Nwanda Internal News
(July 2017)

DAYS

Awesome Rewards were awarded to the following staff this month:

Dean Elson for an excellent job done on Peterbill Group
Keisha Sibiya for an excellent job done on Peterbill group
Talita Roux for a job well done on her last two files

Farewell to staff member:

We bid farewell to Carmen Maroun and Roald van der Heiden, we wish them the best in their future endeavours.

Announcement:

Sumita’s boyfriend, Michlin, proposed on the stage at The Barnyard on the night that we were there for the Sports & Social event. We wish the beautiful couple many happy years together.

Proposal

n2

Charity:

Thank you to everyone for their generous donations to St Francis Care Centre in celebration of Mandela Day.

mandaba

 

 

 

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Gone are the days of tax-free salaries abroad

Many South African taxpayers earning a salary abroad have for many years been able to benefit from so-called “double non-taxation”. This would be the case where salaries are earned in countries where the employer country would not tax salaries earned in that country, and where a domestic South African income tax exemption would also be available to such South African employees. The UAE for example is renowned therefore that it levies very little, if any, taxes on non-resident employees employed in that jurisdiction. This regime interacts quite well with the South African exemption from income tax provided to South African employees working abroad and in terms of which South Africa would in many cases also not levy income tax on salaries so earned abroad. In other words, a salary earned abroad may potentially not be taxed in either the country of source or residence (i.e. South Africa).

In terms of section 10(1)(o)(ii) of the Income Tax Act[1] salaries earned abroad would be exempt from South African income tax if the salary is earned for services rendered outside of South Africa, and the employee would be absent from South Africa for at least 183 days in a tax year, of which at least 60 are consecutive.

In the annual national budget speech earlier this year, Government warned of its intention to withdraw relief for South African individuals working abroad and effectively achieving double “non-taxation” on salaries so earned. This threat has now been borne out by the proposed withdrawal of the exemption in section 10(1)(o)(ii) of the Income Tax Act, proposed in terms of the draft Taxation Laws Amendment Bill published on 19 July 2017. As is explained by the draft Explanatory Memorandum to the Bill,

“It has come to Government’s attention that the current exemption creates opportunities for double non-taxation in cases where the foreign host country does not impose income tax on the employment income or taxes on employment income are imposed at a significantly reduced rate.”

The draft Bill proposes that section 10(1)(o)(ii) be deleted effectively for tax years commencing on or after 1 March 2019. This would effectively mean that South African residents will be taxable in South Africa on salaries earned abroad to the extent that the source country does not levy tax on the income so earned. To the extent however that income is taxed abroad too, South Africa should grant a credit against taxes payable here in terms of either an applicable double tax agreement or the provisions of section 6quat of the Income Tax Act.

[1] 58 of 1962

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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The 2017 tax season is open

The Commissioner for SARS recently published the annual notice to officially ‘open’ the 2017 tax season. Individuals are now able to file their annual income tax returns for the 2017 year of assessment (which ended on 28 February 2017) from 1 July, and we request that our clients contact us so that we can arrange for the necessary. The following time frames will apply:

  • For a company, within 1 year of its year-end (for example, a company with a financial year-end of 31 March 2017 is required to submit its 2017 tax return by 31 March 2018);
  • For all other taxpayers (including natural persons and trusts), returns are to be submitted at the latest by:
    1. 22 September 2017 for persons still making use of manual hardcopy returns;
    2. 24 November 2017 for persons (excluding taxpayers registered for provisional tax) making use of SARS’ eFiling system; and
    3. 31 January 2018 for all provisional taxpayers making use of SARS’ eFiling system.

As was the case in previous years, companies may only file returns using eFiling – manual returns are not allowed in terms of the above SARS notice.

Not all individuals are required to submit income tax returns. Various criteria are listed which, only if any of these are met, means that a person is obliged to submit a return to SARS.  For example, all companies, whether incorporated in South Africa or not, are obliged to submit returns if South Africa is the place from which the company is effectively managed.  Non-tax resident companies, but which were incorporated in South Africa, must also render returns, as well as non-tax resident companies incorporated outside of the Republic and earning income from a South African source.

Taxpayers (excluding companies) are required to submit returns if they carried on any trade in South Africa during the 2017 tax year. This does not include the mere earning of a salary. A variety of other factors are listed in terms of which non-company taxpayers are required to submit returns. The main exemption from having to submit a return for tax resident natural persons though is if the person earned only a salary from a single employer during the year which did not exceed R350,000, and income from interest for that person was also less than R23,800 (or R34,500 if the person is older than 65).

