levied and collected from the estate of every person who dies on or after 1 April 1955 in terms of the Estate Duty Act, 1955, Act 45 of 1955 (the Act). Estate Duty is charged at the rate of 20% upon the taxable amount of the estate calculated in terms of the Estate Duty Act. Under current legislation it is levied on the “dutiable amount of the estate” exceeding R3 500 000.
In general, the estate is liable for Estate Duty and it shall be paid by the executor. Where a policy was paid to a beneficiary directly, the beneficiary is liable for the proportionate share of the Estate Duty payable.
The Commissioner for SARS is responsible for administering the Estate Duty Act. SARS has delegated its powers and authority to the Master of the High court. There are 14 Masters’ offices in SA (Pretoria, Bloemfontein, Kimberley, Cape Town, Port Elizabeth, Grahamstown, Durban, Pietermaritzburg, Polokwane, Bisho, Johannesburg, Mmtata, Thohoyandou, and Mafikeng).
SARS remains responsible for collecting the Estate Duty.
The Executor will calculate the Estate Duty when preparing the liquidation and distribution account. He will then complete the Estate Duty return (REV 267)and send to the Master of the High Court’s office where the estate is registered. A copy of the liquidation and distribution account must be sent with the REV 267. The Master will then assess the Estate Duty payable.
The duty assessed must be paid within 1 year of date of death or on the date prescribed in the notice of assessment. Currently interest will be levied at the rate of 6% p.a on late payments.
A basic deduction of R 3.5 million is allowed in the determination of an estate’s liability for estate duty as well as deductions for liabilities, bequests to public benefit organisations and property accruing to surviving spouses. A flat rate of 20% is levied on balance of estate on all property of residents and SA property of non-residents.
The threshold below which no donations tax is payable is R100 000. Thereafter a 20% flat rate of value on property is payable. In the case of a taxpayer who is not a natural person, the exempt donations are limited to casual gifts not exceeding R 10 000 p.a. in total. Dispositions between spouses and donations to certain public benefit organisations are exempt from donations tax.
The annual capital gains tax exemption for individuals has been increased to R30 000. The monetary threshold below which no capital gains tax is imposed at death is R300 000.
The distinction between the setting-in allowance and private individual allowance has fallen away.
Emigrants can, on application, request to transfer blocked assets in excess of the limit of R4 million per family unit or R2 million per single person, subject to an existing schedule, at the discretion of the Exchange Control Department of the South African Reserve Bank, and an exit charge of 10% of the amount. Persons who have emigrated, but have not fully utilised the current authorised foreign capital allowance, may be accorded additional capital transfers, provided the amount availed of does not exceed the current limits.
A single discretionary allowance of R 1000 000 granted per individual for maintenance, gifts, travel and study. Travel Allowances for visits outside the Common Monetary Area (CMA) : Adults – the travel allowance forms part of the discretionary allowance referred to above. Persons under the age of 18 – R200 000 per calendar year. Travel facilities may be provided by way of travelers cheques, foreign bank notes and credit/debit cards. Travel facilities not availed of during one calendar year may not be carried forward to the following year. Travelers proceeding on visits outside the CMA are permitted to export up to R5000 per person in SA Reserve Bank notes. This is not regarded as being part of the travel allowance.
Common monetary area residents travelling to and from Namibia may be provided with Botswana Pula to an amount of R5 000 per annum over the above limits.
Current income earned on blocked assets may be transferred to the emigrant’s new residence through normal banking channels. Income includes: interest, director’s fees, monthly pension payments, retirement annuity payments (specific approval required), the income portion only of a voluntary annuity.
Maintenance payments to family members (mothers, fathers, sisters, brothers) of up to R9 000 per month are allowed on the production of certified documentary evidence proving need and the relationship.
An amount of R9 000 more than the amount of the court order is allowed.
Inheritances bequeathed to non-residents are freely transferable.
Residents may send gifts of money to the value of R30 000 per year to non-residents.
Up to R5 000 in cash may be taken in Rand notes when departing from the Republic, in addition to travel allowance.
Credit card payment can be made for offshore purchases up to R20 000 per transaction.
