Payroll... and other Taxes in your pocket. March / Payroll & HRIS Technology

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1 Payroll and other Taxes in your pocket 2015/2016 March 2015 Payroll & HRIS Technology

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3 INDEX Intro and General Amounts Exempt from Employees Tax Allowances Fringe Benefits Allowable Deductions Medical Tax Credits Special Income Independent Contractors Employment Tax Incentive Other Related Statutory Requirements Dividends Tax & Capital Gains Tax Legislative Calendar Other Taxes: Trust Tax Directives Provisional Tax Interest and Dividends Company Tax Small Business Corporations Micro Businesses Learnership Allowance VAT Transfer Duty Estate Duty Donations Tax Securities Transfer Tax LabourNet Products & Services

4 2015 Budget in a Nutshell How it all came in! Tax Revenue Only This Year s Budget Last Year s Actual Tax on income, profits, capital gains Tax on payroll & workforces (e.g. skills levies) Tax on property (estate duty, transfers, etc.) Tax on goods and services (VAT, levies, etc.) Tax on international trade (import duties, etc.) TOTAL Tax Revenue Last Year (2014 / 2015) Tax on income, profits, capital gains Tax on payroll & workforces (e.g. skills levies) Tax on property (estate duty, transfers, etc.) Tax on goods and services (VAT, levies, etc.) Tax on international trade (import duties, etc.) INTRO AND GENERAL Tax Revenue Budget (2015 / 2016) Tax on income, profits, capital gains Tax on payroll & workforces (e.g. skills levies) Tax on property (estate duty, transfers, etc.) Tax on goods and services (VAT, levies, etc.) Tax on international trade (import duties, etc.) 1

5 Some Commentary Preparing and delivering the 2015 budget speech must have been a hugely daunting task for the Minister of Finance, Nhlanhla Nene. Firstly, he had to calm the waters and do a pretty smart balancing act to keep taxpayers, the greater business community, and general market sentiment at bay, whilst still ensuring that all governments revenue collection requirements would somehow be met. This, off the back of what was a tough year, and with all indications being that the year ahead will be no different, was always going to present a challenge. Secondly, this being his maiden budget speech, and with his highly popular and respected predecessors in the house scrutinising his every word, he certainly had some pretty serious expectations to live up to. All this couldn t have been easy for him, but by addressing those concerns we all have, aptly and soundly in the manner in which he did, and by spreading the load in terms of how the additional revenue would be collected, the general consensus was that he passed the test very well, so he and his team do need to be congratulated. Needless to say some of the items in the Budget Speech did not sit well with taxpayers, unions and the opposition benches. For instance, this is the first time in 20 years that there has been a tax increase for individuals, an increase which mainly impacts the individuals at the upper end of the earning s table. Hopefully this is not a sign of things to come. On the other hand though, and as has become customary over the years, those taxpayers at the lower end of the earnings table, again this year still managed to get some relief. Coupled with this we didn t escape higher prices regarding electricity, fuel, cigarettes and alcohol, to mention a few, and as such it looks like most of us will need to tighten our belts somewhat this year. In essence, it was a budget which was close to what most had predicted and thus expected, with a few little surprises thrown in here and there as well, but a budget that we all can live with for now. INTRO AND GENERAL

6 INTRO AND GENERAL Payroll & HRIS How it s all going out! Expense Items (in R Billion) 2014/15 Revised Estimate 2015/16 Budget Estimate % Average Growth 2014/ /18 General Public Services % Defense Public Order and Safety % Local Development and Social Infrastructure % Economic Affairs % Social Protection % Health % Basic Education % Post-School Education & Training % Debt-Service Costs % Unallocated Reserves Total expenditure % 3

7 Expenditure This Year (2015 / 2016) General public services Defense Public order and safety Local Development & Social Infrastructure Economic Affairs Social Protection Health Basic Education Post-School Education & Training Debt-Service Costs Unallocated Reserves Expenditure Last Year (2014 / 2015) General public services Defense Public order and safety Economic infrastructure Economic services Social Protection Housing and community amenities Health Education, sport and culture Employment and social security Science & Technology State debt cost Contingency reserve INTRO AND GENERAL

8 INTRO AND GENERAL Payroll & HRIS Some Commentary The Minister committed that the state would also be tightening it s own belt this year with the announcement of initiatives to reduce expenditure on items such as catering, travel, venue hire and entertainment, so feeling the pinch would not just be exclusive to taxpayers out there. Further measures to reduce state expenditure included reprioritising of certain non-performing initiatives and projects, new and less expensive measures to assist in the funding of state owned companies, freezing the growth of public service positions, containing the state salary bill to 40% of non-interest spending, identifying and curbing wastage and introducing measures to improve efficiency, just to mention a few. On the flip side more money would be spent on infrastructure maintenance, fuel for police vehicles, medicine and school books - all good and noble as long as the expenditure is justified and managed properly. As usual the SARS collection machines again stood up to expectations and assisted in greater compliance amongst taxpayers, brought many new entrants into the tax net and ensured that taxes due were collected accurately and on time. This area will receive even more attention this coming year, particularly when the improved and more automated AA88 collection processes are released. Finally, government s eyes are still firmly on the National Development Plan which was crafted some time back, as this has been positioned as the vehicle that will, amongst other things, lead to more job creation and thus enabling many citizens to come out of the poverty cycle. Much in the budget speech was aligned to this plan, so hopefully this year will bring us another step closer to seeing this plan become a reality. 5

