The Professional - Institute of Accounting and Commerce (IAC) [PDF]

The Professional Volume 7, Issue 4

Special points of interest:

June 2016

IAC Western Cape—Compliance Conference

 Prescribed interest rate increased to 10.25%  Early Bird prices for Tax Indaba  Tax filing season commences on 1 July 2016

Inside this issue:

Retirement reforms Transfer fees

2

SARS Auto merg- 3 ing IRP5 changes Capital gains Part disposal of residence

4 5

2016 Tax returns 6 IAC Logo 7 VAT Deemed 8 supplies Accounting basis Zero-rating Food 9 Excess payments 10 Group insurance Rejection of rulings Replaced BPRs

11

Tax indaba New members Staff Profile

13 15 16

12

The IAC proudly congratulates the Western Cape Committee for organizing a very successful Compliance Conference. A wide variety of topics were presented and knowledge was shared with the attendees. The conference also afforded members the opportunity to interact with each other as well as asking practical questions during the various presentations. We also wish to thank the various presenters for sharing their knowledge with us as well as everyone that worked behind the scenes to make the event exceptional.

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The Professional

Revenue Laws Amendment Act 2—Retirement reforms The Revenue Laws Amendment Act 2, 2016 was gazetted on 20 May 2016. This Act amends certain provisions of the Taxation Laws Amendment Act, 2015 [Act No.25 of 2015], Taxation Laws Amendment Act, 2014 [Act No.43 of 2014] and Taxation Laws Amendment Act, 2013 [Act No.31 of 2013] to postpone certain provisions in respect of taxation of retirement benefits and corrects the calculation of the amount of a deduction to be included in taxable income in respect of deductible contributions to defined benefit retirement funds.

Provident fund annuitisation Contributions made by provident fund members to their funds before 1 March 2018 will not require annuitisation. This section also makes provision for the Minister of Finance to consult with interested parties, including at NEDLAC, and to report back to Parliament on the outcome of those consultations no later than 31 August 2017. The inclusion of the compulsory annuity paid by a provident fund or a provident preservation fund from the definition of the term ‘compulsory annuity” in section 10C of the Income

Tax Act, was also postponed until 1 March 2018. The Amendment Act also postponed the tax free transfer from pension fund to provident fund until 1 March 2018. Fringe benefit contributions Section 2 makes provision for the deemed employee contribution to be equal to the value of the fringe benefit under paragraph 12D of the Seventh Schedule to the Income Tax Act, 1962 even if such value is greater than the actual contribution paid by the employer.

Coming together is a beginning; keeping together is progress; working together is success. Henry Ford

Draft SARS documents for public comment The following documents are currently available for public comment:  Draft Guide on the Taxation of Professional Sports Clubs and Players (Due 27 June 2016)  Draft Rule Amendment Notice under section 64D and 120 of the Customs and Excise Act dealing with the movement of new imported vehicles on own wheels (Due 30 June 2016)  Draft Interpretation Note on the taxation of REITs and controlled companies (Due 29 July 2016)  Changes in Harmonized System Nomenclature (Due 29 July 2016)

Professional Sports Clubs—Transfer fees Professional players are often transferred from one club to another. These transfers can be between two local clubs or cross-border. In such cases, the receiving club pays a transfer fee to the other club that is contractually entitled to the player’s performance to ‘release’ the player from the club. It is generally unlikely that clubs would actively trade in players’ contracts and the transfer fee will therefore not be revenue in nature, but rather capital.

Based on the definition of “asset” in Schedule 8 to the Income Tax Act, the contractual right that the club holds to demand performance from a player would qualify as an “asset” of the club for CGT purposes. Consequently, the disposal of such right will give rise to a capital gain or capital loss, depending on whether the selling club disposes of the right at a higher or lower price (proceeds) than what it paid to acquire it (base cost),

If the club however, paid a transfer fee to the player’s previous club in order to obtain the services of the player the transfer fee paid to the player’s previous club would be regarded as expenditure incurred in relation to the contractual rights held by the present club and would accordingly constitute deductible base cost in the existing contractual rights.

