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Fasset Update March 2013. Fasset Update March 2013 Seta Funding Regulations Overview of major changes WSP submission will be due on 30 April (and not.

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Presentation on theme: "Fasset Update March 2013. Fasset Update March 2013 Seta Funding Regulations Overview of major changes WSP submission will be due on 30 April (and not."— Presentation transcript:

1 Fasset Update March 2013

2 Fasset Update March 2013 Seta Funding Regulations Overview of major changes WSP submission will be due on 30 April (and not 30 June as with current) as from 2014 Mandatory Grants (previously 50% of SDL) is now 20% 80% of the Discretionary Grants funding will be allocated to PIVOTAL programmes PIVOTAL is defined as professional, vocational, technical and academic learning programmes that result in qualifications or part-qualifications on the National Qualifications Framework There is a new ‘minimum requirements’ Mandatory Grant form

3 Fasset Update March 2013 Fasset’s Strategy 2013 / 2014 Fasset is focusing on new relationships in order to extend the skills development reach in implementing a career pipeline approach Further Education Training (FET) Colleges Universities Addressing skills need in the public sector Provincial footprint, focus on rural areas A PIVOTAL Grant will be introduced for all races, however the transformation agenda will continue to be pursued through specific interventions such as SCG, Bridging Programmes, LCG, NLRG etc.

4 Fasset Update March 2013 Mandatory Grant Training plan for the upcoming year and training report for the previous year 20% of the SDL, paid quarterly 2 forms: 50 Employees (MS Excel format) All training, including short courses, PIVOTAL programmes to be specified No discretionary criteria e.g. any population group, gender etc... applies Cost of training not linked to payout amount Training committee recommended for employers employing 50 or more Due 30 June 2013 – to be submitted via hand delivery on Friday Will move to 30 April from 2014

5 Fasset Update March 2013 Combined Pivotal and Strategic Cash Grant Now 50% of the SDL 30% of grant may fund any learner on pivotal programme 20% of grant to fund Black African learners and people with disabilities Qualifications (degrees, diplomas), learnerships, internships – to be NQF- registered Learners currently commencing, undergoing, or completing a pivotal programme in the 2013 calendar year Tariffs are applicable Due date 15 February 2014 – to be submitted via hand delivery on Friday

6 Fasset Update March 2013 Learnership Cash Grant Entry Grant : On registration of Black African learners on learnerships Exit Grant: On completion of Black African learners on learnerships SDL payers and non-levy payers Fasset learnership or specific other Seta learnership 10 entry grants per employer 10 exit grants per employer Black African learners and learners with a disability Higher amount for learners with a disability Employers with staff complement under 150 Due date 15 February 2014 – to be submitted via hand delivery on Friday Length of Learnership Entry TariffExit Tariff 12 monthR 5, monthR 7,000R 13, monthR 20,000

7 Fasset Update March 2013 NSFAS Loan Repayment Grant Ensuring retention of learners on learnerships 3 year learnership attracts R 60,000 grant towards NSFAS account Transformation in the sector: Black African learners and people with disabilities Learners currently commencing, undergoing, or completing a learnership in the 2013 calendar year with a Fasset employer Employed learner or an employer representative may apply Black African learners will be relieved of the NSFAS financial burden Salary threshold applies May be applied for in tranches Due date 15 February 2014 – to be submitted via hand delivery on Friday

8 Fasset Update March 2013 NSFAS Grant Amounts LengthTariffAmount 12 (1 year)On registrationR 5,000 In month 12 of the learnershipR 25, (2 year)On registrationR 5,000 In month 6 of the 24-month learnershipR 15,000 In month 18 of the 24-month learnershipR 25, (3 year)On registrationR 5,000 In month 6 of the 36-month learnershipR 15,000 In month 18 of the 36-month learnershipR 20,000 In month 32 of the 36-month learnershipR 20,000

9 Fasset Update March 2013 Assessor and Moderator Grant To ensure the supply of assessors of academic and workplace training Reimbursement of the cost of training Maximum of R 4,500 Assessor/moderator to be registered with Fasset in 2013 Training can take place before 2013 Due date 15 February 2014 – to be submitted via hand delivery on Friday

10 Fasset Update March 2013 Lifelong Learning MonthTopicsTarget Occupations Mar 2013Budget & Tax Update 2013Legislative (All) Apr 2013Change ManagementHR (SDFs, HR Professionals) May 2013How to Manage your BusinessLeadership and Management (Middle & Senior Managers) Jun 2013Culture and Diversity in the WorkplaceLeadership and Management (Junior and Middle Managers) Jul 2013Project ManagementLeadership and Management (Junior and Middle Managers) Aug 2013Managing TeamsLeadership and Management (Middle and Senior Managers) Sep 2013 Compliance with Changes in Legislation relevant to the Finance Sector Legislative (All) Oct 2013Mentoring and CoachingHR (SDFs, HR Professionals) Nov 2013Conflict ManagementLeadership and Management (Middle and Senior Managers) Feb 2014 Survive and Thrive in an Office Environment Leadership and Management (Junior and Middle Managers) Only firms with a valid SDL number with Fasset will be able to register for the events This calendar is subject to change

11 Fasset Update March 2013 Innovations in accreditation Whole firm accreditation To accredit non-credit bearing training Firms that offer training that they would like recognised and accredited Non-credit bearing training i.e. no assessment Functions as Approved Provider accreditation i.e. not linked to unit standards Internships Internships that fall into the graduate work-based category Companies apply for programme and site accreditation May then apply for Fasset grants Claim points of BEE scorecard

12 Fasset Update March 2013 Bridging Programme: Access into Higher Education The funding window opens doors for learners to enter higher education. Black African and all disabled learners Learners lacking requisite entry requirements into a sector-specific higher education qualification Incorrect subject choices or followed an unrelated discipline 2 nd chance learners Complete programmes and meet entry requirements which allow them to enter sector-relevant higher education qualifications, for progression in the sector Tuition fees, examination support courses and soft skills interventions

13 Fasset Update March 2013 Bridging Programme: Academic/Professional Body Qualifications The funding window opens doors for learners to enter higher education. Public providers and professional bodies to assist learners to obtain formal qualifications Learners will be placed in learnerships, internships or full-time employment Number of learners with scarce skills qualifications will increase Employers will have access to increased numbers of employable learners Broader economy will benefit with learners who have a cross-cutting skill that is needed to grow the whole economy

14 Fasset Update March 2013 Bridging Programme: Access into Employment Designed to assist unemployed learners (NQF levels 6 – 8) and bridge the gap between theoretical learning and workplace experience. Accounting and non-accounting graduates Unemployed, part of NEET population of learners Ministerial imperative Will undergo work readiness programmes e.g. bridging technical, assertiveness, it, English language, attitude Available for employment on learnerships, internships or full-time employment Employers will have access to increased numbers of employable learners Broader economy will benefit with learners who have a cross-cutting skill that is needed to grow the whole economy

15 Fasset Update March 2013 Upcoming Research To assist the Board and sector in aligning training to strategic objectives. 2012/13 (Year 13) Grant Analysis Report Sector Skills Plan Update for the period commencing 1 April 2014 Annual Benchmarking of Training in the Sector Learnership Readiness Pack Internship Readiness Pack Lifelong Learning Learnership Programme (LLLP) Employer Support Guide Tracer Study on Development Projects (Academic) Database Update (Employers) Database Update (Learners)