9 Payroll Taxes... in your Pocket! Payroll Taxes: 2015/2016 Tax Rates Taxable Income Rates of Tax R0 - R % of each R1 R R R % of the amount above R R R R % of the amount above R R R R % of the amount above R R R R % of the amount above R R R % of the amount above R Rebates This Year Last Year Primary (All Taxpayers) R R Secondary (65 years and over) R7 407 R7 110 Tertiary (75 years and over) R R2 367 Tax Threshold This Year Last Year Below 65 years R R years and over R R years and over R R INTRO AND GENERAL

10 Lump Sum Severance Bene ts Taxable Income Rates R0 R % R R % of taxable income above R R R R % of taxable income above R R R % of taxable income above R Lump Sum Withdrawal Bene ts Taxable Income Rates R0 - R % R R % of taxable income above R R R R % of taxable income above R R R % of taxable income above R INTRO AND GENERAL SARS Of cial Interest Rate (for low/interest free loans) The SARS official Interest Rate is determined by the current Repo Rate set by the Reserve Bank of South Africa. This rate is the Repo Rate plus 1 percentage point. The current interest rate set as from 1 August 2014 is: 6.75% 7

11 Amounts Exempt from Employee s Tax The following value of items received by an Employee from their Employer are exempt from tax (provided certain conditions are met): Uniforms Transfer/Relocation Costs Share Schemes Bursaries/Scholarships Income Received by Expatriates The above listed items are exempt under the following conditions: Uniforms It is an employment condition that the Employee wears a uniform while on duty The uniform is clearly distinguishable from their ordinary clothing Transfer/Relocation Costs If costs were incurred in relation to the transportation of the Employee/their household/their personal goods from their previous residence to their new residence, if relocated by Employer Costs, allowed by the Commissioner, incurred by the Employee with respect to the sale of their previous residence as well as those incurred when settling into their new residence Costs incurred with respect to the rental of temporary accommodation occupied while the Employee is in search of permanent accommodation (these expenses are exempt for a maximum period of 183 days after the Employee s transfer) Share Schemes Employers can issue qualifying shares to Employees up to a cumulative value of R per Employee in respect to the current year and the immediate preceding 4 years Employers may claim the shares as a deduction up to R per Employee An amount received or accrued by an Employee derived from either: - the cancellation of a transaction under which the Employee purchased the shares under the scheme - upon repurchase (by the Employer) at a price not exceeding the selling price to them under the scheme is exempt from tax if the Employee does not receive compensation for consideration EXEMPT INCOME

12 EXEMPT INCOME in excess of the purchase price actually paid for the shares Gains from selling the shares by the Employee before 5 years are subject to income tax in the hands of the Employee Gains from selling the shares by the Employee after 5 years are subject to Capital Gains Tax in the hands of the Employee Please note that any dividends paid out from these schemes will be subject to the standard dividend withholding tax applicable (discussed further on in this booklet) Bursaries There must be an agreement for the Employee to reimburse the Employer in the event that studies are not completed (excludes inability to conclude studies due to death, illness or disability) In the case where a scholarship or bursary is granted to enable or assist any relative of an Employee to study - The Employee s remuneration for the year may not exceed R The bursary is tax free to the extent that it does not exceed R for education up to NQF level 4 (matric or grade 12) during the tax year; or R for education over NQF level 5 and upwards In the event that none of the above-mentioned conditions are met, the amount so received will result in a taxable fringe benefit. Expenditure in connection with internal or on-the-job training or courses presented by other institutions on behalf of the Employer, does not represent a taxable benefit in the hands of the Employees, provided that the training is job-related and ultimately for the Employer s benefit Income Received by Expatriates Income received by an Outbound expatriate (SA tax resident working abroad) is exempt if the Employee meets the following conditions: - Employee is physically outside SA for more than 183 full days (the 183 day period is to fall within any 12 month period starting or ending during the tax year) - Employee is physically outside SA for a period exceeding 60 consecutive full days during the 12 month period mentioned above Income received by an Inbound expatriate (individual who is not a SA tax resident) is exempt from SA tax provided it is not received from a source within SA 9