Volume 7, Issue 4

Page 3

SARS: Auto-merging of taxpayer profiles SARS is in the process of merging tax profiles of individuals and companies with multiple tax and customs registrations. This means that SARS will match and merge taxpayer’s registered details for tax, customs and excise based on the information that is on the SARS system. The merging of these records will create one consolidated profile. Taxpayers will then be able to view and manage all their individual or company tax types and registered particulars in one consolidated view. This process will take place in batches over a sixmonth period. Process SARS indicated that it will send affected taxpayers a letter to indicate that the records that will be merged. If the taxpayer does not agree with the records indicated, the taxpayer will have 21 days from the date of issue of the letter to request a correction to the records that will be merged. The request for correction can be submitted via the taxpayer’s eFiling profile or at a SARS

Branch. Detailed reasons must be provided why a specific record should be excluded from the consolidated profile. If the taxpayer does not send a request for correction, SARS will merge the records and send the taxpayer a confirmation letter. This letter will indicate all the records that have been merged into the consolidated tax profile. If the taxpayer is a registered eFiler, the letter will be available on the eFiling Home Page. If the taxpayer is not an eFiler but have an email address on the SARS system, the letter will be forwarded to that email address. If the taxpayer is not a registered eFiler and did not provide SARS with an email address, SARS will send the letter to the postal address on its system. The taxpayer must update any outdated information by using the existing eFiling Registration, Amendment and Verification (RAV01) form or at a SARS Branch.

Taxpayers can also include additional records which were not listed in the original letter by performing an “entity merge” using eFiling or by visiting a SARS Branch with the relevant supporting documents to include the record. SARS confirmed that it will simply match and merge the taxpayer’s records into one consolidated profile to make it easier for the taxpayer to view and manage the profile. The taxpayer’s eFiling access and permissions will not be affected during the merge process. If a company profile has multiple representatives for the various tax types on record at SARS, the income tax representative will be listed as the main record (Active Representative) unless the records have previously been merged by a Representative at a SARS Branch or on eFiling. Other representatives will still be able to submit returns and make payments but will not be able to perform sensitive updates such as banking details or merges.

Always be yourself, express yourself, have faith in yourself, do not go out and look for a successful personality and duplicate it. Bruce Lee

IRP5 and IT3(a) amendments or updates Individual taxpayers are no longer able to change or update their pre-populated Employee Tax Certificate (IRP5) details when completing their Individual Income Tax Return (ITR12) if their details are not correct. In instances where an employer has provided incorrect employee information, the affected employee will have to revert to the employer who will need to make changes on the IRP5 certificate and then re-submit it to SARS.

SARS indicated that this change in process was implemented to enhance the quality and correctness of taxpayer data submitted by employers. SARS also noted the following in its letter to Tax Practitioners:

 Taxpayers can add additional

IRP5s but not change those filed by their employers

 Should an employer or service provider revise a taxpayer’s IRP5 data after an ITR12 has been declared and

assessed, the taxpayer has the ability to file a Request for Correction (RFC) or SARS has the ability to do a Revised Declaration (RD) and send a revised assessment (ITA34) to the taxpayer. The SARS Practitioner Contact Centre can be contacted on 0860 12 12 19 for further information.

Page 4

The Professional

Capital gains A person’s capital gain during the current year of assessment is equal to the amount by which the proceeds received or accrued in respect of the disposal exceed the base cost of the asset. The words ‘in respect of’ make it clear that amounts received or accrued before the disposal of an asset must be brought to account as proceeds in the year of disposal in calculating a capital gain. This will include receipts or accruals which preceded that disposal. It can also happen that events in a subsequent year of assessment give rise to a capital gain. This would include instances where—

couped otherwise than through the reduction of any debt owed by that person; or

 in the case of a pre-valuation date asset  Any capital gain is redetermined in the current year; plus

 If a capital loss arose the last time para 25 was applied, the amount of that capital loss.