Quite a number of taxpayers are therefore potentially exempt from the requirement to submit an income tax return, even if registered for income tax purposes. However, even though it may in terms of the notice not be required to submit a tax return, it may still be beneficial to do so. Natural person taxpayers are often under the unfortunate impression that the completion of a return necessarily gives rise to the incidence of tax.

This is of course not so and many may have suffered tax consequences during the year already by having amounts deducted from salaries in the form of pay-as-you-earn contributions deducted from their salaries. This of course amounts to a mere cash flow mechanism introduced to ensure a steady supply of cash to the fiscus and which contributions are set-off from the annual tax liability when the annual tax return submitted is assessed. However, the opportunity to negate this is presented through the completion of a tax return and claiming deductible expenses in the form of e.g. medical aid or pension fund contributions.

The principle in this regard is that all income is taxable irrespective of whether a return is completed or not. However deductions can only be claimed by completing a tax return and natural persons specifically should jump at the opportunity to do so.

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Beware of capital gains tax when you emigrate

While many people immigrate to South Africa, we also see many of our clients emigrating from South Africa. And while formal migration-status is not necessarily linked to tax residency, the time of tax migration often coincides with formal emigration linked to passport or visum status. Many are surprised to learn (often after the fact) that emigration for tax residency purposes gives rise to tax consequences in South Africa, and specifically to capital gains tax (“CGT”) consequences in the form of so-called “exit charges”.

In essence, section 9H of the Income Tax Act, 58 of 1962, determines that when a person ceases to be tax resident in South Africa, that person is deemed to have disposed of all his or her assets on the day that the individual emigrates for income tax purposes. In other words, in calculating their income tax exposure, individuals emigrating for tax purposes are regarded as having sold all of their assets at market value on the day before that on which they leave the country. As a result, a capital gain is realised on this deemed disposal that is subject to CGT at the prevailing tax rates. Currently, 40% of capital gains so realised by individuals are included in their annual taxable income, which amount may be subject to tax at rates of as high as 45%.

The policy justification for taxing individuals upon emigration is that taxes are to be levied on all capital growth achieved on assets owned by South African residents while they were tax resident. Once an individual will have emigrated, limited mechanisms would exist whereby capital gains may only be realised upon eventual actual sale of assets subsequently once the individuals are no longer tax resident in South Africa. (It is for this reason that South African immovable property is excluded from the “exit charges” regime; section 35A of the Income Tax Act provides for a withholding tax mechanism whereby CGT may be recovered from non-residents when they sell South African immovable property.)

While one may have sympathy for the policy justification for the levying of “exit charges”, it must be recognised that any deemed disposal of assets necessarily creates a cash flow conundrum for the individuals affected, quite often proving prohibitive for wealthy individuals seeking to emigrate. It is quite possible that assets of individuals emigrating may consist mainly of illiquid assets such as share investments. Upon emigration, these very assets may need to be actually disposed of in order to raise sufficient cash resources to be able to pay the resultant CGT that would have been payable on a deemed disposal of those assets at emigration.

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Exemption for foreign salary earners

South African tax resident individuals are liable to income tax on their worldwide income. In other words, where a South African tax resident individual were to earn a salary for employment which may from time-to-time be exercised outside of the borders of the Republic, that income earned is still included in that South African tax resident individual’s gross income.

An exemption is available though to South African employees where the extent of the services rendered abroad are significant.[1] The exemption is however limited to income earned in the form of remuneration from an employer and only to the extent that the remuneration received is for those services rendered abroad. In terms of the relevant provision, salaries earned in whatever form for services rendered outside of South Africa will be exempt from income tax in South Africa where the employee has been absent from the Republic for:

  • At least 184 days during a 12-month period (in other words for more than 50% of a 1-year period); and
  • More than 60 days of the above will have continuously been spent beyond South Africa’s borders.

As above, it is important to appreciate that it is not the entire salary earned by the employee for the year of assessment which will be exempt from South African income tax. The exemption is limited to only so much as relates to services rendered abroad. In other words, to the extent that the salary is earned for services that will be rendered in South Africa, that portion of a salary earned will still be taxable in South Africa.

The exemption is typically applicable to employees seconded for periods of time to render services abroad. It is quite likely that even though the income earned may be exempt from South African income tax, that the country in which the services are rendered will seek to levy tax on the employee’s income based thereon that the source of the income earned will be in that other country.

It is therefore possible for employees to benefit from the exemption on foreign earned salaries, whilst also paying very little income tax in the other country, if such a country is one with very low individual income tax rates (typically countries in the Middle East, such as Dubai). This incidence of “double non-taxation” has recently drawn the attention of National Treasury, and the Minister of Finance warned in this year’s Budget Speech that South Africa is considering rescinding the exemption if the other country in which the employment services are rendered does not seek to significantly tax the income earned by the employee.

