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Fasset Update March 2013 Welcome and introduction

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1 Fasset Update March 2013 Welcome and introduction
Please indicate that no lunch will be served, only light refreshments will be available at the tea break.

2 Seta Funding Regulations
Fasset Update March 2013 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 Discuss major changes to the Seta environment as a result of the new regulations.

3 Fasset’s Strategy 2013 / 2014 Fasset Update March 2013 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. Refer to the partnerships that Fasset intends to develop with various parties. Discuss the transformation agenda and that it will still be addressed through some of the discretionary interventions.

4 Mandatory Grant Fasset Update March 2013 Training plan for the upcoming year and training report for the previous year 20% of the SDL, paid quarterly 2 forms: <50 Employees and >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 Note: Deadline for submission is 30 June 2013 (Sunday), however Fasset will only accept hand deliveries on the last working day before the deadline i.e. Friday 28 June Fax or submissions are welcome over the weekend.

5 Combined Pivotal and Strategic Cash Grant
Fasset Update March 2013 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 – to be submitted via hand delivery on Friday Structure of the two grants is the same and will therefore be combined. The criteria for the Strategic Cash Grant remains Black African, however the Pivotal Grant will include all population groups. As the Mandatory Grant was dropped to 20% of the SDL, an employer is able to reclaim the 50% if the full Pivotal Grant of 30% is reached. Deadline for submission is 15 February 2014 (Saturday), however Fasset will only accept hand deliveries on the last working day before the deadline i.e. Friday 14 February Fax or submissions are welcome anytime leading up to the deadline.

6 Learnership Cash Grant
Fasset Update March 2013 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 – to be submitted via hand delivery on Friday Length of Learnership Entry Tariff Exit Tariff 12 month R 5,000 24 month R 7,000 R 13,000 36 month R 20,000 Based on a tariff scheme dependant on the status and length of the learnership. Higher tariff is available to learners with a disability as well as if an employer is running a learnership for the first time.

7 NSFAS Loan Repayment Grant
Fasset Update March 2013 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 – to be submitted via hand delivery on Friday Note that the grant will be paid directly to NSFAS and that the learner or employer will not receive the funds. This grant aims to prevent learners from leaving the sector for higher paying salaries before they have completed their learnership. Encourage learners to apply as soon as it opens to decrease the interest calculate.

8 NSFAS Grant Amounts Length Tariff Amount 12 (1 year) On registration
Fasset Update March 2013 Length Tariff Amount 12 (1 year) On registration R 5,000 In month 12 of the learnership R 25,000 24 (2 year) In month 6 of the 24-month learnership R 15,000 In month 18 of the 24-month learnership 36 (3 year) In month 6 of the 36-month learnership In month 18 of the 36-month learnership R 20,000 In month 32 of the 36-month learnership NSFAS Loan Repayment Grant is based on a tariff scheme, dependant on the status and length of learnership. Can be applied for in tranches.

9 Assessor and Moderator Grant
Fasset Update March 2013 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 – to be submitted via hand delivery on Friday

10 Lifelong Learning Fasset Update
March 2013 Month Topics Target Occupations Mar 2013 Budget & Tax Update 2013 Legislative (All) Apr 2013 Change Management HR (SDFs, HR Professionals) May 2013 How to Manage your Business Leadership and Management (Middle & Senior Managers) Jun 2013 Culture and Diversity in the Workplace Leadership and Management (Junior and Middle Managers) Jul 2013 Project Management Aug 2013 Managing Teams Leadership and Management (Middle and Senior Managers) Sep 2013 Compliance with Changes in Legislation relevant to the Finance Sector Oct 2013 Mentoring and Coaching Nov 2013 Conflict Management Feb 2014 Survive and Thrive in an Office Environment Very Important: From 1 April 2013, only employers that are up-to-date with the Fasset registration i.e. NLPs will be able to register for Lifelong Learning events. NLP forms are available on the website and registration is annual. Only firms with a valid SDL number with Fasset will be able to register for the events This calendar is subject to change

11 Innovations in accreditation
Fasset Update March 2013 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 Access into Higher Education
Bridging Programme: Access into Higher Education Fasset Update March 2013 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 2nd 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 More information on the Bridging Programmes can be found on the Fasset website. Programmes that assist learners in subject choices and gain access to higher education.

13 Academic/Professional Body Qualifications
Bridging Programme: Academic/Professional Body Qualifications Fasset Update March 2013 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 Programmes offered by Professional Bodies and HET institutions that assist learners in obtaining the qualification relevant to the sector.

14 Access into Employment
Bridging Programme: Access into Employment Fasset Update March 2013 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 Only applicable to certain venues: Training provider available during the breaks o discuss the programme further. NEET: Not in employment education and training

15 Upcoming Research Fasset Update March 2013 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) Results from the Sector Survey and Customer Satisfaction Survey will be made available and published in the Annual Report.

16 FET Funding Window Fasset Update March 2013 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 Fasset is the lead Seta in Limpopo and will start the focus of the FET partnerships in this province.

17 Career Guidance and Provincial Strategy
Fasset Update March 2013 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 Brand ambassadors are currently being appointed at institutions across the country, and the campaign will run through the 2013 academic year.