(Pre-valuation date asset generally means an asset acquired (but not disposed of) before 1 October 2010.)

 further proceeds are received or accrued; or  part of the base cost is recovered or re-

Capital gain arising from redetermination Success is simple. Do what’s right, the right way, at the right time, Arnold H Glasow

The capital gain or loss on disposal of a pre-valuation date asset must, in accordance with para 25(2), be redetermined when any of the following events occur in a year subsequent to the year of disposal:

 more proceeds are received or accrued;

 previous proceeds become irrecoverable,

 further expenditure is incurred, or

 previous expenditure is recovered or recouped. When a redetermination is required, it simply means that the capital gain or loss on disposal of the asset must be redetermined from scratch, taking into account all amounts of proceeds and expenditure from the date on which the asset was first acquired. Redetermination is necessary for the following reasons:

 Any capital gain or loss de-

termined under the first disposal may have been elim-

inated by the kink tests in paras 26 and 27. In the absence of redetermination this could cause hardship or confer an undue benefit on a taxpayer.

 If the time-apportionment base cost method was used with the first disposal, any subsequent capital gain or loss would otherwise not be time-apportioned. For example, additional proceeds received or accrued in a year subsequent to the year of disposal would comprise a full capital gain in the year received or accrued. Note in this regard that the values of ‘N’ and ‘T’ in the timeapportionment formula (period before and after valuation date) remain unchanged. In other words, these periods are determined by the date of disposal, and not by the date of receipt or accrual of subsequent proceeds or the incurral of subsequent expenditure.

Adjustment of capital gain or loss The redetermined capital gain or loss must be taken into account in the current year under para 3(b)(iii)(aa) (capital gain) or para 4(b)(iii)(aa) (capital loss). There is no requirement that a person must consistently apply the same valuation method. For example, a person may have elected time-apportionment for the first disposal and market value for the redetermination. Redetermination is not required when the weightedaverage method is adopted under para 32(3A). Any capital gain or loss that was previously determined is reversed out as a capital loss or gain as the case may be, Under para 3(b)(iii)(bb) (previous capital loss treated as capital gain) or para 4(b)(iii)(bb) (previous capital gain treated as capital loss). [For more information refer to the Comprehensive CGT Guide on the SARS website]

Volume 7, Issue 4

Page 5

CGT: Part-disposal of a primary residence A natural person and special trust must generally disregard the

 capital gain or loss deter-

mined on the disposal of that person’s primary residence to the extent it does not exceed R2 million, or

 Capital gain if the proceeds

on the disposal of that person’s primary residence does not exceed R2 million.

A person may however decide to dispose a part of the primary residence for example, when

 a part of the main residence

is disposed of (for example, by converting a single house into living units),

 the bare dominium or usufruct in the residence is disposed of,

 a part of the primary resi-

dence is bequeathed to a surviving spouse, or

 a part of the rights attaching

to the residence are lost as a result of the obstruction of the view from the residence.

In these circumstances it is important to remember that the underlying principle is that a person’s primary residence exclusion should not exceed R2 million for a single physical structure. If a person therefore decides on a piecemeal disposal of a residence the person’s exclusion should not exceed R2 million for the sum of the parts. Unlike the the primary sion is not and is tied structure.

annual exclusion, residence excluavailable annually to the physical

This view is supported by para 45(2), which requires that when more than one natural person or special trust jointly holds an interest in a primary residence at the same time (a natural consequence of a partdisposal), the R2 million exclusion must be apportioned in relation to each interest so held. How to? 1. Calculate the primary residence exclusion The applicable exclusion calculated as follows:

(Portion’s selling price/market value of ‘full’ residence) x Exclusion of R2 million 2. Calculate the capital gain/loss Portion’s selling price Less Portion’s base cost (‘’Full” base cost x % sold) Less: exclusion calculated in step 1. 3. Subsequent allocation of primary residence exclusion After the disposal, under para 45(2) the remaining primary residence exclusion (i.e. R2 million less amount calculated in step 1) is allocated between the owners in accordance with their respective interests. [For more information refer to paragraph 11.3 of the Comprehensive Guide to Capital Gains Tax (Issue 5) on the SARS website]

The interest rate

 charged on outstanding tax-

es, duties and levies; and

 interest rates payable in

respect of refunds of tax on successful appeals and certain delayed refunds

was increased from 9.75% to 10.25% with effect from 1 May 2016. This rate is applicable until the Public Finance Management Act (PFMA) rate changes. [Interest Rates—Table 1 per SARS website]

life may seem, there is always something you can do and succeed at. Stephen Hawking

is

Interest rates As from 1 April 2003 the “prescribed rate” is linked to the rate determined in terms of section 80 of the Public Finance Management Act, 1999 (PFMA) but for income tax purposes the rate only becomes effective as from the first day of the second month following the date on which the PFMA rate comes into operation.