13 Allowances An Employer can grant Employees any of the below allowances, these allowances are granted in addition to the Employee s normal income: Subsistence Allowances Travel Allowances Allowances for a Holder of a Public Office Other Specific Allowances Subsistence Allowances Granted if the Employee spends at least 1 night away from their normal residence for business purposes If the Employee was away from their usual residency but still within SA, the deemed daily amounts are as follows: - R109 for incidental costs only - R353 for meals and incidental costs If the Employee was away from their usual residency and is outside SA, the deemed daily amounts are based on the rates prescribed per the specific country (see SARS country table) Travel Allowances These allowances are granted in the form of regular travel allowances or reimbursive allowances: 80% of the travel allowance is to be included in taxable remuneration If the Employer is satisfied that at least 80% of the travel allowance will be used for business purposes, they may reduce taxable portion of the allowance to only include 20% of the allowance in taxable remuneration Reimbursive allowances are based on actual km s travelled by the Employee (calculated by multiplying actual business km s by the prescribed rate) Prescribed rate determined by the Minister (based on either of the below) - R3,18 per km - Determined rate (based on vehicle value as well as the fixed, fuel and maintenance costs) Travel to and from an Employee s home and place of business is deemed to be private travel Where a travel allowance is paid in addition to a reimbursive allowance or vice versa, both amounts will be combined on assessment. This combined allowance will be treated as a travel allowance ALLOWANCES

14 ALLOWANCES Payroll & HRIS Travel Allowance Taxation Table Scenario Must PAYE be deducted Code A fixed allowance is paid Yes 3701 Fuel and expenses paid by the Employer (e.g. petrol, garage and maintenance cards). Reimbursed at not more than the prescribed rate per kilometre and travels not more than kilometres. No other travel allowance is received Reimbursed at not more than the prescribed rate per kilometre and travels not more than kilometres Receives a travel allowance or certain expenses are paid for the Employer Reimbursed at not more than the prescribed rate per kilometre and travels more than kilometres. No other travel allowance is received Reimbursed at not more than the prescribed rate per kilometre and travels more than kilometres Receives a travel allowance or certain expenses are paid for by the Employer Reimbursed at a rate exceeding the prescribed rate per kilometre Yes 3701 No 3703 No (Reimbursements) Yes (Fixed allowance) No 3702 No (Reimbursements) Yes (Fixed allowance) No

15 Determined Rates Vehicle Value Fixed Cost (R) Fuel Cost Maintenance Cost (c) R0 R R R R R R R R R R R R R R Travel Reimbursements are taxed on assessment if any of the following criteria is met - The business kilometers reimbursed exceeds 8 000km for the year - The business kilometers are reimbursed at a rate over R3.30/km Purchases of fuel via a company fuel, garage or maintenance card is added to the total travel allowance value and is taxed as per above Holder of a Public Office Granted to a holder of a public office to allow or enable them to defray expenses incurred in performing their duties 50% of the allowance received is subject to Employee s Tax Other allowances Where the Employee receives an allowance from the Employer and that allowance does not fall into any of the above discussed categories. Ordinarily any allowance that is not specified, the Employer should add 100% of the allowance value to the Employees taxable income ALLOWANCES

16 FRINGE BENEFITS Fringe Bene ts An Employee can receive any of the below listed fringe benefits from their Employer. All fringe benefits received are subject to Employee s Tax: Acquisition of an asset at less than Market Value Right to Use a Motor Vehicle Right to Use an Asset (excluding motor vehicles) Right to Use Cellphones/Laptops/Equipment Provision of Meals/Refreshments Free/Cheap Accommodation Low/Interest-free Loans Subsidy for Loans/Capital Payment of Employee debt/release of Employee from debt Medical Aid Contributions by Employer on Employee s behalf Medical costs settled by the Employer Employer Contributions to Insurance Policies (e.g. Income Protection and Disability) Long Service Awards Acquisition of an asset Where an Employee has been granted an asset by their Employer, consisting of goods, commodities or property (excluding money) for no compensation or for a compensation less than the value of the asset The Asset granted is valued at it s Market Value at the time it is acquired by the Employee If asset is movable property acquired by the Employer so as to dispose to the Employee the asset is valued at it s cost to the Employer Trading stock is valued at the lower of cost or Market Value Relief for the provision low cost housing will have no value if: - The remuneration proxy of the Employee in respect of the year of assessment of acquisition does not exceed R per annum; - The Market Value of the immovable property to the Employee on the date of acquisition is not more than R ; and - If the Employee is not a connected person in relation to the Employer 13