Exchange control limits on new outward foreign direct investments by South African corporates are abolished. Requests by corporates to invest overseas are considered in the light of the national interest. Application to the Reserve Bank’s Exchange Control department is still required for monitoring purposes and for approval in terms of existing foreign direct investment criteria, including demonstrated benefit to South Africa. The South African Reserve Bank reserves the right to stagger capital outflows relating to very large foreign investments so as to manage any potential impact on the foreign exchange market. South Africa corporates will be able to retain foreign dividends offshore. Foreign dividends repatriated to South Africa after 26 October 2004 may be transferred offshore again at any time for any purpose. Foreign companies, governments and institutions may list on South Africa’s bond and securities exchanges, (South African private individuals will now be able to invest, without restriction, in inward listed instruments on South African exchanges.) Foreign portfolio investment by South African institutional investors As an interim step towards prudential regulation, retirement funds, long-term insurers, collective investment scheme management companies and investment managers are allowed to transfer funds from South Africa for investment abroad. The exchange control limit on foreign portfolio investment by institutional investors applies to an institution’s total retail assets. The foreign exposure of retail assets may not exceed 15% in the case of retirement funds, long-term insurers and 25% in the case of collective investment scheme management companies and investment managers registered as institutional investors for exchange control purposes. Institutional investors will on application, be allowed to invest an additional 5% of their total retail assets by acquiring foreign currency denominated portfolio assets in Africa through foreign currency transfers from South Africa or by acquiring inward listed securities.
On arrival, immigrants must notify their bank of their foreign assets and undertake not to dispose of these to residents. Within 5 Years of immigration, an immigrant may freely transfer from SA all assets brought into the country. After 5 Years, the same rules which are applicable to SA residents apply to that person.
Non-residents may freely invest in or disinvest from SA Non-residents have unrestricted rights to invest in gilts and shares listed on the JSE and export the proceeds on the sale thereof. Interest and dividends are also freely remittable. Loans by non-residents to SA individuals/entities require prior Exchange Control approval. Where certain assets such as unlisted shares, fixed property or businesses are transferred between non-residents and residents, the value of the asset must be verified by a commercial bank. Ex con approval is required for the remittance of certain income such as royalties and certain dividends.
In terms of the Seventh Schedule, the following fringe benefits which are provided to an employee or the holder of an office for a consideration less than the actual value or cost, give rise to a taxable benefit:
Kindly note that this is a broad summary of fringe benefit taxation
On assessment further relief is available for the cost of licence, insurance, maintenance and fuel for private travel if the full cost thereof has been borne by the employee and if the distance travelled for private purposes is substantiated by a logbook.
In addition, certain other perks are also treated as a taxable benefit:
As from 1 March 2011 the amount taxed is the difference between interest payable on the loan by die employee and the repo-rate +1%. No benefit is placed on a casual loan to an employee up to R3000 or a study loan to enable the employee to further his own studies.
Investment income derived from interest and certain foreign dividends:
In addition, all domestic dividend income (except dividends distributed by a fixed property company and certain foreign source dividends) will be exempt from tax.
Special rules apply to the taxation or exemption of dividends received from controlled foreign companies (CFC), depending on the level of shareholding and other conditions. We recommend that our clients seek expert tax advice in this regard.
Interest is exempt where earned by non-residents who are physically absent from SA for 183 days or more per annum and who are not carrying on business in SA.
The exemption for foreign dividends and interest is limited to R3 700
65 and older: no limit
Younger than 65 years:
Medical aid contributions may be claimed as a credit against tax payable as follows :
Other medical exenses which may be claimed as a deduction against taxable income include:
The taxpayer may deduct the other medical expenses to the extent that it exceeds 7.5% of taxable income before this deduction and any retirement lump sum benefit
Taxpayers under the age of 65 may claim all qualifying medical expenses, where the taxpayer or the taxpayer’s spouse or child is a handicapped person, without the 7.5% limit.
Any medical expenses paid by the estate of a deceased taxpayer are deemed to have been paid by the deceased taxpayer on the day before his or her death.