16 Fasset Update March 2013 FET Funding Window To develop FET colleges, which is also a national and ministerial imperative. Capacitating FET colleges with funding set aside Improvement of relevant courses offered by FET colleges Development of lecturers so as to ensure a quality supply of FET learners Partnership agreements to be put in place with Waterberg and Sekhukhune FET colleges in Limpopo as part of a broader joint Seta initiative to establish a regional presence in rural areas and townships through FET colleges Fasset will support the co-ordinated Seta collaborative effort to establish a regional presence in rural areas and townships through public FET colleges Appointment of a Fasset Provincial Liaison / Brand Ambassador

17 Fasset Update March 2013 Career Guidance and Provincial Strategy Fasset has an intensive National Career Guidance campaign: In line with DHET’s National Career Guidance initiatives Setas have a role to play in drawing the youth into the mainstream economy Targeting learners from Grade 9 level onwards, awareness on careers in finance Extend and deepen Fasset’s footprint and reach in rural and impoverished areas −Fasset Brand Ambassadors −Print and online advertising −Exhibitions −Print and digital motivational career guidance material −Social media −Partnerships

18 Fasset Update March 2013 Stakeholder Engagement Engaging with Fasset stakeholders by informing and educating through regular, effective communication, meeting the following strategic imperatives: The promotion of critical and scarce skills areas within our sector Promotion of skills development within sector through targeted marketing Promoting skills, access to jobs, sustainable livelihoods via development projects Developing a culture of high-quality, lifelong learning and fostering skills development for high-quality jobs Focus on the critical SMME component, specifically levy-exempt employers Fostering skills development in the formal economy for productivity and employment growth

19 Fasset Update March 2013 Tools Fasset website: On the website you can gain access to the following: −Download all the application forms you are required to complete for the grants −Latest Fasset information −List of all the relevant Fasset contacts −List of Fasset learnerships −Apply for Mandatory Grant online −Lifelong Learning calendar

20 Thank You For more information please contact the Fasset Call Centre on or visit Fasset Update March 2013

21 Facilitated by Deloitte.

22 Introductory Overview

23 Where is most of our tax collected?* 23 *Figures per Budget Review 2013

24 Detailed comparison of revenue – 2013 vs. 2012* 24 *Figures per Budget Review 2013

25 Detailed comparison of revenue – 2013 Actual To Budget * 25 *Figures per Budget Review 2013

26 Budget Proposals: Individuals

27 Personal income tax relief of R7 billion Individuals whose taxable income is from one employer and is below R a year are not required to submit income tax returns Clarity on Retirement reforms Tax-preferred savings and investment vehicles are to be introduced by 2015, to encourage greater savings Tax relief on transfer of low cost housing to employees Rules to ensure uniform tax treatment of employee share schemes Monetary threshold for bursaries given to relatives of employees be increased Alignment of income protection and disability policies Amendment to exemption when working offshore 27 Budget – Individual Overview

28 White markers indicate position of Deloitte Drawing Guides 7.40 cm 2.91 Inches 6.00 cm 2.36 Inches 8.00 cm 3.15 Inches  cm  4.61 inches 0.50 cm  0.2 inches   0.50 cm  0.2 inches cm  4.61 inches  To view Deloitte drawing guides: 1.Right-click on slide and select ’Grid and Guides...’ 2.Check ’Display drawing guides on screen’ 3.Select ’OK’ Rebates Thresholds Budget – Individual Rates Rebates2013/ /2013 PrimaryR12 080R SecondaryR6 750R6 390 TertiaryR2 250R Tax thresholds 2013/ /2013 Below 65R67 111R Age 65 and overR R Age 75 and overR R

29 White markers indicate position of Deloitte Drawing Guides 7.40 cm 2.91 Inches 6.00 cm 2.36 Inches 8.00 cm 3.15 Inches  cm  4.61 inches 0.50 cm  0.2 inches   0.50 cm  0.2 inches cm  4.61 inches  To view Deloitte drawing guides: 1.Right-click on slide and select ’Grid and Guides...’ 2.Check ’Display drawing guides on screen’ 3.Select ’OK’ Budget – Individual Fiscal Drag Effect of fiscal drag / /2014 No adjustment 2013/2014 With adjustment SalaryR R Tax thereonR R R After taxR R R Restate tax to 2012/2013 terms (R and R /1.056)R R R

30 White markers indicate position of Deloitte Drawing Guides 7.40 cm 2.91 Inches 6.00 cm 2.36 Inches 8.00 cm 3.15 Inches  cm  4.61 inches 0.50 cm  0.2 inches   0.50 cm  0.2 inches cm  4.61 inches  To view Deloitte drawing guides: 1.Right-click on slide and select ’Grid and Guides...’ 2.Check ’Display drawing guides on screen’ 3.Select ’OK’ Budget – Individual Fiscal Drag Effect of fiscal drag 30 Taxable income2013 rates2014 ratesClaimed benefit Actual benefit/(loss) R R6 560R6 928R640RNIL R R54 860R58 431R1 469(R472) R R R R2 555(R1 105) R R R R3 015(R1 350)

31 Tax exempt: Returns generated (including interest, capital gains and dividends) Annual contributions limited to R p.a. per taxpayer (no rollover) Lifetime limit of R (to be adjusted for inflation) Interest exemptions to be replaced with interest bearing and equity savings vehicles Purpose of this is to encourage savings to fund short and medium term expenditure Current status: The new accounts will be introduced by April Budget - Tax-preferred savings and investment vehicles

32 Budget - Retirement reforms Retirement fund contribution deduction 27.5% of greater of remuneration or taxable income limited to R Contributions in excess of the annual capped amounts may be rolled forward to future tax years Non-deductible contributions will be exempt on retirement – both annuities & lump sums Provident fund contributions to be allowed as part of the 27.5% tax deduction Employer contributions to retirement funds will constitute a taxable fringe benefit, which will qualify for the 27.5% tax deduction. Proposed that provident funds are subject to the same annuitisation rules as pension and retirement annuity funds. 32

33 White markers indicate position of Deloitte Drawing Guides 7.40 cm 2.91 Inches 6.00 cm 2.36 Inches 8.00 cm 3.15 Inches  cm  4.61 inches 0.50 cm  0.2 inches   0.50 cm  0.2 inches cm  4.61 inches  To view Deloitte drawing guides: 1.Right-click on slide and select ’Grid and Guides...’ 2.Check ’Display drawing guides on screen’ 3.Select ’OK’ Budget - Individuals Trust reform Proposals not apply to special trusts (minor children or disabled persons) Discretionary trusts will no longer operate as flow-through vehicles –Taxable income/(loss) and capital gains/(losses) taxed in trust –Distributions treated as deductible expenses iro current taxable income –Possible double taxation of capital gains –Review of trusts as generation skipping devices 33