However difficult

The interest rates payable on credit amounts (overpayment of provisional tax) under section 89quat(4) of the Income Tax Act was also increased from 5.75% to 6.25% with effect from 1 May 2016.

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The Professional

Furnishing 2016 tax returns Notice was given on 3 June 2016 that the following persons are required to furnish an income tax return in respect of the 2016 year of assessment:

 every SA resident company, trust or other juristic person;

 every non-resident company, trust or other juristic person,

 which carried on a trade through a permanent establishment in the Republic;

 which derived income from a source in the Republic; or

 which derived any capital gain or capital loss from a source in the Republic;

 every company incorporated, established or

formed in the Republic, but which is not a resident as a result of the application of any agreement entered into with the Government of any other country for the avoidance of double taxation;

Action is the foundational key to all success. Pablo Picasso

 every natural person—  who carried on any trade in the Republic

(other than solely in his or her capacity as an employee);

 to whom an allowance or advance was paid or

granted as described in section 8(1)(a)(i) of the Act (other than an amount reimbursed or advanced as described in section 8(1)(a)(ii)) and whose gross income exceeded the thresholds set out in item (viii);

 who had capital gains or capital losses exceeding R30 000;

 who is a resident and –  held any funds in foreign currency or

owned any assets outside the Republic, if the total value of those funds and assets exceeded R225 000 at any stage during the 2016 year of assessment;

 to whom any income or capital gains

from funds in foreign currency or assets outside the Republic could be attributed in terms of the Act;

 held any participation rights, as referred to in section 72A of the Act, in a controlled foreign company;

 to whom an income tax return is issued

or who is requested by the Commissioner in writing to furnish a return, irrespective of the amount of income of that person; or

 who, subject to the provisions below*, at the end of the year of assessment—

 was under the age of 65 and whose gross income exceeded R73 650;

 was 65 years or older (but under the

age of 75) and whose gross income exceeded R114 800; or

 was 75 years or older and whose gross income exceeded R128 500;

 every non-resident whose gross income

consisted of interest from a source in the Republic to which the provisions of section 10(1)(h) of the Act, do not apply; and (f

 every representative taxpayer of any person referred to above.

Natural persons not required to submit returns * A natural person is not required to submit a 2016 income tax return if that person’s gross income consisted solely of one or more of the following:  Remuneration [other than an allowance or advance described n section 8(1)(a)(ii)] which did not exceed R350 000 and PAYE was deducted or withheld in terms of the prescribed deduction tables.  Interest from a source in the Republic not exceeding:  R23 800 in the case of a natural person younger than 65 years; or  R34 500 in the case of a natural person aged 65 years or older  Dividends and the natural person was a non-resident throughout the 2016 year of assessment.

Volume 7, Issue 4

Page 7

Furnishing 2016 tax returns—Deadlines Returns in respect of the 2016 year of assessment must be submitted within the following periods: Companies Companies must submit their income tax returns within 12 months from the date on which its financial year ends. All other persons In this instance “all other persons” include natural persons, trusts and other juristic persons, such as institutions, boards or bodies. These persons must submit their income tax return for the 2016 year of assessment –  on or before 23 September 2016 if the return is submitted manually;  on or before 25 November 2016 if the return is submitted by using the SARS eFiling platform or electronically through the assistance of a SARS official at an office of SARS; or  on or before 31 January 2017 if the return relates to a provisional taxpayer and is submitted by using the SARS eFiling platform. In instances where accounts are accepted by the Commissioner in terms of section 66(13A) of the Act in respect of the whole or portion of a taxpayer’s income, which are drawn to a date after 29 February 2016, but on or before 30 September 2016, the income tax return must be submitted to SARS within 6 months from the date to which such accounts are drawn. Returns The forms prescribed by the Commissioner for the rendering of returns are available via the internet at www.sarsefiling.co.za or on request or on application from any office of SARS, other than an office which deals solely with matters relating to customs and excise. All companies must submit their tax return electronically via SARS eFiling. All other persons have to option to submit their returns in the following manner:  Electronically by using the SARS eFiling platform, provided the person is registered for eFiling;  Mailing/posting the return to SARS;  Delivered to an office of SARS, other than an office which deals solely with matters relating to customs and excise; or  Delivered to such other places as designated by the Commissioner from time to time. If a person fails to submit their tax return within the prescribed period, that person is, on conviction, liable to a fine or imprisonment not exceeding 2 years. SARS may also estimate that person’s taxable income, impose a penalty in respect of the failure to submit the return within the required period or both. If the taxpayer knowingly and willfully makes any false statement in a return or attempts to evade tax (or assists another person to do so) that person is, on conviction, liable to a fine or imprisonment not exceeding 5 years.