If paid by the employer of the taxpayer, the amount paid must, to the extent that it has been included in the income of the taxpayer as a taxable benefit in terms of the Seventh Schedule, be deemed to have been paid by that taxpayer.
As from 1 March 2010 the full contribution by an employers is a fringe benefit.
The fringe benefit has no value where the contribution is in respect of:
Income tax is the normal tax which is paid on your taxable income. Examples of amounts an individual may receive, and from which the taxable income is determined, include :–
You are liable to pay income tax if you earn more than R70 700 in the 2014 year of assessment, and are younger than 65 years of age. If you are 65 years of age or older, the tax threshold (i.e. the amount above which income tax becomes payable) increases to R110 200. For taxpayers aged 75 years and older, this threshold is R123 350.
Where taxpayers receive remuneration which is less than R250 000, they may elect not to submit an income tax return, provided the following criteria are met:
The rates of tax chargeable on taxable income are determined annually by Parliament, and are generally referred to as “marginal rates of tax” or “statutory rates”. The rate of tax levied on an individual is set on a sliding scale which results in the tax increasing as taxable income increases. Every year, the Minister of Finance announces the rates to be levied by publishing the applicable tax tables during the annualbudget speech.
If you earn a taxable income which is above the tax threshold (see above), you must register as a taxpayer with SARS. To register for income tax, you must complete an IT77 registration form which can be obtained from the SARS website, namelywww.sars.gov.za. The form can also be requested from any SARS branch or the SARS Contact Centre. Once it has been completed, it can be taken to any SARS branch for processing or the form can be posted to SARS. To find your nearest branch visit our branch locator.Step two: You must submit a return
If you are registered for income tax, you will be required to submit an annual income tax return to SARS. See the 2014/2015 Tax Tables. The 2014 year of assessment (commonly referred to as a “tax year”) runs from 1 March 2014 to 28 February 2015. Every year, SARS announces its Tax Season, a period during which you are required to submit your annual income tax return. The tax season for the 2014 tax year opens on 1 July 2014. The income tax return which should be completed by individuals is known as the ITR12 form. For more information, see ourITR12 Comprehensive Guide, source codes and live stock values.
The deadline for all taxpayers will be published once this has been made available in the Goverment Gazette. If you don’t submit your income tax return on time, you may be liable for penalties.Top Tip: When completing your return, you will require the following documentation in order to verify the existing, pre-populated information that appears in the return, as well as to complete any remaining portions:
The following legal changes impacting Dividends Tax as per the SARS BRS 2013 Dividends Tax V1.0.0 came into effect on 26 April 2014:
The following changes apply to the use of Secondary Tax Credits credits:
Further to previous communiques regarding trade testing currently in progress, SARS would like to advise that the due date for Dividends Tax Legal Changes data submissions is effective from 1 May 2014. Trade testing concluded on 12 April 2014 and provides an opportunity to prepare your systems for electronic submissions through one of the following channels:
This new data platform was launched on 26 April 2014.
Dividends Tax is a tax charged at 15% on shareholders when dividends are paid to them, and, under normal circumstances, is withheld from their dividend payment by a withholding agent (either the company paying the dividend or, where a regulated intermediary is involved, by the latter). A dividend is defined in section 1 of the Act, but in essence is any payment by a company for the benefit of a shareholder in respect of a share in that company (excluding the return of contributed tax capital, i.e. consideration received by a company for the issue of shares). It is triggered by the payment of a dividend by any:
Dividends Tax replaced Secondary Tax on Companies (STC) in order to:
Some beneficial owners of dividends are entitled to an exemption or a reduced rate (foreigners) under the Dividends Tax system, whereas dividends received by them under the STC system were taxed in full in the hands of the declaring company.
Generally speaking Dividends Tax is payable by the beneficial owner of the dividend, but is withheld from the dividend payment and paid to the SARS by a withholding agent . The person liable for the tax, however, remains ultimately responsible to pay the tax should the withholding agent fails to or withholds the incorrect tax. An exception to this general principle is where a dividend consists of a distribution of an asset in specie, resulting in the liability for the tax falling on the company itself (such as with STC), which means that it may not withhold the tax from the dividend payment.