[1] Section 10(1)(o)(ii) of the Income Tax Act, 58 of 1962

This article is a general information sheet and should not be used or relied upon 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 financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

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Changes to the dispute management process

The South African Revenue Service (SARS) recently introduced certain changes and improvements to its current dispute management process.

Any taxpayer who is aggrieved by any assessment may request SARS to provide those reasons for the assessment sufficient to enable the taxpayer to formulate an objection. For the first time, taxpayers will be able to make such a request for reasons for an assessment electronically via eFiling or at any SARS branch. This automated functionality will be available for personal income tax (PIT), corporate income tax (CIT) and value-added tax (VAT). Where a valid request for reasons has been identified by the SARS system, the period that an objection can be lodged will be automatically extended to the period permitted by the Dispute Resolution Rules issued by SARS in terms of section 103 of the Tax Administration Act.[1]

The new dispute management process will also introduce a separate condonation workflow whereby the taxpayer will be allowed to submit a Request for Reasons, Notice of Objection (NOO) or Notice of Appeal (NOA) after the periods prescribed by the Dispute Resolution Rules have lapsed. Previously, the condonation process was included in the actual dispute process. To the extent therefore that a dispute was treated by SARS as invalid (as opposed to not being allowed to proceed as a result of a late submission), taxpayers were confused as to the outcome of the dispute and what the next available step in the dispute process was. The new automated condonation process therefore allows SARS to attend to requests for condonation for the late submission of the relevant notices or requests before attending to the dispute itself. This will ensure that the late submission is aligned with the legislation as it will prevent situations where the dispute is simply classified as invalid merely because the relevant submission is late (quite often automatically).

Taxpayers will also now be able to request SARS to suspend certain payments of VAT pending the outcome of a VAT dispute via eFiling or at a SARS branch similar to the requests for suspension of payments that were already implemented for PIT and CIT in 2015.

eFiling will furthermore be made an entirely guided process to ensure that the dispute is submitted according to legislative requirements and to eliminate any invalid disputes from being submitted to SARS.

The take-away is that SARS regards these changes as part of its ongoing commitment to delivering a better service to taxpayers. The changes to the dispute management process are therefore aimed at aligning the process more closely with the relevant legislation, to remove uncertainties that existed with regards to the dispute process and to make the process easier to follow.

[1]28 of 2011

This article is a general information sheet and should not be used or relied upon 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 financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

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Nwanda Internal News
(June 2017)

Nwanda news

Awesome Rewards were awarded to the following staff this month:

  •  Shaista Ebrahim for working hard and meeting deadlines.
  • Kavitha Bhawanideen for overall good work.
  • Sumita Vasudev for excellent work and meeting deadlines.
  • Ntshepeng Tshotetsi for stepping up to the challenge and doing an excellent job.

New staff members:

A warm welcome to Nothando Nkosi,she has joined Bob’s team as an audit senior.

New Employee

Farewell to staff member:

We bid farewell to Melishia Engelbrecht, we wish her the best in her future endeavours.

Good luck for the exams:

Esmeralda Lottering is writing the June ITC exam and we wish her all the best.

 Donation to charity:

Casual day money that was collected and Nwanda donated R2000 to Gift of the Givers towards their Knysna and Western Cape disaster relief project.

More about them can found on their website:

http://www.giftofthegivers.org/disaster-relief/south-africa/1137-2017-disaster-relief-sa/knysna-and-western-cape-disasters/6652-gift-of-the-givers-knysna-update

We urge you to contribute your money for casual days so that we can continue to contribute towards more worthy causes.

Announcement:

Congratulations to Patricia, she gave birth to a baby boy on 24 June.

Motivation

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Submit your 2017 Income Tax Return and avoid penalties

Annual Tax season is here, and Income Tax return submissions begin 1 July 2017. We’ve taken the liberty of answering frequently asked questions individuals may have. The South African Revenue Service (SARS) has allocated different submission deadlines dependant on the manner of the submission.

What are the submission deadlines for Income Tax Returns?

Please pay careful attention to the deadline applicable to you:

  • 22 September 2017 for manually submitted returns;
  • 24 November 2017 for returns submitted electronically at a SARS branch or via e-filling; or
  • 31 January 2018 for returns submitted by provisional taxpayers via e-filling.

Companies are exempt from the abovementioned dates, as they are required to submit their returns within 12 month their financial year, via e-filing.

Who is required to submit, and who is exempt?