Use of the IAC Logo The following resolutions are applicable to the use of the IAC logo:



Only members who are in good standing will be allowed to use the IAC logo.



The logo must be placed on the bottom right hand corner of your letterhead, complement slips etc. or signboards.



Members must contact the IAC office for a copy of the jpg file.



Use of the logo is at the sole discretion of the Board and it reserves the right to either withdraw or allow the members to continue to use the logo.

Year of assessment Company: Financial year ending during 2016 calendar year Other persons: 1 March 2015 — 29 February 2016.

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The Professional

Deemed supplies Vendors need to be careful when determining their VAT liability by being aware of the various deemed supplies listed under section 8 of the VAT Act. This section deems certain supplies to be that of goods or services and also pulls in certain other activities which would otherwise not be regarded as supplies. Failing to account for VAT on these supplies could result in the imposition of penalties and interest where output tax is understated.

Try not to become a man of success, but rather try to become a man of

tional institutions

 Foreign donor funded projects

 Transfer of a going concern  Receipt of an indemnity payment

 Supply of goods or services to vendor’s foreign branch

 Repossession or surrendering of goods

 Right of use  Betting transactions

Below is a brief list of the deeming provisions:

 Section 17(2) goods e.g. cars

 Sale in execution

 Supplies partially subject to

 Ceasing to be a vendor  Credit agreement (e.g.doorto-door sales)

and entertainment goods VAT at 0% and 14%.

 Share block companies  Local import agents

 Lay-by agreements

 Expropriation

 Supplies to public authorities,

 Housing subsidies

municipalities and constitu-

 Temporary removal of goods

from a customs controlled area by customs controlled enterprise or IDZ operator

 Supply of goods or services

by a vendor to another vendor under a asset-for share, amalgamation, intra-group transaction or liquidation/ winding-up or deregistration under section 42, 44, 45 or 47 of the Income Tax Act.

 Warranty agreements  Excess amounts received for

standard rated taxable supplies.

Vendors involved in any of the above need to refer to the specific subsection to ensure that VAT is correctly accounted for. It is also important to read section 8 with section 9 (time of supply) and 10 (value of supply) to ensure that the deemed supply is accounted for in the correct tax period at the right value.

value. Albert Einstein

VAT accounting basis Most vendors have to account for VAT on the invoice basis, that is generally account for output tax when a tax invoice is issued and deduct input tax when a tax invoice is received even though the consideration was not yet received or paid.

 Municipal entity that supplies

There are however exceptions to the above rule. The persons listed below may account for VAT on the payment basis, that is, declare output tax in the period consideration is received and deduct input tax in the period the vendor pays the consideration.

vices” The South African Broadcasting Corporation Limited (SABC)

 Public authority  Water board

electricity, gas or water or services consisting of drainage, removal or disposal of garbage or sewage;

 Association not for gain  Supplier of “electronic ser-

 Natural persons (or unincor-

porated body of persons of which all members are natural persons) if the total value of the vendor’s taxable supplies during a12-month period has not exceeded R2.5 million or is not likely to exceed that amount.