Dividends Tax applies to any dividend declared and paid from 1 April 2012 onwards, and the withholding agent (either the company or the regulated intermediary) should pay the tax withheld to SARS on or before the last day of the month after the month in which the dividend was paid. Dividends Tax payments should be accompanied by a return (DTR01/02). Penalties and interest may be levied for late payments of dividends tax or the late submission of dividends tax returns.
As a shareholder (in either a company that is resident in South Africa or in a foreign company whose shares are listed at the JSE) you will become liable for the Dividend Tax when a dividend is paid to you. However, the relevant withholding agent will have to withhold and pay the tax to SARS. The withholding agent should also send you the required declaration and undertaking form(s) for completion if you wish to qualify for any of the exemptions (section 64F) or a reduced rate in terms of a DTA (foreign residents only). The completed form must be sent to the withholding agent before it may exempt the dividend payment or withhold at a reduced rate.
The main difference lies in who is liable for the tax. Dividends Tax is a tax levied on shareholders (beneficial owners of dividends) when they receive dividends, but STC is a tax levied on companies on the declaration of dividends. There will not be overlap between STC and Dividends Tax. If a dividend is declared before 1 April 2012 (irrespective of actual payment date) it will be subject to STC. Only where the dividend is declared and paid on or after 1 April 2012 will it be subject to Dividends Tax
Certain lump sum payments received on termination of service, qualify for taxation at the average rate of tax. The average rate of tax to be used in determining the tax liability on the lump sum will be the higher of the average rate of tax in respect of taxable income (Excluding the lump sum) accrued in the current and preceding years of assessment. Lump sum payments received by the taxpayer from his employer by way of bonus, gratuity or compensation upon either reaching the age of 55, retirement due to superannuation, ill health or other infirmity is tax free to a maximum of R30 000 over the lifetime of the taxpayer. Furthermore, all employees who lose their jobs as a result of either the employer ceasing to operate or because of a general reduction of staff, will qualify for the R30 000 tax free concession regardless of age. This exemption will however not apply to any present or past director of the employer company nor to any shareholder who holds or held more than 5% of a company’s shares. Lump sums paid by the employer as a result of the death of any person that arises out of the course of the employment of that person, may qualify for an exemption up to the amount of R315 000. The exempt amount must be reduced with the portion of a lump sum that qualified for the R30 000 exemption, as mentioned in the prior paragraph. Lump sum benefits payable by approved funds are aggregated for tax purposes and subject to tax as detailed below.On retirement or death:
Pension Funds, Retirement Annuity Funds and Provident Funds.
A maximum of one third of the taxpayer’s entitlement from a pension or retirement annuity fund may be commuted to a lump sum.
The taxable portion of the lump sum from a pension, provident or retirement annuity fund received on or after 1 October 2007 as a result of death or retirement is calculated as :
The total lump sum less the deductible amount
The deductible amount is calculated by means of a formula B which is as follows :
Z = C + E – D where Z is the deductible amount / C is a fixed amount of R315 000 less any withdrawal benefit deducted after 1 March 2009 the taxpayer qualifies for this deduction once during his or her lifetime / E is the sum total of fund contributions made by the taxpayer that did not qualify as a deduction during prior years / D is the sum of all the Z-values deductible amounts allowed in prior years.
The taxable portion of the lump sum on death or retirement is taxed separately from the other taxable income of the taxpayer at the following tax rate :
|Taxable Amount||Tax Liability|
|Up to R315 000||0%|
|R315 001 – R630 000||18% x taxable amount in excess of R315 000|
|R630 001 – R945 000||R56 700+ 27% of the amount above R630 000|
|R945 001 and above||R141 750 + 36% of the amount above R945 000|
With effect from 1 March 2009, the exempt portions, upon withdrawal, will be as follows : Pension funds: The tax-free portion will be R22 500 plus any amount paid into any approved pension fund or retirement annuity fund Retirement annuity fund: The tax-free portion will be R22 500, plus the amount paid into another retirement annuity fund or used to purchase an approved insurance policy that provides benefits similar to a retirement annuity fund. Provident funds: The tax-free portion will be R22 500, plus any amount paid into any approved pension, provident or retirement annuity fund. The taxable portion of a lump sum upon withdrawal from a fund will be taxed separately from other taxable income, with effect from 1 March 2009. The rate will be as follows :
|Taxable Amount||Tax Liability|
|R0 – R22 500||0%|
|R22 501 – R600 000||18% of the amount above R22 500|
|R600 001 – R900 000||R103 950 + 27% of the amount above R600 000|
|R900 001 and above||R184 950 + 36% of the amount above R900 000|
In all cases, the tax-free portions from either a pension, provident or retirement annuity fund shall not be less than the lesser of the lump sum benefit or any contributions made to the fund by the member which were not previously allowed as deductions.