The threshold in respect of individuals required to submit a return is provided below:

  • Every individual who is a resident and had capital gains that exceeded R40 000;
  • Individuals whose gross income exceeded
  1. R116 150 (if older than 65 but under 75 years) or
  2. R75 000 (if under 65 years),
  3. R129 850 (if older than 75)

A natural person, or a deceased’s estate is exempt from submission if their gross income consists solely of any one or more of the categories below;

  • Remuneration does not exceed R350 000 from a single source (including allowances);
  • They did not receive a car allowance or other income;
  • They received interest income from a source within South Africa that does not exceed:
  1. R23 800 (if you are younger than 65 years) or
  2. R34 500 (if you are 65 years and older);
  • They received dividends and were a non-resident during the 2017 year of assessment; and
  • received or accrued an amount from a tax-free investment.

What are the necessary supporting documents? 

  • IRP5/IT3(a) certificate(s) from your employer or pension fund;
  • IT3(b) and (c) certificates for investment returns; such as interest, dividends and/or capital gains/losses
  • Financial statements (if applicable);
  • Medical aid contribution certificates and receipts for out-of-pocket medical expenses
  • ​Completed confirmation of diagnosis of disability form (ITR-DD) (if applicable)
  • Retirement fund certificates (pension, provident and retirement annuities);
  • Logbook and other documents in support of business travel expenses;
  • Bank account details; and
  • Any other relevant income and deduction information.

To curb penalties and interest related to late submission, we strongly recommend collating the respective documents in preparation for submission to SARS as soon as possible. Should you require assistance with your Income Tax return, please contact our offices.

For further information regarding South African Taxation, please get in touch with us via the contact information below.

This article is a general information sheet and should not be used or relied upon 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 financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

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Nwanda Internal News
(May 2017)

DAYS

Awesome Rewards were awarded to the following staff this month:
Miguel Jorge – commitment to the Due Diligence for Nordlands Opertations
Renier Smit – going above and beyond in completing TSRs and PSRs
Natasha Bothma – hard work and meeting deadlines
Vicky du Plessis – excellent work in resolving issues at SARS

Attitude

New staff members:
A warm welcome to

Farewell to staff member:
We bid farewell to Gideon Manika, we wish him the best in his future endeavours.

Commencement of Ramadaan month:
Ramadaan starts from 26th May and ends on 24th June. We wish the Muslim staff a blessed month.

 

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Your primary residence and capital gains tax

Capital gains tax is somewhat of a misnomer in that it does not represent a tax in and of itself, but rather operates to include a portion of a person’s capital gains realised when an asset is sold in that person’s taxable income, and which taxable income is then subject to income tax. For natural persons, 40% of capital gains realised on assets are included in taxable income, whereas the inclusion rate for legal persons stand at 80%.

Disposing of immovable property would typically give rise to a significant capital gain. However, where that property sold is the primary residence of the person selling it, certain exclusions apply which reduce the ultimate income tax liability of the seller, often even eradicating the capital gains tax effect of the sale altogether.

Paragraph 44 of the Eighth Schedule to the Income Tax Act, 58 of 1962, defines a residence as “any structure, including a boat, caravan or mobile home, which is used as a place of residence by a natural person, together with any appurtenance belonging thereto and enjoyed therewith.” The exclusion does not apply however to any residence but only to a person’s primary residence. Again, a primary residence is defined as “a residence—

(a) in which a natural person … holds an interest; and

(b) which that person … or a spouse of that person … ordinarily resides or resided in as his or her main residence and uses or used mainly for domestic purposes…”

Theoretically therefore, the exclusion would not apply to holiday homes. The Act is further explicit in that a person cannot have more than one primary residence at any given moment.

The exclusion afforded to disposals of primary residences is quite significant and can operate in either of two potential manners. Firstly, where the selling price of the primary residence is less than R2 million, no capital gains tax will be payable. Secondly, even if the selling price is more than R2 million, up to R2 million of the capital gain will be excluded from being subject to income tax.

Where two persons use the same property as a primary residence and jointly own that property, the R2 million is apportioned between the two of them. In other words, the exclusion applies per property and not per taxpayer. If for example a husband and wife own a house which they sell for a profit of R3 million, each will be taxable on R500,000’s worth of gains (being R1.5million less R1million each)

The exclusion is significant, yet not one to be taken for granted. Many taxpayers make the mistake of transferring their primary residence to a trust structure for estate duty purposes, thereby forfeiting the potential primary residence exclusion if the property is sold in future: by virtue of the definitions above non-natural persons can never have a primary residence and trusts and companies therefore are ineligible for the relief provided.

This article is a general information sheet and should not be used or relied upon 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 financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

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