34 White markers indicate position of Deloitte Drawing Guides 7.40 cm 2.91 Inches 6.00 cm 2.36 Inches 8.00 cm 3.15 Inches  cm  4.61 inches 0.50 cm  0.2 inches   0.50 cm  0.2 inches cm  4.61 inches  To view Deloitte drawing guides: 1.Right-click on slide and select ’Grid and Guides...’ 2.Check ’Display drawing guides on screen’ 3.Select ’OK’ Budget - Individuals 34 Discretionary TrustCurrentProposed InterestR Capital profitR Net profit before taxR Less: distribution to beneficiary-R Less: capital profit-R Add: capital gainR Less: tax deductible payment to ben-R Taxable income in trustRNIL BeneficiaryCurrentProposed InterestR Interest exemption-R Capital gain (33% inclusion)R6 667 Taxable income from trustR Taxable income in beneficiaryR6 667R %R2 667R14 453

35 White markers indicate position of Deloitte Drawing Guides 7.40 cm 2.91 Inches 6.00 cm 2.36 Inches 8.00 cm 3.15 Inches  cm  4.61 inches 0.50 cm  0.2 inches   0.50 cm  0.2 inches cm  4.61 inches  To view Deloitte drawing guides: 1.Right-click on slide and select ’Grid and Guides...’ 2.Check ’Display drawing guides on screen’ 3.Select ’OK’ Budget - Individuals Disparity between deduction on disability or income protection policies –Proposed treatment is non-deductible contributions and exempt pay-outs Cross border services –Current – exemption from SA tax if > 183 days outside SA in 12 months –Proposal indicates possible substitution on of exemption tax credits if SA employer 35

36 Amendments: Individuals

37 For the 2013 (and 2014) tax year there is a combination of rebates and deductions The phasing in of the rebate system as opposed to the deduction system will be complete by 1 March 2014 (i.e. the start of the 2015 year of assessment) when the s18 deduction provisions will be deleted 37 Medical

38 Leave pay and other variable cash remuneration Section 23E deleted and section 7B inserted –From 1 March 2013 –Leave pay, over-time pay, commission, bonuses and travel reimbursement will shift to a “payment basis”. –Payment will trigger employee gross income pay-as-you-earn withholding, and employer deductions. 38

39 Provision of leased (operating) company cars par 7 7 th Schedule: Fringe benefit for car use currently based on premise employer owns the vehicle –determined value based on car value Companies increasingly renting cars-rental costs will now form the basis of the fringe benefit value The employees can still claim a deduction based on business v private use The benefit of using an employer’s petrol card will form part of inclusion in cost if linked to specific vehicle 39

40 Employer owned insurance policies Amendments to clarify when s11(a) deduction on employer owned insurance policies may be claimed Specific exclusion from 11(w) widened to include: – insurance policies against death/ disability /severe illness in the course of employment –The effect will be to allow 11(a) deduction for these policies –This will not create a fringe benefit but any pay-out to employee will be taxable 40

41 Cession Of Employer-owned Insurance Policies (With Investment Values) To Retirement Funds Paragraph (d)(iii)(cc) of the definition of “gross income” in section 1 Deferred compensation schemes used as retirement saving vehicle Concession allows for a cession of employer-owned insurance policies (despite any investment element) to a pension or provident fund without triggering tax for employees Deferred compensation schemes will continue to be discouraged going forward 41

42 Exemption For Compulsory Annuity Income Stemming From Non-deductible Retirement Contributions Insert section 10C; amend section 11(n); amend paragraphs 5(1) and 6(1)(b) of the Second Schedule Lump sums are exempt to the extent that non deductible contributions were made This will be extended to retirement annuities 42

43 Provisional Tax Amendments Tax Administration Laws Amendment Act Clarity that retirement fund lump sum benefit, retirement fund lump sum withdrawal benefit and severance benefit excluded from estimate of taxable income Current anomaly that creates a potential penalty where actual tax paid exceeds the estimate is addressed Clarity that penalties are considered percentage based penalties imposed under Chapter 15 of the Tax Administration Act 43

44 Budget Proposals: Corporate

45 Budget - Corporate Relief for small businesses corporations and social-impact firms Reforms to the tax regime applicable to small business corporations are proposed. The reforms are aimed at broadening the regime for qualifying entities by increasing the turnover limit from R14 million to R20 million. It is proposed to provide additional tax relief for qualifying companies in the form of an increase in the tax threshold and a reduction in tax payable on the first R of taxable income. 45

46 Budget - Corporate Protection of the tax base Closure of artificial and excessive debt has been on the tax policy agenda for more than two years Rules on artificial debt – will re-characterise to treat as shares (with interest deduction disallowed) Rules on connected person debt – will place limits on interest incurred, with a roll over for interest disallowed Rules on acquisition debt – time limits to be imposed for claiming interest 46

47 Budget - Corporate Tenant improvements to commercial buildings It is proposed that the ownership test for allowance be replaced with “possession and use” Associated amendments to the taxation of the lessor and treatment of leasehold improvements will be effected The lack of allowance to commercial tenant was complicating many commercial arrangements 47

48 Budget - Corporate Special Economic Zones Tax treatment in special economic zones designed to attract investment 15% corporate income tax rate for businesses Tax deduction for employment of workers earning less than R p.a. Accelerated depreciation allowance for buildings Donations Donations to PBOs in excess of the current allowable limit of 10% of taxable income will be carried forward and allowed as a deduction in subsequent years Clarification of trading stock cost calculations It is proposed that the cost price of trading stock automatically agree to IFRS without the need for SARS approval 48

49 Budget – Corporate Employment Tax Incentive A youth employment tax incentive will be tabled in parliament within the course of this year. This incentive will be aimed at providing the youth with the opportunity to enter the labour market, gain valuable experience and access career opportunities. It will be a graduate tax incentive at the entry-level wage, falling to zero when earnings reach the personal income tax threshold. 49

50 Amendments: Corporate

51 New Definitions Revised share definition –Old: “share” means, in relation to any company, any share or similar equity interest in that company –New: ‘share’ means, in relation to any company, any unit into which the proprietary interest in that company is divided Debt terminology consistency –Debt will continue to bear its ordinary meaning –Sections related to debt have been aligned 51

52 Dividends tax amendments Section 64EB –New section inserted –Closure of dividend conversion schemes –Schemes for the benefit of foreign shareholders that arguably reduces the Dividends Tax rate to zero (without any reliance on a tax treaty) –The proposed amendment will be effective on 1 September 2012 in respect of transactions entered into on or after that date and to amounts paid on or after 1 October 2012 in respect of transactions entered into before 1 September

53 Dividends tax amendments s64k Tax Administration Laws Amendment Act: –Amended to make clear that dividends tax return must be filed when a dividend is paid, regardless of withholding tax s64L Tax Administration Laws Amendment Act: –Late rebate allowed if claimed within three years from payment of dividend. –declaration AND written undertaking to be submitted for refund. s64M Tax Administration Laws Amendment Act: –Refunds in respect of dividends paid by regulated intermediaries-as for 64L 53

54 Revision of the learnership allowance s12H Amendments to address two practical issues which were limiting the effectiveness of the learnership allowance: –Timing of registration –Failed learnerships 54