New Proposed Rules on Withdrawal of Pension, Provident Funds, Preservations Funds is NOT YET being applied by SARS. The new changes to tax on withdrawal (As announced in the Budget Speech for 2009) have not yet been promulgated into law. This causes much confusion as Sars is applying the new R22500 tax free allowance but the balance of the benefit is still being taxed at old average rates as was the case prior to 1/3/2009. SARS have confirmed that they will only change their systems to apply the table when it is passed into law which they expect will be in the latter part of this year. As the expectation is that it will apply retrospectively to 1 March 2009 SARS have advised that any member who is over taxed as a result of this will be reimbursed with their next assessment. (i.e. 2010 tax year.)
Small annuities – retirement benefits of R75 000 or less, may now be commuted in full as a lump sum. Previously pension and retirement annuity funds could pay out only up to one third of the retirement benefit in a lump sum and the balance of the fund was used to purchase a compulsory annuity and only benefits of R25 200 could be commuted in full. Draft legislation to be tabled in Parliament shortly should bring relief to divorcees who have been unable to access their share of their former spouses’ retirement funds despite recent changes to the law and a ruling on the matter by the Pension Funds Adjudicator. A Personal Finance report says the draft General Financial Services Laws Amendment Bill contains provisions to amend the Pension Funds Act to clearly state thatevery divorcee who has been awarded a share of a former spouse’s retirement fund in a divorce order will be able to access the benefits with effect from 13 September 2007. The efforts of many divorcees who were divorced before this date to access these benefits have been thwarted by retirement funds and their administrators, which claimed that the law was unclear. An amendment to the Pension Funds Act promulgated in September was intended to introduce a ‘clean break’ in pension interests on divorce for all divorcees. But legal advisers to funds and their administrators argued that it was incorrectly drafted and applied only to divorce orders made after the amendment was promulgated.
Provisional tax is not a separate tax. It is a method of paying tax due, to ensure the taxpayer does not pay large amounts on assessment, as the tax load is spread over the relevant year of assessment. It requires the taxpayers to pay at least two amounts in advance, during the year of assessment, which are based on estimated taxable income. Final liability, however, is worked out upon assessment and the payments will be off-set against the liability for normal tax for the applicable year of assessment.The aim is to help taxpayers meet their liabilities in the form of two payments, instead of in the form of a single, large sum on assessment. A third payment is optional after the end of the tax year, but before the issuing of the assessment.
Any person who receives income (or to whom income accrues) other than a salary, is a provisional taxpayer. A provisional taxpayer is defined in paragraph 1 of the Fourth Schedule of the Income Tax Act, No.58 of 1962, as any – person (other than a company) who derives income, other than remuneration or an allowance or advance as mentioned in section 8(1); company; or person who is told by the Commissioner that he or she is a provisional taxpayer. Excluded from being a provisional taxpayer as defined are any – approved public benefit organisations or recreational clubs; body corporates, share block companies or certain associations of persons; and persons who are exempt from paying provisional tax, namely: Non-resident owners or charterers of ships or aircraft; Any natural person who is under the age of 65 and who does not earn any income from carrying on a business – provided that person’s taxable income will not be more than the threshold (R63 556 for 2013 and R67 111 for 2014); or the taxable income of that person (earned from interest, foreign dividends and rental) will not be more than R20 000; Any natural person who is 65 years or older – provided that person’s taxable income will not be derived in any way from carrying on any business; will not be more than R120 000; and will not be derived otherwise than from remuneration (such as salary), interest, foreign dividends or property rental. Examples of income that will make you a provisional taxpayer include rental income, interest income or other income from the carrying on of any trade. Companies automatically fall into the provisional tax system. There is no formal registration or deregistration needed to be a provisional taxpayer. If a taxpayer is liable for provisional tax, he or she merely needs to request and submit an IRP6 return.