17 Right to Use an Asset Employee deemed to receive a taxable benefit if the Employer grants the employee the right to use an asset for private or domestic purposes (excludes use of accommodation/vehicle) Value placed on the use is determined as follows: - Employer leasing/hiring asset - amount payable by Employer while Employee is granted use of asset less any consideration given by the Employee - Employer owned asset - 15% per annum on the lesser of cost to the Employer or Market value on the date Employee commences with use - Sole right of use granted to Employee - cost to Employer if Employee granted use over a period extending the asset s life Right to Use Cellphones/Laptops/Equipment In the event that an Employee is granted the right to use a cellphone /laptop or equipment by their Employer, this use will constitute a fringe benefit unless the following is applicable: - Private use is incidental (Incidental means that if more than 50% of the total use of the asset is for business purposes) - The asset is provided by the Employer as an amenity for recreational purposes for the use of his/her Employees in general at his/her place of work - Equipment the Employer allows the Employees to use from time to time for a short period of time and the value of the private use is negligible - The asset consists of a computer or telephone which is to be used mainly for business purposes Right to Use a Motor Vehicle Employee granted right to use a vehicle for private or domestic purposes Private use includes travel to and from the Employee s home and place of work The determined value of the vehicle is determined as follows: - Acquired under a bona fide sale agreement - original cost to Employer (excludes finance, interest charges and includes VAT) - Held under a lease - Market value of the lease to the Employer (Incl. VAT if the Employer cannot claim the VAT or Excl. VAT if the Employer can claim VAT) - If a limit is placed on the value of the vehicle,the Employee can obtain the more expensive vehicle make a contribution to the more expensive vehicle, contributions made by the Employee must be deducted from the cost price of the vehicle duly obtained - If vehicle is obtained under any other manner (i.e. it is a gift) - Market value of vehicle at the time right of use is obtained FRINGE BENEFITS

18 If Employee is granted a vehicle for more than 12 months after the Employer obtained the vehicle, the determined value of the vehicle must be reduced by 15% for each completed 12 month period (reducing balance method) Value of the fringe benefit is calculated at 3.5% of the determined value (for each month the Employee uses the vehicle) If the vehicle is subject to a maintenance plan, the fringe benefit is valued at 3,25% of the determined value 80% of the fringe benefit must be included in the Employee s taxable remuneration If the Employer is satisfied that at least 80% of the benefit will be used for business purposes, then only 20% of the benefit needs to be included to taxable income In the case where an Employee has a company fuel, petrol or maintenance card, this is deemed as the Employer purchasing fuel and is part of the benefit amount. i.e. it does not increase the amount of the benefit Meals and Refreshments Employee is granted a meal, refreshment or voucher entitling them to a meal or refreshment Value of benefit is the cost to the Employer less any consideration paid by Employee No value shall be placed on: - Any meal or refreshment supplied by an Employer to his/her Employees in any canteen, cafeteria or dining room operated by or on behalf of the Employer and patronised wholly or mainly by his/her Employees or on the business premises of the Employer - Any meal or refreshment supplied by an Employer to any Employee during business hours or extended working hours or on special occasions - Any meal or refreshment enjoyed by an Employee in the course of providing a meal or refreshment to any person whom the Employee is required to entertain on behalf of the Employer - Board and meals provided with accommodation. They are dealt with as part of the accommodation benefit FRINGE BENEFITS Provision of Accommodation A taxable benefit shall be deemed to have been granted where the Employer has provided the Employee with residential accommodation either free of charge or for a rental consideration which is less than the value of the accommodation. - Formula: (A-B)*(C/100)*(D/12) - A = Remuneration Factor (i.e. annualised remuneration received in the previous tax year) 15

19 - B = (i.e. Tax threshold for the year - official confirmation of the limit is normally published after the budget speech) - C = 17/18/19 (i.e Depends on type of accomodation supplied) - D = number of months accommodation granted during the tax year It is however, important to note that a fringe benefit will not arise in cases where the Employee is granted accommodation within South Africa while they are away from their usual place of residency (provided the residency is within the Republic). This provision will however not apply if the Employee is granted more than one residential unit in different locations and that Employee is entitled to use them from time to time while performing their duties Free/Cheap Services Employer provides Employee with a service and Employee utilises the services for private or domestic purposes The following values are placed on the benefits: - Travel facility - if the Employer is in the business of transporting people by sea/air and Employee travels to destination outside SA lowest fare payable by any passenger less amount paid by the Employee - Other services - cost to Employer to render service less amount paid by Employee Low/Interest-free Loans Any Employer loans granted fall under the National Credit Act even if the Employer is exempt from registering with the National Credit Regulator An Employee is exempt from registering with the National Credit Regulator if: - The company does not charge interest - The company has less than 100 agreements or the total loan book is less than R The loans are incidental and become loans if the Employee does not repay in the stipulated time Employers are to check the Employee s credit record before awarding a loan A low or interest free loan is when an Employer grants an Employee a loan and the interest on the loan is charged at a rate below the official interest rate and the interest rate paid by the Employee The fringe benefit is valued at the difference between the interest that would have been paid had the interest been charged at the official rate The SARS official Interest Rate is determined by the current Repo Rate set by the Reserve Bank of South Africa. This rate is the Repo Rate plus 1 percentage point FRINGE BENEFITS