55 Repeal of anti-avoidance for the transfer of depreciable assets between connected persons s23J 55 The anti-avoidance rules for connected person sales created certain anomalies The increase in the CGT inclusion rate greatly reduced the arbitrage opportunity For above reasons, anti-avoidance provisions under section 23J wholly deleted Considering adoption of domestic transfer pricing principles to address larger problem of inflating untaxed gains

56 Allowance amendments 56 Section 11(e)(iiA) - requirement for SARS approval of foundation and supporting structure removed Section 12B - supporting structures for electricity generation are now included also at 50:30:20 allowance if fixed to and integrated with the machinery or plant Section 12C - requirement for SARS approval of foundation and supporting structure removed Section 13quat – Urban Development Zones extended from 2014 to 2020

57 Revision Of The Industrial Policy Project Incentive s12I 57 Allowance intended to promote investment in domestic manufacturing sector –Clarification that allowance limit is over life of project and not annual –Scrapping of tax clearance requirement –Annual reporting period will be clarified –Effective 1 January 2012

58 Government transfers and subsidies s12P Consolidation of tax treatment of government grants Basic principles- –Government grants listed in new 11th Schedule are “exempt” from normal tax –Intention for double dipping not to be permitted –Generally, unexpended portion of cash grant = recoupment Effective years of assessment commencing on/after 1 January

59 Hybrid Equity Instruments –s8E Anti avoidance measure: Any dividend on a share that is a hybrid equity instrument is deemed to be income (formerly deemed to be interest) Exception introduced: where shares issued as a financing tool to acquire substantial interests in a target operating company The rule prohibiting “indirect” securities (and even the definition of a prohibited financial instrument) was considered too wide, and amendments narrow the application 59

60 Third Party Backed Shares s8EA Anti avoidance measure: Any dividend on a share that is a third party backed share is deemed to be income Amendments to widen relief for the exception where shares issued as a financing tool to acquire substantial share interests in a target operating company Amendments to rules specifically catering for multi-tier preference share schemes Certain adjustments to cover certain emerging avoidance gaps 60

61 Qualifying Interest In Asset-for-share Reorganisations Section 42 –Minimum threshold for participation exemption reduced to 10% –Qualifying interest reduced to 10% to align with participation exemption 61

62 Debt reductions s20(1)(a) and para 12(5) of the Eight Schedule replaced by s19 and para 12A Applies on or after 1 January 2013 If reduction was subject to donations tax, estate duty or was taxed as a fringe benefit no recoupment or gain If not potential recovery or recoupment (s 19 and 8(4)(a)) or capital gain (para 12A) Position of lender - loss on write off of debt to connected person disregarded unless: –Debtor reduces base cost of asset (para 12A)/aggregate capital loss (para 12A)/includes amount in gross income (e.g. a recoupment) –Acquirer includes the amount in gross income/aggregate capital gain 62

63 Debt reductions Y/A commencing after 1 January 2013 Debt used to acquire trading stock still held –Reduce “cost” of stock for tax purposes –Excess treated as recovery or recoupment Debt used for expenditure other than trading stock or allowance assets –Reduction amount treated as recovery or recoupment Capital assets –Reduce base cost (if still held) –Excess reduces assessed capital losses – Any remaining excess is not taxed Allowance assets –First applies to capital portion i.e. reduce base cost, excess recouped 63

64 Debt reductions Y/A commencing after 1 January 2013 Relief from capital gains for: –A group of companies –The debt is reduced in the course of liquidation and if owed to a connected person –To the extent the reduction does not exceed base cost of the connected person No relief applies if: –Debt was reduced as part of a scheme to avoid tax, and –The parties became connected after the debt arose or –The company has not taken steps to liquidate within 36 months –Has not withdrawn steps –Does anything to invalidate 64

65 Incurral of interest in terms of certain debts deemed to be in production of income Section 24O Introduced to provide parity with so called indirect share acquisitions i.t.o s45 Deduction will be allowed for interest incurred if that interest is associated with: –debt used to acquire controlling share interests and, –the acquisition is comparable to those indirectly allowed for indirect share acquisitions into operation on 1 January 2013 and applies in respect of acquisition transactions entered into on or after that date 65

66 Share-for-share recapitalisations s41/43 Par 78 8 th Schedule Currently relief in recapitalisation limited to capital gains Under new rules rollover will apply to any type of recapitalisations unless consideration other than shares is received The entire "tax profile" of the shares disposed of applies to the new shares acquired, including cost, date of acquisition, and, pre valuation date valuations The rules only apply to non equity shares if non equity shares were acquired by means of a subdivision or consolidation 66

67 Value Mismatches Involving Share Issues s24B(1) and 40CA Deletion of 24B(1) asset received as subscription price for shares –cost is lesser of the market value of the asset and the market value of the shares issued 40CA introduced-company acquires asset in exchange for shares issued (subject to 24B) –deemed to have incurred a cost equal to the market value of the shares issued. –If debt is issued, the cost is equal to the amount of the debt 67

68 Value Mismatches Involving Share Issues s24BA Applies where the company acquires an asset in exchange for the issue of shares and the consideration is not at market value –MV>Value of shares Issuer of shares has capital gain Acquirer of shares: –Capital asset - reduce base cost –Trading stock - reduce amount –MV

69 Value Mismatches Involving Share Issues s24BA Will not apply when: –transaction where consideration is at arm’s length –company and that person form part of the same group of companies –Effective 1 January 2013 Amendment to value shifting rules: –because of 24BA no longer necessary for companies –will apply only to a trust or partnership going forward Effective: 1 January

70 Unified System for Taxing Real Estate Investment Vehicles In order to qualify as a REIT for tax purposes, the entity must be a resident and its securities must be a listed on the JSE as securities in a REIT The REIT may claim deductions in respect of amounts: –declared by the REIT as dividends (other than in respect of share buy- backs) to its shareholders; –and incurred by it as interest on the debenture portion of a linked unit issued to shareholders (if applicable) Resident shareholders: Dividends distributed by a REIT to its resident shareholders are subject to normal tax Foreign shareholders: From1 Jan 2014, dividends distributed to foreign shareholders of a REIT will be subject to dividends tax 70

71 IT14SD Supplementary disclosure normally issued when: –Refund is due –As a pre cursor to an audit Essentially a self audit Most of the required reconciliations are not readily available 21 calendar days from date of issue option of further 21 Failure to comply results in re-assessment or failure to pay refund 71

72 Micro Business par 11 6 th Schedule Gives effect to the turnover tax and employees’ tax aspects of the 2012 Budget proposal –Micro-businesses have the option of making tax payments twice- yearly Aligns the relevant provisions of the Income Tax Act with those of the Tax Administration Act, 2011, –Clarifies that a penalty under paragraph 11 of the Sixth Schedule is deemed to be a percentage based penalty imposed under Chapter 15 of the Tax Administration Act 72

73 Budget Proposals: VAT

74 Budget - VAT Registration of foreign businesses in e-commerce for SA VAT (imported services?) Special time-of-supply rule - services where consideration not determined upfront due to contingent future event Motor car as defined to include racing and recreational cars Time of supply rules for connected persons Conversion date for foreign denominated standard rated invoice 74

75 Budget - VAT Finalisation of export incentive scheme – indirect exports by road Home-owners association Claw-back of VAT – debt relief 75