The amount of provisional tax payable is worked out on the estimated taxable income for that particular year of assessment, as follows: The First Period: Half of the total estimated tax for the full year; Less the employees tax for this period (6 months); Less any allowable foreign tax credits for this period (6 months). The Second Period: The total estimated tax for the full year; Less the employees tax paid for the full year; Less any allowable foreign tax credits for the full year; Less the amount paid for the first provisional period. The Third Period (voluntary): The total tax estimated payable for the full year; Less the employees tax paid for the full year; Less any allowable foreign tax credits for the full year; Less the amount paid for the 1st and 2nd provisional tax periods.
SARS has introduced changes to provisional tax which affect the way in which provisional taxpayers file their IRP6 returns. With most provisional taxpayers making their submissions electronically, SARS will no longer mail IRP6 returns to provisional taxpayers nor can it be downloaded on the SARS website. You will now be asked to send your IRP6 using one of the methods below: Register for SARS eFiling. The eFiling facility allows you to ask for your IRP6 return and make your submission and payments online, and makes sure you get fast turnaround times for assessment and refund payments. If you are already an eFiler, simply add provisional tax to your profile so that you can access and file your IRP6 return online. Call the SARS Contact Centre on 0800 00 SARS (7277) to ask for an IRP6 return or find out more about the new Provisional Tax process. Visit the SARS branch nearest you where our staff will help you to fill in and send your IRP6 electronically.
The first provisional tax payment must be made within six months of the start of the year of assessment for 28 February or six months after the approved financial year end date . The second payment must be made no later than the last working day of the year of assessment ending 28 February. The third payment is voluntary and may be made – within seven months of the year of assessment, where the year of assessment ends in February, which is 30 September and within six months of the year of assessment, in any other case.
|Taxable Deductible||Life Office Tax||Personal Income Tax on Benefits/Proceeds||Capital Gains Tax||Estate Duty|
|7||Sinking Fund Policy||No||?||-||-||?|
|12||Disability income replacement policy||Yes||?||?||-||-|
|Number – see notes||? = Tax applies||– = Tax does not apply|
The Taxation Laws Amendment Act No 3 of 2008 (“the Act”) was promulgated on 22 July 2008. Below is a brief summary of some of the provisions of the Act. Please Note: Where the amendments affect any of our retirement funds, rule amendments may be necessary before we can give effect to the amended legislation.
The maximum retirement age of 70 years has been removed. Members of retirement annuity funds can now retire at ANY age after age 55 Retirement annuity benefits can be commuted on emigration. The emigration must be recognised by the South Africa reserve bank for the purposes of exchange control. The benefit may be subject to tax depending on the specific circumstances of the member Commutation of a lump sum from a “paid up” retirement annuity fund prior to retirement is provided for. The amount which can be commuted will be as determined by the Minister by notice in the Gazette. Currently the Gazetted amount is R7000.