20 FRINGE BENEFITS No Fringe Benefit value will be placed on a loan in the following circumstances: The granting of a casual loan or loans if the aggregate of the loans do not exceed the sum of R3 000 at any time. The loans contemplated in this exclusion are short-term loans granted at irregular intervals to Employees and not all loans merely because they are less than R A taxable benefit would arise if the loans were granted on a regular basis to all Employees or a certain category of Employees notwithstanding the fact that the loan does not exceed R Loan Subsidies Employer pays a subsidy in respect of any amount of interest or capital due by an Employee on a loan The fringe benefit is valued at the amount of the subsidy paid by the Employer Settlement of Employee Debt Employer pays an amount owing by the Employee to a third party (without requiring the Employee to repay the amount) or the Employee is released from an obligation to pay a debt due to the Employer Settling of medical aid contributions is however, excluded The fringe benefit is valued at the amount paid by the Employer to the third party or the amount of debt from which the Employee is released Medical Aid Contributions Employer contributes to a medical scheme on the Employee s behalf (whether directly or indirectly) The fringe benefit is valued at the amount of the contribution made by the Employer Medical Costs Incurred by Employer Employer incurred medical expenses on behalf of an Employee/their spouse, relative, child or dependent (whether directly or indirectly) The fringe benefit is valued at the amount incurred by the Employer 17

21 Employer Contributions to Insurance Premiums Employer pays insurance premiums on the Employee s behalf (whether directly or indirectly) The premiums are paid for the benefit of the Employee/their spouse, child dependent or nominee The fringe benefit is valued at the premium paid by the Employer Long Service Awards Employer pays cash or awards an asset to an Employee for long service Value of benefit is the amount of the award or cost of the asset The award is tax free if the amount is under R5 000 provided: - The initial unbroken service period is 15 years; and - Subsequant unbroken service periods of 10 years Allowable Deductions Retirement Funding Income (RFI)/Non-Retirement Funding Income (Non-RFI) RFI is the amount of income used to determine what the contribution amount for a pension or provident fund should be RFI is the amount of income that is left after RFI is calculated Pension Fund Contributions Employee contributions to a pension fund are deductible from the amount of remuneration received by the Employee before tax is deducted Current contribution deduction limited to the greater of: - R % of retirement funding income Arrear contribution deduction limited to R1 800 Retirement Annuity Fund Contributions Employer may (at their discretion) deduct the Employee s contributions to a Retirement Annuity fund when calculating the Employee s taxable remuneration The Employee is however required to provide proof of payment Current contribution deduction limited to the greater of: - R R3 500 minus the pension deduction allowed - 15% of non-retirement funding income Arrear contribution deduction limited to R1 800 ALLOWABLE DEDUCTION

22 Medical Expenses Persons over 65: If the Employee or dependent has a disability, they are allowed the following deductions (over and above the standard Medical Tax Credit): - Contributions to a registered Medical Aid that are in excess of 4 times the Medical Tax Credit - Additional Medical expenses paid - Medical expenses incurred outside SA Limited to 33.3 %of the sum of the full medical aid contributions in excess of 3 times the credit plus 33.3 percent of all other qualifying out of pocket medical expenses paid by that person (excluding medical aid contributions ) Persons under 65: with no disability, are allowed the following deductions (over and above the Medical Tax Credit): - Contributions to Medical Aid that are in excess of 4 times the Medical Tax Credit - Additional Medical expenses in excess of 7.5% of taxable income (determined prior to Medical Aid deduction) Limited to 25% of the aggregate of the full medical aid contributions in excess of 4 times the credit plus all other qualifying out of pocket medical expenses (excluding medical scheme contributions), only to the extent that it exceeds 7.5% of the taxable income ALLOWABLE DEDUCTIONS Person 65 and older Disability Person under 65 years Calculation of Additional Medical Expenses Tax Credit Fees paid to a medical scheme or fund 33.3% of the total of fees paid to medical scheme or fund, as exceeds 3 times the amount of medical scheme fees tax credit 33.3% of the total of fees paid to medical scheme or fund, as exceeds 3 times the amount of medical scheme fees tax credit AND Qualifying medical expenses paid by that person (excl. medical scheme contributions) 33.3% of qualifying medical expenses paid by that person 33.3% of qualifying medical expenses paid by that person 25% of the aggregate of fees paid to medical scheme or fund as exceeds 4 times amount of medical scheme fees tax credit and the amount of qualifying medical expenses as exceeding 7.5% of taxable income (excluding retirement fund lump sum benefit and severance benefit) 19

23 Donations Only donations to certain Public Benefit Organisations (PBO) are deductible These deductions are limited to 10% of the total taxable income of an Employee during a tax year. An Employee would claim these amounts on assessment A payroll-giving programme operated by an Employer enables Employees to donate from their salaries on a monthly basis to organisations that have been approved to issue section 18A receipts. The donation is taken into account by the Employer when calculating the monthly Employees tax to be deducted. The deduction is limited for Employees tax purposes to 5% of remuneration after deducting certain amounts as specified Employer Paid Insurance Premiums These premiums are only deductible by the ER if they have been taxed as a fringe benefit in the Employee s hands Home Office Expenses Home office expenses include: - Rental - Interest on bond - Repairs to premises - Telephone expenses - Rates & taxes - Cleaning - Office equipment - Wear and tear - Office stationery - Other premises related expenses For Home Office expenses to be deductible in the following conditions must be met: - The part of the home in respect of which a claim is submitted must be occupied for purposes of a trade - The part that is so occupied must be specifically equipped for purposes of the trade. - If the trade is employment or the holding of an office: - the income derived from this trade must be 50% or more commission or other payments which are based on the taxpayer s work performance, and the taxpayer s duties were not performed mainly in an office provided by his or her Employer; - the taxpayer s duties must be performed 50%or more in that part of the private premises occupied for purposes of trade ALLOWABLE DEDUCTIONS