18 Stakeholder Engagement
Fasset Update March 2013 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 We encourage feedback from the sector, should you have any queries or suggestions, please send this through to our Call Centre.

19 Tools Fasset website:
Fasset Update March 2013 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 or visit
Fasset Update March 2013 Thank You For more information please contact the Fasset Call Centre on or visit Introduce the Speaker

21 Facilitated by Deloitte.

22 Introductory Overview

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

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

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

26 Budget Proposals: Individuals

27 Budget – Individual Overview
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

28 Budget – Individual Rates
Rebates Thresholds Rebates 2013/2014 2012/2013 Primary R12 080 R11 440 Secondary R6 750 R6 390 Tertiary R2 250 R2 130 Tax thresholds 2013/2014 2012/2013 Below 65 R67 111 R63 556 Age 65 and over R R99 056 Age 75 and over R R

29 Budget – Individual Fiscal Drag
Effect of fiscal drag 2012/2013 2013/2014 No adjustment With adjustment Salary R R Tax thereon R R R After tax R R R Restate tax to 2012/2013 terms (R and R /1.056) R R

30 Budget – Individual Fiscal Drag
Effect of fiscal drag Taxable income 2013 rates 2014 rates Claimed benefit Actual benefit/(loss) R R6 560 R6 928 R640 RNIL R R54 860 R58 431 R1 469 (R472) R R R R2 555 (R1 105) R R R R3 015 (R1 350)

31 Budget - Tax-preferred savings and investment vehicles
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 2015.

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.

33 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

34 Budget - Individuals Discretionary Trust Current Proposed Interest
Capital profit R20 000 Net profit before tax R42 800 Less: distribution to beneficiary -R42 800 Less: capital profit -R20 000 Add: capital gain R13 333 Less: tax deductible payment to ben -R36 133 Taxable income in trust RNIL Beneficiary Current Proposed Interest R22 800 Interest exemption -R22 800 Capital gain (33% inclusion) R6 667 Taxable income from trust R36 133 Taxable income in beneficiary 40% R2 667 R14 453

35 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

36 Amendments: Individuals

37 Medical 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

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.

39 Provision of leased (operating) company cars par 7 7th 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

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

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

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

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

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 R550 000 of taxable income.

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

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

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

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.

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

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 2012

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

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

55 Repeal of anti-avoidance for the transfer of depreciable assets between connected persons s23J
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 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
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 2013

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

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

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

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

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

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

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

66 Share-for-share recapitalisations s41/43 Par 78 8th 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

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

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<Value of shares excess deemed dividend for issuer of shares

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 2014

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

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

72 Micro Business par 11 6th 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

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

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

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).

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

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

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

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

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

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 2014

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

86 Amendments: International Tax

87 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

88 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.

89 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.

90 Resident definition section 1
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

91 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.

92 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 2013.

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

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 2014

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

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

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

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

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!)

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

103 Chapters in the act Chapter 1 11 Recovery 2 12 Interest 3 13 Refunds 4
Definitions 11 Recovery 2 General Administration 12 Interest 3 Registration 13 Refunds 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

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

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

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

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

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.

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

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.

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

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)

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

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

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”

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 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.

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

120 Advance Rulings – Chapter 7
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

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

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

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

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

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

127 Assessments – Chapter 8 Old New s77 Assessment and recording thereof
Original assessments Recording of assessments s78 Estimated assessments s95 Estimation of assessments s79 Additional assessment s92 s79A Reduced assessments s93 s79B Withdrawal of assessments s98 s80 Inspection of record of assessments s94 Jeopardy assessments s96 Notice 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

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

130 Income Tax Act to Tax Administration Act
OLD NEW s 81 Objection against assessment Chapter 9 Dispute resolution Part B Objection and appeal s 104—Objection against assessment or decision s 106—Decision on objection s 83 Appeals to tax court against assessment s 107—Appeal against assessment or decision s 83A Appeals to tax board

131 Income Tax Act to Tax Administration Act
OLD NEW s 86A Appeals against decisions of a tax court Part E Appeal against tax court decision ss 133–141 s 88 Payment 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.

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

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

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

136 non-compliance Penalty B: Understatement penalty
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 Penalties – Chapter 15 & 16 Old New s 75B
Administrative penalty in respect of non-compliance s208–220 Administrative non-compliance penalties s 76 Additional tax in the event of de-fault or omission S Part A:Understatment Penalty s 80S Reportable Arrangement Penalties s 212 Reportable 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 para 20(A(3) Additional tax in the event of failure to submit an estimate of taxable income timeously para 27(2) Penalty on late payment of provisional tax Remains in ITA, deemed percentage based in TAA

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….

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

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)

142 Penalties - Chapter 16: Understatement penalty
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 Penalties - Chapter 16: Understatement penalty
1 Item 2 Behaviour 3 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 understatement 25% 50% 5% 0% (ii) Reasonable care not taken in completing return 75% (iii) No reasonable grounds for tax position taken 100% 35% (iv) Gross negligence 125% (v) Intentional tax evasion 150% 200% 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

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

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

147 Miscellaneous Budget Proposals

148 Budget – Miscellaneous Proposals
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 CO2 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


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