76 Amendments: VAT

77 Various issues Section 1 (paragraph (b) of the ‘instalment credit agreement’ definition) –expanded to cater for certain aspects of Sharia compliant (Ijarah) finance leases Credit and debit notes – s21(1) –Allowance to correct mispriced invoices Transfer duty limitation also does not apply in respect of second-hand fixed property change of use adjustments (backdated to 10 January 2012). 77

78 Potential Vat Double Charge For Goods Removed From Customs Controlled Areas (CCA) – Existing rules A. Goods imported into a customs controlled area (CCA) –VAT on imports exempt on movable goods into a CCA of an IDZ –On exit of CCA deemed import triggers VAT B. Goods locally supplied to a vendor in a CCA/IDZ –Local supplies in CCA are zero rated –VAT relief on temporary (30 day removal) –On exit (over 30 days) deemed supply triggers VAT C. Personal consumption of goods in a CCA –VAT triggered if not wholly consumed in the course of making taxable supplies 78

79 Potential Vat Double Charge For Goods Removed From Customs Controlled Areas (CCA)-New rules A. Goods imported into a customs controlled area (CCA) –Will remain outside of VAT net regardless of 30 day rule when entered for home consumption B. Goods locally supplied to a vendor in a CCA/IDZ –Customs officials will set triggering event C. Personal consumption of goods in a CCA –If initially converted to private use won’t be taxed again under 30 day rule on removal 79

80 Imported Goods Sold By Foreign Persons Prior To Entry For Home Consumption Pre-entry sales by foreign persons exempt if occur within South African territory before home consumption Will eliminate need for registration Taxpayer may waive with SARS approval 80

81 Relief For Bargaining Councils and political parties Goods or services supplied by bargaining councils/political parties to any of their members should exempt to the extent that membership contributions are received as consideration Deregistration for councils/parties that solely supply service to members for contributions –Deemed supply reduced to zero –Outstanding VAT assessed reduced to zero on written application –No refunds will be paid on outstanding assessments 81

82 Miscellaneous provisions Abridged tax invoices –Threshold increased to R5 000 Microbusiness –Option to pay turnover tax, VAT and employees tax twice a year E-filing –Deemed filed on 25th if filed on last day of the month 82

83 Budget Proposals: International Tax

84 Budget - International Protection of the tax base Uniform cross-border withholding tax to prevent base erosion Service fees now to be included in cross-border withholding framework, together with the existing withholding on interest and royalties Subject to treaty relief Interest, royalties and cross border service fee amendments ALL effective 1 March

85 Budget - International Deferral of expenditure incurred by certain connected persons To limit potential abuse, deductions will be deferred until payment Streamlining currency taxation The current tax calculation of currency gains and losses is extremely complex and not wholly in sync with accounting principles The currency taxation rules will continue to be simplified in favour of a more practical approach that aligns more fully with IFRS 85

86 Amendments: International Tax

87 White markers indicate position of Deloitte Drawing Guides 7.40 cm 2.91 Inches 6.00 cm 2.36 Inches 8.00 cm 3.15 Inches  cm  4.61 inches 0.50 cm  0.2 inches   0.50 cm  0.2 inches cm  4.61 inches  To view Deloitte drawing guides: 1.Right-click on slide and select ’Grid and Guides...’ 2.Check ’Display drawing guides on screen’ 3.Select ’OK’ Rollover relief for CFC intragroup transactions s45 Current tax system fully extends the domestic rollover regime to cross-border transactions except for intra-group transactions (ie section 45 transactions) The domestic intra-group rollover rules will be extended to include: –inbound restructurings same group of companies built-in gain equity shares at the transferor company level –and foreign-to-foreign restructurings same group of companies 87

88 White markers indicate position of Deloitte Drawing Guides 7.40 cm 2.91 Inches 6.00 cm 2.36 Inches 8.00 cm 3.15 Inches  cm  4.61 inches 0.50 cm  0.2 inches   0.50 cm  0.2 inches cm  4.61 inches  To view Deloitte drawing guides: 1.Right-click on slide and select ’Grid and Guides...’ 2.Check ’Display drawing guides on screen’ 3.Select ’OK’ Exit charge on ceasing to be a Resident of South Africa In response to the Tradehold case: Deemed capital gain or deemed capital loss when either: –a resident ceases to be a resident –a resident becomes a Headquarter Company (“HQC”) –A controlled foreign company (“CFC”) ceases to be a CFC (otherwise than by becoming a resident) Achieved by deeming the person/company to have disposed of its assets on the day immediately before it ceases to be a resident/becomes a HQC /ceases to be a CFC, for an amount equal to the market value thereof; and Deemed reacquired at market value to establish new base cost. 88

89 White markers indicate position of Deloitte Drawing Guides 7.40 cm 2.91 Inches 6.00 cm 2.36 Inches 8.00 cm 3.15 Inches  cm  4.61 inches 0.50 cm  0.2 inches   0.50 cm  0.2 inches cm  4.61 inches  To view Deloitte drawing guides: 1.Right-click on slide and select ’Grid and Guides...’ 2.Check ’Display drawing guides on screen’ 3.Select ’OK’ Exit charge on ceasing to be a Resident of South Africa Prior position: –Section 9H only dealt with a resident ceasing to be a resident or becoming a HQC. New position: –CFCs now included within the ambit of section 9H –Split between companies and persons other than companies –Determines the commencement and ceasing of years of assessment, including the foreign tax year in respect of a CFC –Upon a company ceasing to be a resident or becoming a HQC – deemed to have declared and paid a dividend in specie –Section 9H provides for an exemption in respect of assets which, after a person ceases to be a resident or a CFC, are attributable to a permanent establishment of that person in South Africa – becoming a HQC is specifically excluded now. 89

90 White markers indicate position of Deloitte Drawing Guides 7.40 cm 2.91 Inches 6.00 cm 2.36 Inches 8.00 cm 3.15 Inches  cm  4.61 inches 0.50 cm  0.2 inches   0.50 cm  0.2 inches cm  4.61 inches  To view Deloitte drawing guides: 1.Right-click on slide and select ’Grid and Guides...’ 2.Check ’Display drawing guides on screen’ 3.Select ’OK’ In terms of the current “resident” definition, a company will be resident in South Africa if it is: –incorporated, established or formed in South Africa; or –has its place of effective management (“POEM”) in South Africa. Added proviso that that where any person that is a resident ceases to be a resident during a year of assessment, that person must be regarded as not being a resident from the day on which that person ceases to be a resident 90 Resident definition section 1

91 White markers indicate position of Deloitte Drawing Guides 7.40 cm 2.91 Inches 6.00 cm 2.36 Inches 8.00 cm 3.15 Inches  cm  4.61 inches 0.50 cm  0.2 inches   0.50 cm  0.2 inches cm  4.61 inches  To view Deloitte drawing guides: 1.Right-click on slide and select ’Grid and Guides...’ 2.Check ’Display drawing guides on screen’ 3.Select ’OK’ Resident definition s1 Relief from the effective management test in the case of high-taxed controlled foreign companies (CFCs) “resident” does not include a company if: –The company is incorporated, formed or established outside South Africa –The company’s POEM is located in South Africa –The company would be a controlled foreign company with a foreign business establishment, had it not been for its POEM being located in South Africa; and –The aggregate amount of tax payable to the government of any other country in respect of any foreign tax year, constitutes at least 75% of the normal tax that would have been payable in respect of the company’s taxable income, had the company been a resident of South Africa for the foreign tax year. 91