24 OTHER TYPES OF INCOME Medical Tax Credits Medical Tax Credits apply to Employees who are members of a registered medical scheme The Medical Tax Credits will be allowed as a deduction from normal tax payable Monthly credit allowed is as follows: - R270 per month for 1 member - R540 per month for 2 members - Additional R181 per month for each member in excess of 2 Contributions made to a Medical Aid by an Employer on the Employee s behalf will result in a taxable fringe benefit Contributions and medical expenses paid on behalf of a pensioner by an Employer are excluded from taxable income The above-mentioned Medical Tax Credits replace the previously allowed Medical Aid deductions that were based on the capped amounts Special Income Director s Remuneration A director qualifies for Director s Remuneration: - If he/she is a registered director of a registered company or member of a CC; and - Earns less than 75% of their income from fixed income Is taxed on the higher of: - Deemed remuneration; or - Actual remuneration Deemed remuneration is determined on the formula: Y = T/N - Y - Monthly amount to be determined - T - Balance of remuneration in previous year excluding remuneration: o From relinquishment, termination, loss, repudiation, cancellation or variation of any office of employment o In commutation of amounts due under any contract of employment o Gains made by the exercise, cession or release of any right to require marketable security o Gains made from the disposal of any qualifying equity share o Gains made from the vesting of any equity instrument 21

25 - N - the number of completed months in the tax year used to determine T o If the previous year has not been determined as yet, then the SARS commissioner must determine the amount for the formula o If the remuneration for the last year has not been determined, then use the year prior to that year and add 20% and N will be the number of completed months for that year. If tax paid on actual director wholly responsible If tax paid on deemed director responsible for actual and balance by company - Company can reclaim tax at end of year with assessment from the director Severance Pay Remuneration paid by an Employer to an Employee for: - Relinquishment, termination, loss, repudiation, cancellation or variation of a person s office or employment, if: o The person has reached the age of 55 years o The person has become permanently incapable of holding the office o The company ceasing to do business o The person has become redundant The company must apply for a directive from SARS for the taxation Leave pay and other termination related pay does not form part of the severance pay The amount paid to the Employee is exempt from tax if: - The amount is paid in respect of the death or disablement caused by an occupational injury or disease contracted before 1 March The amount does not exceed R The amount was paid in terms of the Road Accident Fund Act (in this case a directive must still be applied for ) Compensation Benefits due to Death of the Employee A lump sum paid by the Employer as the direct result of an occupational death of the Employee The lump sum payment must be made in connection with the COID Act The amount must be deemed to have accrued to the Employee immediately prior to their death The company must apply for a directive from SARS for the taxation amount OTHER TYPES OF INCOME

26 OTHER TYPES OF INCOME The benefit is exempt from tax if: - The benefit is paid in terms of the COID Act - The Employer is liable - The amount does not exceed R Lump Sum Bene ts for Withdrawal from Retirement Funds due to Termination of Employment Early withdrawal from retirement funds to be categorized as: - Those before 1 March 2009; and - Those after 1 March 2009 The fund administrators must apply for a directive from SARS for the taxation Early withdrawal includes retrenchment, dismissal and divorce Restraint of Trade Payments A payment to enforce a restraint of trade agreement Must be payable to a natural person, labour broker without an exemption certificate, or personal service provider Taxed as an annual payment or bonus Arbitration Awards An award to a person on order from the CCMA or Labour Courts Can be awarded for: - Unfair dismissal - Termination of contract prior to expiry date - Unfair labour practices Company to send written application to SARS to determine tax exempt amount Amount taxed as an annual payment or bonus Independent Contractors Income received by an Independent Contractor is subject to certain conditions, Specifically excluded from the remuneration definition (i.e. it is not subject to Employee s Tax) An Independent Contractor differs from an Employee in the following manner: - They are not subject to the supervision or control of another person with regards to the manner in which their duties are performed as well as the hours within which these duties are to be performed - Payment is based on the results of the output produced by the individual 23