Pension and provident preservation funds are now defined in the Income Tax Act The Act also serves to govern (together with the Pension Funds Act) preservation funds and the intention is that this legislation should replace the SARS retirement fund notes (RF1/98 and its addenda etc.) which previously governed preservation funds Where a benefit is being transferred from an occupational pension or provident fund to a preservation fund there is no longer a requirement for a “participating employer” Where a benefit is being transferred from one preservation fund to another preservation fund the “eligibility” requirements as set out in RF1/98 no longer apply. More specifically it is no longer a requirement that the member: be employed; and/or be contributing to an employer’s retirement fund Benefits paid to non-member spouses in terms of valid divorce orders and unclaimed befits can be transferred into preservation funds
Living annuities are now defined in the Income Tax Act The Act also serves to govern (together with the Long Term Insurance Act) living annuities and the intention is that this legislation should replace the SARS retirement fund notes (RF1/96 and its addenda etc.) which previously governed living annuities More specifically the Act provides for the following: Commutation from living annuities up to an amount prescribed by the Minister by notice in the Gazette. We have been verbally advised that this amount is likely to be R75 000 That the amount of income which can be drawn from a living annuity will be prescribed by the Minister by notice in the Gazette. Consequently this amount will remain within the existing parameters of 2.5%-17.5% until the Minister determines that it should be amended On the death of an annuitant the value of the annuity may be paid to the beneficiary/ies or the deceased estate as a lump sum. Alternatively, the beneficiary/ies may elect to receive an annuity
Transfer Duty is a tax levied on the value of any property acquired by any person by way of a transaction or in any other way. It’s based on the value by which any property has increased when you come to dispose of that property. For the purpose of Transfer Duty, property means land and fixtures and includes real rights in land, rights to minerals, a share or interest in a “residential property company” or a share in a share-block company. All Conveyancers are requested to register with SARS. These are the Transfer Duty rates applied to properties acquired on or after 23 February 2011, and apply to all persons (including Companies, Close Corporations and Trusts):
|VALUE OF PROPERTY (Rand)||RATE|
|R0 → R600 000 ||0%|
|R600 000 → R1 000 000||3% on the value above R600 000, but not exceeding R1 000 000|
|R1 000 000 → R1 500 000||R12 000 plus 5% on the value above R1 000 000, but not exceeding R1 500 000|
|R1 500 000 and above||R37 000 plus 8% on the value above R1 500 000|
For acquisitions: The person acquiring the property For renunciations: The person in whose favour or for whose benefit, any interest in or restriction upon the use or disposal of property has been renounced.
A Transfer Duty Declaration can be submitted to SARS in one of two ways: Through eFiling, Through Third Party Conveyance systems which integrate with eFiling. Should supporting documents be required, it will be requested of the Conveyancer to upload such electronically. Once satisfied, the application will be approved. If no payment is required, the system will automatically release the receipt after approval. Should a payment be required, the Conveyancer will make such electronically after which the receipt will be issued. It is advised that all parties ensure their tax affairs are in order as property transfers are used in an attempt to ensure tax compliance across all taxes. If, for example, you are not registered or you have outstanding tax returns or payments, you will be given the opportunity to correct matters with SARS. Should matters not be resolved, steps will be taken to ensure compliance and this may delay the transfer of the property. One such step that may be taken is the appointment of the Conveyancer or any other person as an agent with the instruction to pay SARS from the proceeds of the sale. It is further recommended that you ensure that your personal details (ID number, Income Tax/VAT number) on our systems are correct as any disparity could also cause delays. A taxable supply is a supply on which VAT must be charged at the standard rate (currently 14%) or at the zero rate. To be a taxable supply, the supplier (seller or transferor) must be a “vendor” and the supply of the property must be in the course or furtherance of an “enterprise.” The supply of an entire enterprise with all its assets (including any fixed property) as a “going concern” may qualify as a zero-rated taxable supply if all the conditions in section 11(1)(e) of the VAT Act are met. Refer to Interpretation Note 57: Sale of an enterprise or part thereof as a going concern and VAT News 15 – August 2000 for more details in this regard.
Duty is payable within six (6) months from the date of acquisition. If the Transfer Duty is not paid within this period, interest calculated at 10% per annum for each completed month. A completed month is calculated as the first day from the expiry of the interest free 6 month period to the date of payment. Interest will be charged at the “prescribed rate”. However, these specific provisions did not come into effect from 1 October 2012 when the Tax Administration Act became effective, but will come into effect way of Presidential Proclamation in the Government Gazette at a later date. Remember that in the case of conditional sales the period of 6 months commences from the date on which the transaction was entered into (i.e. the last date of party signature to the agreement), and not the date when the contract becomes binding upon the parties (i.e. the date the conditions are fulfilled.)
From 1 April 2011 all Transfer Duty must be paid electronically via eFiling. This will normally be done by a Conveyancer, who acts on your behalf. See the video guide to Transfer Duty and eFiling below.
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