Nwanda Internal News
(March 2018)

DAYS

Awesome Rewards: 

  • Rafeeah Razak for a job well done on his first big audit (Consolidated Safety Equipment)
  • Carla Teixeira for Excellent client service
  • Daniel Adlam for Going above and beyond to meet a deadline
  • Jennifer Neill on working hard and meeting the deadline on all the sections allocated to her on Optron
  • Talita Roux for her hard work on Metalsa
  • Shene Miller for obtaining 3 distinctions
  • Talita Roux for obtaining 3 distinctions
  • Lebohang Lemaoana for her hard work on Metalsa
  • Dean Elson for passing CTA 2 exams

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Congratulations: 

To Esmeralda Lottering for passing APC SAICA Board exam

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New staff members:

A warm welcome to –

  • Anika Pretorius (tax compliance officer)
  • Mohammed Limbada (audit supervisor in Bob’s group)

Sports & Social Club threw a party for Esmeralda and Dean on Friday 9 March.

Nwanda Internal News
(Jan / Feb 2018)

DAYS

Awesome Rewards: 

  • Amy Anderson for obtaining 1 distinction
  • Dean Pullen for obtaining 3 distinctions
  • Jennifer Neill for obtaining 5 distinctions
  • Matthias Krafft for obtaining 2 distinctions
  • Mohammed Moolla for obtaining 3 distinctions
  • Shene Miller for obtaining 3 distinctions
  • Talita Roux for obtaining 3 distinctions
  • William Harris for obtaining 1 distinction
  • Cindy Hendricks for organizing the year end party at valley of the waves 

Congratulations: 

New staff members:

A warm welcome to –

  • Warren Gailey – Audit manager (Mauritz’ group)
  • Claudia Dos Ramos – Audit manager (Bob’s group)

Claudia Dos Ramos – Audit manager (Bob’s group)

  • Justin Heathcote – Junior audit manager (Christopher’s group)

Justin Heathcote – Junior audit manager (Christopher’s group)

  •  Kareemah Sayed – Junior Clerk (Christopher’s group)

Kareemah Sayed – Junior Clerk (Christopher’s group)

  •  Joshua Bester – RM

Joshua photo

  • Shivendran Moodley – MJ

Shivendran Moodley – MJ

  • Luiz Correia – Junior Clerk (Bob’s group)

 Luiz Correia – Junior Clerk (Bob’s group)

  •  Ndoji Manika – Junior Clerk (Christopher’s group)

Ndoji Manika – Junior Clerk (Christopher’s group)

  • James Harrison – Junior Clerk (Roy’s group)

 James Harrison – Junior Clerk (Roy’s group)

  •  Zayyan Khan – Junior Clerk (Pieter’s group)

 Zayyan Khan – Junior Clerk (Pieter’s group)

  • Cristen St John – Junior Clerk (Mauritz’s group)

Cristen St John – Junior Clerk (Mauritz’s group)

  • Kayla Jagaroo – Junior Clerk (Mauritz’s group)
  • Yamkela Mnotoza – Junior Clerk (Mauritz’s group)

Yamkela Mnotoza – Junior Clerk (Mauritz’s group)

  • Saul Black – Junior Clerk (Roy’s group)

Farewell to staff member:

We bid farewell to Shene Miller, we wish her the best in her future endeavours.

2018 Budget Speech

On 21 February 2018, Finance Minister Malusi Gigaba delivered his maiden budget speech.

Following President Ramaphosa’s State of the Nation Address theme of hope and renewal, Gigaba placed key emphasis on the risks that have been a centre of concern for the South African economy.

These are the tax proposals as noted in the 2018 budget speech:

Value-added Tax

VAT has increased from 14% to 15% and will take effect from 1 April 2018. This increase will affect 80% of higher income earners. Zero-rated food, such as brown bread, will remain VAT-free.

Personal Income Tax

The personal income tax of those earning between R0 – R555 600 per annum will remain unchanged, while those who earn more than R555 601 per annum will be affected by a 3.1% increase. Primary, secondary and tertiary rebates are partially increased for inflation.

Estate Duty and Donations Tax

The Estate Duty rate has increased by 5% on dutiable estates in excess of R30 million. The same percentage increase is applicable on donations of more than R30 million.

Was Now
Estate Duty above R30 million 20% 25%
Donations above R30 million 20% 25%

Sin Tax

2018 Sin Tax will increase by 6 – 10%. Tobacco will increase by 8.5%. The below infographic details the increase:

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Excise Duty

Due to take effect as of 1 April 2018, the maximum ad valorem excise duty for motor vehicles and luxury goods will increase from 7% to 9%.

Fuel and Road Accident Fund Levy

On 4 April 2018, the General Fuel Levy will increase by 22 cents per litre, and the Road Accident Fund Levy will increase by 30 cents per litre.

Social Grants

Lower income households will be financially relieved through an increase in social grants. The grant increases, which will be effective as of 1 April 2018, are as follows:

Increase Total amount
Disability Grant R90 R1690
Care Dependency Grant R90 R1690
Child Support Grant R20 R400
Old Age Grant R90 R1690

On 1 October 2018, these grants will increase by a further R10, taking the disability, care dependency and old age grants to R1 700, and the child support grant to R410.

Environmental Taxes

The Department of Environmental Affairs is due to publish a policy regarding the scope of environmental reform. Levy on plastic bags, vehicle emissions tax and the levy on light bulbs will be raised to promote eco-friendly choices.