27 - The individual is required to provide their own tools and resources to ensure completion of the job - The individual bears all business risk arising The tax liability due by the individual is to be withheld in accordance with a tax directive issued by SARS Employment Tax Incentive The ETI is an incentive reimbursement for employing youth for the first time A qualifying Employer can claim the ETI from 1 January 2014 to 31 December 2016 Any Employer registered for PAYE except government, municipal and public entities qualifies for the incentive Employees who qualify are: - Employed on or after 1 October Between the ages of 18 to 29 years of age; or o If an Employer is in a Special Economic Zone, the age criteria is ignored - In possession of a valid RSA 13 digit identity document; or o In possession of a valid Asylum Seeker permit - Not a connected person to the Employer - Not a domestic worker - Paid the minimum wage of the sector they work in; or o If no minimum wage, more than R per month; or o Less than R per month The ETI can be claimed for the first 24 qualifying months the Employee is employed The first 12 qualifying months the ETI claim is 50% of the remuneration to a maximum of R The second 12 months the ETI claim is 25% of the remuneration to a maximum of R 500 The formula for the ETI amount is: - R or less, 50% (1st 12 months) or 25% (2nd 12 months) of the monthly remuneration - More than R but less than R 4 001, an amount of R (1st 12 months) or R 500 (2nd 12 months) - More than R but less than R 6 001, an amount determined by the formula X = A (B x (C - D) o X - monthly employment tax incentive o A - the amount of R (1st 12 months) or R 500 (2nd 12 months) o B - the number 0.5 (1st 12 months) or 0.25 (2nd 12 months) TAX INCENTIVES FOR COMPANIES

28 TAX INCENTIVES FOR COMPANIES o C - The Employee s monthly remuneration o D - The amount of R More than R 6 000, an amount of Nil The amount is withheld from the PAYE on the EMP201 Other Related Statutory Requirements Over and above having to withhold PAYE from an Employee s income, the Employer is required to make Skills Development Levy (SDL) and Unemployment Insurance Fund (UIF) contributions on the Employee s behalf SDL Remuneration for SDL purposes is remuneration as defined for PAYE purposes (after accounting for the allowable deductions), subject to the following exclusions: - Amounts paid to a labour broker with an exemption certificate - Pension, superannuation, or retirement allowances - Annuities - Voluntary awards in respect of relinquishments or termination of office - Lump sums from a pension fund - Amounts payable to a learner The amount to be contributed is 1% of the Employee s taxable remuneration Employers whose total taxable remuneration is not in excess of R per annum are exempt from SDL UIF In the 2015 budget speech a special proposal for UIF was mentioned. A substantial reduction in UIF contributions can be expected but this will only be finalised during the course of 2015/2016 tax year. Remuneration for UIF purposes is remuneration as defined for PAYE purposes (prior to accounting for the allowable deductions), subject to the following exclusions: - Pension, superannuation, or retirement allowances - Amounts received from a restraint of trade - Voluntary awards in respect of relinquishments or termination of office - Retirement lump sum benefits - Lump sums from a pension fund Both the Employer and Employee are each required to make a contribution of 1% of the Employee s taxable remuneration The maximum amount on which these contributions are calculated is R per annum or R per month or R per week - Subject to change in the 2015/2016 tax year 25

29 COIDA & BCEA The earnings ceiling for COIDA & BCEA contributions has been set at R per annum (effective 1 April 2014). This amount must be used for all Employees who exceed this limit when doing the declaration Dividend Tax & Capital Gains Tax (CGT) Dividend Tax This tax is to be levied at a rate of 15% of any dividend declared or paid This tax is to be withheld by the company paying over the dividend CGT This tax is levied on the disposal of assets and any gains arising are to be included in taxable income The effective tax rates for CGT are as follows: - Individual and special trust 13.3% - Companies 18.6% - Other trusts 26.6% The following specific exclusions are applicable for CGT: - R2 million gain/loss on the disposal of a primary residence - Disposals of retirement benefits - Payments in respect of long term insurance policies - Annual exclusion of R for all individuals and special trusts - Small business exclusion of R1.8 million - A R exclusion upon the death of an individual Useful Tax/Legislative Calendar Payment Type VAT PAYE SDL UIF Date Due 25th day after the end of the period (last working day if you are an e-filer) 7th day of each following month 7th day of each following month 7th day of each following month OTHER PAYROLL TAXES

30 COIDA Employment Equity Reports SA Stats Reports Return of Earnings to be submitted by end of March for preceding tax year Notice of Assessment and payment normally due in September Beginning of October Quarterly If any of the above dates fall on a weekend or a public holiday, payment or submissions must be made on the immediately preceding working day. Other Taxes: Trusts Special Trusts are taxed according to the progressive tax rates that are used to calculate tax due by individuals. A trust other than a special trust will be taxed at a rate of 41%. Tax Directives TAX INCENTIVES FOR COMPANIES Tax directives are issued by SARS to instruct the Employer on how to deduct Employee s Tax in cases where the prescribed tax tables do not cater for certain forms of remuneration or payments. When calculating the Employee s Tax due, Employers must apply the rate stated on the directive issued. The following is applicable with regards to tax directives: The directive is only valid for 1 year or the period stated thereon Employers may not act on photocopies of directives Employers may not deviate from the instructions stated on the directive Tax directives can be obtained by submitting the relevant forms to SARS and can be applied for under the following circumstances: The Employer pays gratuities (upon retirement, retrenchment or superannuation) Employee s Tax is to be deducted from remuneration earned by commission agents or a personal services provider An Independent contractor receives income In cases of hardship When a pension, provident or retirement annuity fund makes a lump sum payment 27