A vendor who registered voluntarily for VAT even though the value of its taxable supplies have not yet exceeded R50 000 must also account for VAT on the payment basis. This vendor must however change to invoice basis from the beginning of the tax period immediately following the tax period when the R50 000 threshold was exceeded. Vendors changing from payment basis to invoice basis must meet the requirements of section 15(7)(8) and (9), including preparation of a debtor an creditor list at the end of the tax period immediately before the change-over.

Volume 7, Issue 4

Page 9

Binding General Ruling 33—Vegetable oil The supply of vegetable oil marketed and supplied for cooking food may be zerorated under section 11(1)(j) read with Item 14 of Schedule 2B of the VAT Act. This type of oil is also exempt from VAT on importation under section 7(1) (b) read with section 13(3). The following vegetable oil is however excluded from Item 14 and would therefore be subject to VAT at the standard rate of 14%:

 Vegetable oil not marketed

and supplied for use in the

process of cooking food, for example, coconut oil displayed where toiletries are sold.

 Olive oil.  Vegetable oil blends that contain olive oil.

 Any vegetable oil to which

another vegetable, in its natural state or processed, is added for purposes of flavouring, that is, a whole garlic clove or chili added to canola oil.

 Vegetable oils supplied in the

 Any vegetable oil to which a

standard-rated item has been added, for example, canola oil and butter blend.

 Any of the vegetable oils or

blends marketed and supplied as salad dressing.

course of carrying out any agreement for the furnishing or serving of any meal, refreshment, cooked or prepared food, as the case may be, so as to be ready for immediate consumption when so supplied.

Binding General Ruling 35— Frozen potatoes Binding General Ruling 35 (BGR35) was published on 27 May 2016 which sets out the VAT rate applicable to the supply and importation of frozen potato products. Zero-rating

aspect;  brighten the colour help to prevent the of the natural sugars vitamins present in potato product;

and loss and the

The following potato products may be zero-rated under section 11(1)(j):

 soften the potato product and make it easier to pack; or

 Potato products that are

 prepare the potato product for freezing,

blanched in hot water, steam or oil for the purpose of preserving it; and

 Potato products that have been treated with a preservative to prevent the potato product from naturally darkening.

is regarded as being performed for the purpose of preserving the product in its natural state. Importation

 stop the action of enzymes that can cause loss of flavour, colour and texture;

The importation of the above mentioned frozen potato products is, under section 13(3) read with paragraph 7(a) of Schedule 1 to the VAT Act, exempt from the VAT levied under section 7(1)(b).

 make the potato product safer for the end-user from a microbiological

The supply of the following

Blanching of potatoes in order to –

Standard rated supplies

frozen potato products is specifically excluded from Item 12 and is subject to VAT at the rate of 14% under section 7(1)(a), irrespective of whether such products have also been treated in the same manner as the products listed previously:  Potato products treated with an additive, excluding dextrose, for a purpose other than to preserve the potato product in its natural state, such as flavourings, sweeteners, spices and salt.  Potato products that are coated with a layer of batter in order to increase the crispiness.  Formed potato products, such as hash browns and röstis. The importation of the above products is subject to 14% VAT under section 7(1) (b).

If everyone is moving forward together, then success takes care of itself. Henry Ford

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The Professional

VAT treatment of excess payments An insurer may require its client to pay an excess when a claim is made under a shortterm insurance policy such as a household content insurance policy. The amount of excess is either expressed as a fixed monetary amount or as a percentage of the value of the goods or services insured. Depending on the terms and conditions of the insurance policy, the insured may be required to pay the excess to the insurer or directly to the third party supplier. The third party supplier is, for example, a panel beater in the case of a damaged car. Binding General Ruling 14 (BGR14) sets out the VAT treatment of these types of transactions.