92 White markers indicate position of Deloitte Drawing Guides 7.40 cm 2.91 Inches 6.00 cm 2.36 Inches 8.00 cm 3.15 Inches  cm  4.61 inches 0.50 cm  0.2 inches   0.50 cm  0.2 inches cm  4.61 inches  To view Deloitte drawing guides: 1.Right-click on slide and select ’Grid and Guides...’ 2.Check ’Display drawing guides on screen’ 3.Select ’OK’ Foreign rebates for service fees improperly subject to foreign withholding taxes s6quin Position prior to amendments –Section 6quin could not be claimed where tax was imposed in violation of a DTA (not legally payable) Position after amendments –Section 6quin has been broadened to allow for a credit in respect of South African sourced income that has been subject to foreign taxes even if those foreign taxes were improperly imposed. –The credit can be claimed in the absence of a DTA. –Amendments dealing with improperly imposed foreign withholding taxes will be effective for years of assessment beginning on or after 1 January

93 Tax treatment of Foreign Exchange Differences s24I(10A) Will only defer unhedged non-current assets or liabilities between group members or connected persons The meaning of current asset or current liability will follow the meaning in accordance with IFRS The revised regime will trigger mark-to-market treatment for foreign currency debts hedged by derivatives and back-to-back loan funding stemming from parties outside the group 93

94 Tax treatment of Foreign Exchange Differences s24I(10) Section 24I(10) exchange items held and not realised will be deemed to have realised (unless into new section 24I(10A) on the last day of the year of the year of assessment which ends before the year of assessment commencing on or after 1 January

95 Removal Of Misplaced Non-monetary And Monetary Foreign Currency Calculations Assets acquired and disposed of in single foreign currency –natural persons and non trading trusts: Calculate gain or loss in foreign currency and convert to Rand at average exchange rate –Other persons: acquisition translated into Rands using exchange rate at acquisition, disposal price will be translated to Rands using the exchange rate at disposal. Removal of non monetary matching for loans (and associated hedges) –Currency gains and losses on loans used to acquire assets other than monetary assets will no longer be matched for companies and trading trusts 95

96 Transfer pricing s31(6) Initiatives aimed at facilitating the expansion, global competitiveness and smooth operation of South African multinational companies in other countries Transfer pricing will not apply to certain cross-border financial assistance transactions (e.g. loans) and certain cross-border uses of intellectual property Relief for transfer pricing in the case of controlled foreign companies with foreign business establishments and a 75% hypothetical South African rate 96

97 Withholding tax on interest paid to non-residents - s37I – s37K Rate increase to 15% (now proposed effective 1 March 2014) Will apply to interest with an SA source Exemptions from withholding tax: –Interest paid by the Government, any bank or Headquarter Company (>10% of equity shares and voting rights) –Interest paid in respect of a listed debt in respect of goods imported into the Republic –Payable to non-resident client as defined in the Securities Services Act –Collective investment schemes –Natural person >183 days in RSA –Permanent Establishment in RSA 97

98 Withholding tax on royalties paid to non-residents Rate increase to 15% (proposed to be effective 1 March 2014) Will apply to royalty with an SA source Exemptions from withholding tax: –Natural person >183 days in RSA –Permanent Establishment –Headquarter Company with at least 10% of the equity shares and voting rights 98

99 Budget Proposals: Tax Administration Act

100 Budget – Tax Administration Tenders and tax compliance SARS is now testing an automated tax clearance certificate for implementation later this year This will enable the real-time tracking of the tax compliance of the person who tendered SARS is also following up on payments made by the state to tenderers to check whether full tax disclosure was made Understatement penalties –Currently – non-waiving –Proposed - penalty provisions will be refined and relief will be provided for bona fide errors (welcomed!) 100

101 Tax Administration Act

102 Introduction High level overview of the TAA –Understand certain key transitional issues –Highlight new or interesting changes in each of the chapters of the TAA –Awareness of certain practical areas we have encountered to date Purpose of the TAA: –Align administration of the general provisions of tax acts into one act –Prescribe rights and obligations of tax payers –Prescribe powers and duties of persons engaged in the administration of tax act 102

103 © 2012 Deloitte Touche Tohmatsu Limited Chapters in the act 103 Chapter 1 Definitions 11Recovery 2 General Administration 12Interest 3 Registration 13Refunds 4 Returns and Records 14 Write off or Compromise of Tax Debts 5 Information Gathering 15 Administrative Non-Compliance Penalties 6 Confidentiality 16 Understatement Penalties 7 Advance Tax Rulings 17 Criminal Offences 8 Assessments 18 Reporting of unprofessional conduct 9 Dispute Resolution 19 General provisions 10 Tax Liability & Payment 20 Transitional provisions

104 Transitional Rules – Frequently Asked Questions What is the impact on the public officer ? –s261 states that public officer appointed ito a tax Act and holding office prior to TAA remains the public officer Which rules for dispute resolution will apply? –S269 states that rules (and regulations) issued under the provision of a tax Act remain in force What is the impact on Rulings, interpretation notes, practice notes and other publications? –S269 states that regarded as having been issued under the authority of this Act to the extent relevant to and consistent with the TAA 104

105 Transitional Rules – Frequently Asked Questions What happens to my tax number? –Chapter 20 of the TAA provides that any tax number allocated to a taxpayer prior to the TAA taking effect will continue to be applicable until SARS allocates a new number to the taxpayer under the TAA When is the new tax ombud coming into existence? –Section 259 of the TAA provides that the Minister of Finance must appoint a person as a Tax Ombud within one year of the commencement date of the TAA 105

106 Transitional Rules - s270(6) Additional tax, penalty or interest which but for the repeal of the legislation in Schedule 1 would have been capable of being imposed, levied, assessed or recovered by the commencement date of the TAA and Which has not been imposed, levied, assessed or recovered by the commencement date of the TAA, may be— –imposed or levied as if the repeal had not been effected; and –assessed and recovered under the TAA 106

107 Definitions – Chapter 1 Assessment – now includes self-assessment Date of assessment – now means date of issue of assessment and not due date for payment Effective date – determines date from which interest accrues Official publication – constitutes SARS's practice generally prevailing Practice generally prevailing - the only sources of SARS’s binding practices will be official publications Tax – defined for purposes of the administration of the Act & includes penalties & interest 107

108 Interpretation - Chapter 2 If the TAA is silent with regard to the administration of a tax Act and it is specifically provided for in the relevant tax Act, the provisions of that tax Act apply If there is an inconsistency between TAA and another tax Act, then the tax Act will prevail Tax administration and Promotion of Administrative Justice Act –Certain provisions were codified –Certain provisions where administrative fairness limited 108