31 OTHER TAXES Payroll & HRIS Provisional Tax A provisional taxpayer is any person who earns income other than remuneration. The following individuals are however, exempt from the provisions of provisional tax: Provided the following conditions are met: - They do not carry on a business - Their taxable income does not exceed the tax threshold - Their annual passive income (interest, dividends or rental income will be R or less) Company Taxes... in your Pocket! Interest and Dividends The following exemptions are applicable with regards to interest and dividends received by a natural person: Individual below the age of 65 - first R of local interest earned per annum is exempt Individual 65 years and older - first R of local interest earned per annum is exempt Of the above-mentioned amounts, an amount not exceeding R3 700 per annum can be used to exempt foreign dividends and interest earned (exemption to be applied to foreign dividends first) Company Tax Companies with their financial year ending during the period 1 April March 2016 will be taxed at a rate of 28%

32 OTHER TAXES Payroll & HRIS Small Business Corporations Small business corporations with their financial year ending during the period 1 April March 2016 will be taxed at the following rates: Taxable Income (R) Tax Rate R0 - R % R R % of the amount above R R R R % of the amount above R R R % of the amount above R Micro Businesses Micro Businesses with their Financial year ending during the period 1 April March 2016 will be taxed at the below rates (no change from previous year): Taxable Income (R) Tax Rate R0 - R % R R % of the amount above R R R R % of the amount above R R R % of the amount above R

33 OTHER TAXES Payroll & HRIS Learnership Allowance Learnership Agreement: - A learnership Allowance is applicable to registered learnership agreements entered into between a learner and an Employer before 1 October A registered learnership agreement means a learnership agreement that is registered in accordance with the Skills Development Act - A learneship that is registered within 12 months after the last day of the year of assessment in which it was entered into, must be deemed to have been registered on the day in was entered into - The agreement must be entered into pursuant to a trade carried on by the Employer Annual Allowance: - R (R for a person with a disability) - in respect of every completed 12 month period VAT VAT is levied at a rate of 14% on the supply of goods and services by a registered vendor Vendors making taxable supplies of more than R1 million are required to register as VAT vendors Vendors making taxable supplies of more than R but less than R1 million may register voluntarily as VAT vendors

34 Transfer Duty Transfer duty is payable upon the acquisition of property, provided that the transaction was not subject to VAT. Transfer duty is levied at the following rates: Value of Property (R) R0 - R % Tax Rate R R % of the value above R R R R % of the value above R R and R % of the value above R R and above R % of the value above R Estate Duty This tax is levied at a rate of 20% on the property of South Africans and the South African property of non-south Africans This tax is levied upon the death of an individual A basic deduction in the amount of R3.5 million is allowable when determining an estate s tax liability The following deductions are also allowed (provided certain conditions have been met): - Liabilities incurred by the estate - Bequeaths to Public Benefit Organisations - Property accruing to the surviving spouse Donations Tax OTHER TAXES This tax is levied at a rate of 20% of the value of property donated The first R of the value of property donated by a natural person is exempt from donations tax (exemption available per annum) Casual gifts (donated by a person other than a natural person) not exceeding R are exempt from donations tax Donations between spouses as well as donations to a PBO are exempt from donations tax 31

35 OTHER TAXES Payroll & HRIS Securities Transfer Tax This tax is levied at a rate of 0.25% and is levied on the transfer of listed securities Securities consist of shares in a company or a member s interest in a close corporation

36 GENERAL Payroll & HRIS LabourNet Products & Solutions Recruitment As a prominent corporate recruiter, LabourNet assists businesses to source an effective workforce by identifying talented individuals who will help them achieve their objectives. Our recruitment specialists offer a range of unique and flexible solutions geared for permanent positions, temporary employment services as well as skills testing and verification services. Payroll Solutionss LabourNet Payroll Solutions provides companies of all sizes and in any industry the flexibility to truly take control of their payroll functions and to align these functions to their business needs, however simple or complex they may be. Clients can choose to fully outsource their payroll functions to LabourNet or maintain administrative payroll tasks within their company whilst making use of our payroll technology. Our highly skilled LabourNet staff offer payroll support and best practice advise focused on ensuring continued compliance with current tax and labour legislation. Payroll & HRIS Technology LabourNet s technology platforms, PSIberWORKS and PSIberLITE, have been designed and developed to create a powerful suite of Payroll & HRIS products and supporting modules which have proven to be the benchmark for future developments in the world of Internet based Payroll, HR and Tax Management systems. The LabourNet solutions cover all aspects of Payroll and HR management from recruitment to retirement. Talent Management LabourNet offers a unique set of services which incorporate talent management functions such as on-boarding, performance management, human resourced development, reward and remuneration and retention and succession functions to ensure the optimal and efficient management of your human resources. 33