Corporate Income Tax and Dividends Tax Rates

These have remained unchanged at 28% and 20% respectively. 

General Points:

  • The increase in VAT and the change in personal income tax will result in an additional R36 billion being raised through these measures.
  • The question of higher education has been answered by this budget speech, and government has allocated R57 billion for free education. NSFAS loans that have already been granted in 2018 will be converted to bursaries.
  • A 1.5% growth in GDP is anticipated for 2018.
  • Consumer inflation is expected to decline to between 5.3% and 5.5% in the years 2017 to 2020.
  • Sin Tax and General Fuel Levy will raise revenue of R2.6 billion.
  • A health promotion levy, which taxes sugary beverages, will be implemented from 1 April 2018.

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)

Withdrawal of vat relief for residential property developers

Section 18B of the Value-Added Tax Act[1] was introduced effective 10 January 2012 in a bid to grant relief for residential property developers caused by the slump in the property market at that time. Many property developers, registered for VAT, would develop residential properties with a view to dispose of these properties in the short-term as trading stock and as part of its VAT enterprise. However, following the global financial crisis of little less than a decade ago, many property developers found themselves in a position where they were increasingly forced to rent out residential properties once a development was completed due to the slower rate at which properties could be disposed of compared to earlier.

The letting of residential property is typically exempt from VAT. Due to a change in use of the properties therefore (albeit temporarily) from being held for sale as trading stock to now being put up to be let in the interim while being on market constituted a change in use of the properties. Due to the change in use of the properties, from being used to make taxable VAT supplies in the ordinary course of business and being sold as trading stock by the developer, to now being used to make VAT exempt supplies in the form of being used to generate residential rental income, the provisions of section 18(1) of the VAT Act would ordinarily have applied. In terms of section 18(1), where goods have been acquired previously for purposes of making VATable supplies, and these goods are subsequently used to make exempt supplies, the VAT vendor must be deemed to have disposed of all those assets for VAT purposes. In other words, even though no actual disposal of assets has taken place, such a disposal is deemed to take place for VAT purposes and which gives rise to output VAT having to be accounted and paid for by the developer based on the open market value of the property at that stage.[2]

As one could quite easily imagine, having to account for output VAT in these circumstances may be prohibitive, especially considering that the value of a property will likely have been enhanced due to the development and that VAT inputs thus far claimed by the developer would be overshadowed by the output VAT amount that is now required to be claimed.

It is in acknowledgement hereof that section 18B was introduced to the VAT Act in 2012. In terms of that provision, property developers were granted a 36-month grace period within which to sell properties, and during which time these residential properties could be rented out without a deemed supply being triggered for VAT purposes.

When introduced originally, it was made clear at that stage that the relief for temporary letting as explained above will only be in effect until 1 January 2018. However, it is arguable that the property market has not recovered sufficiently yet for the relief to be withdrawn at this stage.

[1] 89 of 1991

[2] Section 10(7) of the VAT Act

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)

Tax consultancy services:
A fringe benefit?

A recent judgment of the Tax Court sitting in Pretoria[1] highlighted yet again the very broad nature of the employment fringe benefit regime governed by the Seventh Schedule of the Income Tax Act[2] and as applies to goods and services provided to employees through an employer. As a general principle, employees’ benefits received from their employers in whatever form could potentially be treated as part of employees’ remuneration and therefore subject to income tax in their hands. Such fringe benefits are therefore also subject to the PAYE regime and which should be applied by employers in withholding PAYE on the value of such benefits.

Paragraph (i) to the “gross income” definition in section 1 of the Income Tax Act specifically includes in gross income “… the cash equivalent, as determined under the provisions of the Seventh Schedule, of the value during the year of assessment of any benefit or advantage granted in respect of employment or to the holder of any office, being a taxable benefit as defined in the said Schedule…”.

In the particular tax court case, a South African subsidiary company, forming part of an international corporate group, employed non-resident employees as part of a global secondment programme which the group was implementing. In terms of that secondment programme, employees were guaranteed an after-tax salary amount of not less than what the employees would have received in their country of residence while working for the South African subsidiary company. In other words, where a higher tax charge would be levied in South Africa on remuneration earned, the South African subsidiary would carry that cost on behalf of that employee.

In order to implement this complex “Tax Equalisation Scheme”, the South African employer company contracted the services of a firm of tax consultants to assist the non-resident employees to submit their tax returns in accordance with the South African income tax laws, and also to ensure that the returns reflect the correct information to give effect to the “Tax Equalisation Scheme”.

The Tax Court found that the services which the tax consultants provided, although arguably necessary for purposes of fulfilment of the employer’s contractual arrangement towards its employees, were in essence a service rendered to the employees and not the employer, even though the tax consultants’ services were paid for and contracted by the employer. As a result, these services constituted a “benefit or advantage” for the employees as envisaged in the gross income definition quoted above, and moreover such services were provided for the “private or domestic purposes” of the employees in question.[3] As a result, the appeal against the PAYE assessment raised by SARS in the amount of R2.4m was dismissed.

Although a fact-specific judgment, it nevertheless again highlights the very broad nature potentially of the PAYE regime. Given the heavy penalties and other sanctions linked to a contravention of the provisions of the Fourth Schedule (which governs the collection and payment of PAYE, which may also be levied on fringe benefits received by employees), employers are advised to approach the tax consequences of employee benefits with caution.

[1] Case No IT13775

[2] 58 of 1962

[3] Paragraph 2(e) of the Seventh Schedule to the Income Tax Act

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)