109 Tax Ombud – Chapter 2 Mandate: –To review and address any complaint by a taxpayer regarding a service matter or a procedural or administrative matter The Tax Ombud may not review— –(a) legislation or tax policy; –(b) SARS policy or practice generally prevailing –(c) a matter subject to objection and appeal under a tax Act –(d) a decision of, proceeding in or matter before the tax court. 109

110 Registration – Chapter 3 TAA provides for a single tax account, and it allows SARS to implement a single registration process for all tax types over time Ultimately this will ease the administrative burden on taxpayers as they will need to submit only one form to register for any of the taxes. Taxpayers will have one account that reflects their entire tax liability. The ultimate objective is to create a single view of a taxpayer 110

111 Returns and records – Chapter 4 Section 30 - Kept in the original form, in an orderly fashion, and in a safe place, or, where retained in electronic form, in the manner to be prescribed by the Commissioner in a public notice, or in a form specifically authorised by a senior SARS official in terms of section 30(2) of the Act The public notice has been issued and allows taxpayers to keep records in terms of section 29 in an electronic form, so long as the rules contained in the public notice are adhered to. 111

112 Returns and records – Chapter 4 Retention periods –a period of five years from the date of the submission of a return –may be longer in certain defined instances (s32) Section 28 - Statement concerning accounts by a preparer –The preparer must, at the request of the taxpayer, submit to that taxpayer a copy of the certificate or statement extent of the examination whether disclose the true nature 112

113 Returns and records – Chapter 4 Reportable arrangements –All listed arrangements likely to lead to an undue tax benefit are to be identified by the Commissioner by public notice –Failure to report a reportable arrangement will not constitute a criminal offence, but is subject to an administrative non-compliance penalty Public notice 1108 identifies the following as arrangements that lead to an undue tax benefit: –Any arrangement that would have qualified as a hybrid equity instrument under s8E/ hybrid debt instrument under s8F of the Income Tax Act if the prescribed period had been 10 years (but does not include any instrument listed on an exchange regulated in terms of the Securities Service Act) 113

114 Information Gathering – Chapter 5 Keeping a taxpayer informed of the audit –Stage of audit: A taxpayer is entitled to be informed of the stage the audit is at, at intervals specified by the Commissioner in a Public Notice (Government Notice No 788) –Letter of audit findings: Within 21 days of the audit being finished the taxpayer must be given a letter of findings or confirmation that audit inconclusive 114

115 Information Gathering – Chapter 5 Inspections without prior notice –The inspection may only be done to determine: the identity of the person occupying the premises whether the person occupying the premises is registered for tax whether the person is keeping records in the required format 115

116 Information Gathering – Chapter 5 Request for relevant material –SARS may require the taxpayer or another person to, within a reasonable period, submit relevant material –“relevant material” defined in section one – “foreseeably relevant” 116

117 Information Gathering – Chapter 5 Notice of field audit –prior notice of at least 10 business days –to make available at the person’s premises specified in the notice relevant material that the official may require to audit 117 What doesn’t kill you makes you stronger!

118 Information Gathering – Chapter 5 SARS audits and taxpayer feedback –Government Notice No 788 sets out the form and manner of a report to be submitted by SARS to a taxpayer on the stage of completion of an audit, in terms of section 42(1) of the TAA. 118

119 Information Gathering – Chapter 5 Interviews by SARS and travelling distance –Government Notice No 789 (1 October 2012) –deals with the distance to be taken into account of in determining whether a person may lawfully decline to attend an interview with SARS 119

120 © 2012 Deloitte Touche Tohmatsu Limited Advance Rulings – Chapter The advance ruling system currently regulated in the Income Tax Act and the Value-Added Tax Act is incorporated in TAA Establishes framework for the system and sets out basic rules regarding: –Application process & fees –Exclusions and refusals –Effect of rulings –Impact of subsequent law changes –Retrospective application –Publication of rulings

121 Advance Rulings – Chapter 7 What is the impact on Rulings? S269 states that regarded as having been issued under the authority of this Act to the extent relevant to and consistent with the TAA 121

122 Assessments – Chapter 8 ‘‘Assessment’’ means the determination of the amount of a tax liability or refund, by way of self-assessment by the taxpayer or assessment by SARS Throughout the TAA provision is made for a transition to a full self- assessment system to cater for future modernisation of the tax system 122

123 Assessments – Chapter 8 Old “date of assessment” in relation to any assessment, meant the date specified in the notice of such assessment as the due date or, where a due date is not so specified, the date of such notice “date of assessment’’ now means— –(a) in the case of an assessment by SARS, the date of the issue of the notice of assessment; or –(b) in the case of self-assessment by the taxpayer— if a return is required, the date that the return is submitted; or if no return is required, the date of the last payment of the tax for the tax period or, if no payment was made in respect of the tax for the tax period,the effective date 123

124 Assessments – Chapter 8 Important to be aware of impact on timing –Prescription –Dispute processes Whereas the Income Tax Act merely refers to the "notice of assessment" in the context of the definition of "assessment", the TAA actually prescribes the content of the notice of assessment in s96(1) and (2). In terms of s96(2) if contrary to return must include grounds 124

125 Assessments – Chapter 8 New provisions Original assessment: Defined term that includes 1st assessment by SARS & return which incorporates the taxpayer’s determination of the amount of a tax liability Additional assessment: New simplified grounds on which additional assessments may be issued to achieve alignment across taxes Reduced assessment: Clarity that reduced assessment will also be issued if taxpayer made undisputed errors in return Jeopardy assessment: May be issued before end of tax period to secure early collection of tax at risk e.g. in case of dissipation 125

126 Assessments – Chapter 8 New provisions Estimation of assessment: Concept of ‘estimated assessment’ replaced with provision that original, additional or reduced assessment may be ‘based on an estimation’ Period of limitations for issuance of assessment: SARS assessment 3 years & self-assessment 5 years 126

127 Assessments – Chapter OldNew s77Assessment and recording thereof s91 s97 Original assessments Recording of assessments s78Estimated assessmentss95Estimation of assessments s79Additional assessments92Additional assessment s79AReduced assessmentss93Reduced assessments s79BWithdrawal of assessmentss98Withdrawal of assessments s80Inspection of record of assessments s97Recording of assessments s94Jeopardy assessments s96Notice of assessment

128 Dispute Resolution – Chapter 9 Chapter 9 must be read with the rules to be issued under TAA s103 (which remain the rules ito s107A in ITA for now) New rules will be issued by Minister after consultation with the Minister of Justice and Constitutional Development, by public notice As the dispute resolution process is procedurally intensive, the Guide on Tax Dispute Resolution has been aligned with TAA and published 128

129 Dispute Resolution – Chapter 9 Burden of proof The burden of proof generally lies with a taxpayer TAA now provides that the burden of proof is on SARS to prove— –that an assessment based on an estimate is reasonable –the basis for imposing an understatement penalty 129

130 © 2012 Deloitte Touche Tohmatsu Limited Income Tax Act to Tax Administration Act 130 OLDNEW s 81Objection against assessment Chapter 9 Dispute resolution Part B Objection and appeal s 104—Objection against assessment or decision s 106—Decision on objection s 83Appeals to tax court against assessment Chapter 9 Dispute resolution Part B Objection and appeal s 107—Appeal against assessment or decision s 83AAppeals to tax boardChapter 9 Dispute resolution Part B Objection and appeal s 107—Appeal against assessment or decision

131 © 2012 Deloitte Touche Tohmatsu Limited Income Tax Act to Tax Administration Act 131 OLDNEW s 86AAppeals against decisions of a tax court Part E Appeal against tax court decision ss 133–141 s 88Payment of tax pending appeal Chapter 10 Tax liability and payment Part B Payment of tax s 164— Payment of tax pending objection or appeal

132 Tax liability and payment – Chapter 10 Debt relief measures Under certain circumstances the payment of tax may be suspended if a taxpayer intends to pursue a valid objection In order to recognise legitimate circumstances where a taxpayer suffers a temporary liquidity problem, SARS may extend the date for paying a tax debt or enter into an instalment payment arrangement with the taxpayer SARS is also authorised to compromise a tax debt that is not disputed, and SARS may also write tax off temporarily or permanently. 132

133 Tax liability and payment – Chapter 10 Taxpayer account & allocation of payment Framework for single taxpayer account with rolling balance Framework for “first in first out” payment allocation rule i.e. payment may be applied to oldest debt first despite taxpayer designation 133

134 Interest – Chapter 12 Change (but not yet!) –Alignment of interest provisions across taxes –Accrued daily and compounded monthly General rule –Interest accrues from ‘effective date’, i.e. normally the date that tax is payable under a tax Act, to date of payment (see s187) –Interest rate is the ‘prescribed interest rate’ except in respect of overpayments of provisional tax (4% points below) –Remittance of interest discretion retained - limited to specified circumstances beyond the taxpayer’s control 134

135 Interest – Chapter 12 Refund interest payable by SARS –Interest calculated from the later of the ‘effective date’ or date that the excess payment received by SARS –Taxpayer thus normally entitled to refund interest from same date that SARS would have been entitled to interest on unpaid tax Some exceptions in tax Act e.g. VAT Act where interest on refund only payable after 21 days of claim 135

136 © 2012 Deloitte Touche Tohmatsu Limited 136 Penalties Overview Penalty system across taxes TAA A: Administrative non-compliance Penalty Targets administrative non- compliance Chapter 15 B: Understatement penalty Targets serious non-compliance & tax evasion Chapter 16 C: Criminal offences General offences across taxes Chapter 17

137 © 2012 Deloitte Touche Tohmatsu Limited Penalties – Chapter 15 & OldNew s 75BAdministrative penalty in respect of non- compliance s208–220Administrative non-compliance penalties s 76Additional tax in the event of de-fault or omission S Part A:Understatment Penalty s 80SReportable Arrangement Penaltiess 212Reportable arrangement penalty Fourth Schedule para 20(4) Additional tax in the event of tax-able income being underestimated Remains in ITA, deemed percentage based in TA A Fourth Schedule para 20(A(3) Additional tax in the event of failure to submit an estimate of taxable income timeously Remains in ITA, deemed percentage based in TA A Fourth Schedule para 27(2) Penalty on late payment of provisional tax Remains in ITA, deemed percentage based in TAA

138 © 2012 Deloitte Touche Tohmatsu Limited 138 Penalties - Chapter 15: Administrative non-compliance penalties Fixed amount penalty Based on assessed loss or taxable income Administrative non- compliance Participant failing to disclose information in respect of a reportable arrangement as required by section 37 Fixed penalty amounts for promoter and participant respectively Reportable arrangement Imposed if SARS satisfied that an amount of tax was not paid as and when required under a tax Act Equal to percentage of amount of unpaid tax Percentage prescribed in the tax Act Percentage based penalty

139 Penalties – Fixed Penalty s210 If SARS is satisfied that non-compliance –Non-compliance is failure to comply with an obligation that is imposed by or under a tax Act and is listed in a public notice –Only one public notice on this to date –Failure by a natural person to submit an income tax return as and when required under the Income Tax Act, for years of assessment commencing on or after 1st march 2006, where that person has two or more outstanding income tax returns for such year of assessment, will be liable to the fixed-amount penalty. But – the transitional rules in 270(6) seem to catch other areas of non – compliance…. 139

140 Penalties – chapter 15 Remittance of Administrative penalties –Very similar requirements to s75B regulations gazetted on 31 December 2008 –No significant changes, minor amendments to number of days allowed in certain instances 140

141 Penalties - Chapter 16 New understatement penalty The current open-ended discretion to impose additional tax (now called understatement penalty under TAA) of up to 200% now limited by a new structure whereby percentage of additional tax will be determined by : –Taxpayer’s behaviour (e.g. gross negligence, intentional tax evasion, substantial understatement), and –Other objective criteria (e.g. voluntary disclosure, repeat case) 141

142 © 2012 Deloitte Touche Tohmatsu Limited Penalties - Chapter 16: Understatement penalty 142 New provisions: Imposition triggered by an ‘understatement’ (defined) If understatement is ‘substantial’ (defined) then behaviour irrelevant Methodology for calculation of tax shortfall prescribed Onus to prove grounds for alleged behaviour on SARS Ability to request remittance severely restricted Administrative & understatement penalty ‘double jeopardy’ avoided? Permanent ‘Voluntary Disclosure Programme’ – administrative penalty, understatement penalty & criminal charges relief but not interest

143 © 2012 Deloitte Touche Tohmatsu Limited Penalties - Chapter 16: Understatement penalty Item2 Behaviour3 Standard Case 4 If obstructive, or if it is a ‘repeat case’ 5 Voluntary disclosure after notification of audit 6 Voluntary disclosure before notification of audit (i)Substantial understatement25%50%5%0% (ii) Reasonable care not taken in completing return 50%75%25%0% (iii) No reasonable grounds for tax position taken 75%100%35%0% (iv)Gross negligence100%125%50%5% (v)Intentional tax evasion150%200%75%10%

144 Refund – Chapter 13 A refund need not be authorised by SARS until such time that a verification, inspection or audit of the refund has been finalised If a taxpayer provides acceptable security SARS must release a refund before a verification, inspection or audit is finalised. A decision not to authorise a refund is subject to objection and appeal 144

145 Registration of tax practitioners – Chapter 18 Must register with a recognised controlling body The second phase will be the establishment of an independent regulatory board for tax practitioners May not register if removed from a professional body or convicted for a crime involving dishonesty in the preceding five years 145

146 Tax clearance certificates – Chapter 19 SARS must issue or decline to issue the certificate within 21 business days from the date the application is duly filed Court ruling in favour of taxpayer on revocation of tax clearance certificate because the taxpayer was not afforded an opportunity to make representation to SARS 146

147 Miscellaneous Budget Proposals

148 Budget – Miscellaneous Proposals 148 Carbon Tax With effect from 1 January 2015 a carbon tax rate of R120 per ton of CO2 equivalent, with 10 per cent increases a year Potential phasing out of electricity levy as carbon tax is phased in Vehicle CO 2 emissions tax (amendment from 1 April 2013) Passenger vehicles: increase from R70 to R90 per gram of emissions/km above 120 gCO2/km Double cabs: increase from R100 to R125 per gram/km in excess of 175 gCO2/km

149 149

150 Thank You For more information please contact the Fasset Call Centre on or visit


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