Our greatest glory is not in never falling, but in rising every time we fall. Confucius

Insured pays excess directly to third party supplier

The third party supplier must issue two tax invoices, that is, one to the insured to the extent of the excess payment and one to the insurer to the extent of the trade payment. The third party service pro-

vided would be required to account for output tax. The insured will then be able to rely on the tax invoice issued by the third party service supplier to deduct input tax where the cost was incurred in the course of the insured’s enterprise and the deduction was not denied under section 17(2) of the VAT Act. Insurer pays full amount to supplier and recovers excess from insured. The excess payment received by the insurer from the insured does not constitute “consideration” as the payment is not received in respect of any taxable supply made by the insurer. The insurer is, however, required to issue documentation to the insured in respect of the receipt of the excess payment which must include the following minimum information:

 The insurer’s name, VAT registration address;

number

and

registration number (where applicable) and address;

 The third party supplier’s name and VAT registration number (where applicable);

 A full description of the

goods or services supplied by the third party service provider;

 The date on which the supply was made by the third party supplier; and

 The amount of excess paid

or payable by the insured. The document must state either the VAT amount separately or contain a statement that the amount payable includes VAT and the rate at which VAT was charged.

The insured may then, based on the above document, deduct VAT to the extent of the excess payment made provided the cost was incurred in the course of the insured’s enterprise and was not prohibited under section 17(2). The deduction is calculated as follows: Excess payment x 14/114

 The insured’s name, VAT

Group personal accident insurance An employer, being a vendor, may deduct input tax in respect of the taxable supply of group personal insurance acquired to the extent it is acquired for the purpose of making taxable supplies. Any indemnity payments received by the employer (as principal) under a contract of insurance will result in the employer being liable to account for output tax under section 8(8). The employer will

not be entitled to deduct any VAT in respect of amounts subsequently paid to the employee. Agency If the employer however acts as agent on behalf of its employees it will not be entitled to a deduction as the cost would not have been incurred in the course or furtherance of the employer’s enterprise.

Consequently, the employer will not be required to account for output tax under section 8 (8) if the employee receives an indemnity payment from the insurer, irrespective of whether the payment is made through the employer or directly to the employee.

Volume 7, Issue 4

Page 11

Rejection of ruling applications The Commissioner published an updated list on 24 June 2016 which replaced all previous notices issued under section 80 (2). The aspect in respect of which SARS may reject an application for a binding private or a binding class ruling was extended by the following items: Income Tax Act

 The determination of the allowance referred to in section 24C(2).

 The effect of a salary sacri-

fice for the purposes of the definition of “remuneration” as defined in paragraph 1 of the Fourth Schedule.

 The interpretation and appli-

cation of the exemption under section 10(1)(c)(v), in relation to any agreement entered into before 1 January 1990.

 The deductibility of any ex-

pense incurred by an employer in order to transfer or extinguish, in whole or in part, its post-retirement medical aid obligations towards past or present employees (excluding deductions under section 12M), specifically including, but not limited to—

 lump sum contributions to pension, provident or benefit funds;

 lump

sum settlement payments made directly to employees;

 premiums paid by the employer to acquire annuity policies.

 Applications

concerning residency or tax status, which include—

 the determination of the

place of effective management for purposes of the definition of “resident” in section 1(1);

 any

determination whether a “foreign business establishment” in relation to a controlled foreign company is in existence for purposes of the definition of that term in section 9D(1);

 any

determination whether a “permanent establishment” as defined in section 1(1) has been created.

 Whether

consideration would constitute “fair market value” for purposes of Part V of Chapter II.

 Any exercise of the Com-

missioner’s discretion under section 58(1) to determine whether the consideration given for the disposal of property is adequate.

Value-Added Tax Act

the requirements imposed by any law relating to electronic communications, or that any technical requirements are met in respect of electronic invoicing.

 Confirmation that a supply

of accommodation or any right to occupy a building or part thereof, constitutes “commercial accommodation”.

 Confirmation that a supply

by a “welfare organisation” to a public authority or a municipality qualifies for the zero rate in terms of section 11(2)(n). Other considerations

 Applications for directives or

certificates in terms of the laws administered by the Commissioner if other mechanisms have been established by which those directives or certificates may be obtained.

 Applications concerning the

supplier of goods or services that is not a party to the application.

attribution, allocation or apportionment of expenditure or input tax for income tax or value-added tax purposes.

 The entitlement to deduct

 Tax consequences of trans-

 The liability for tax of a

input tax in respect of goods or services acquired by a person who is not a party to the application.

 Applications requiring the Commissioner to determine that a person is acting as an agent or principal in respect of a supply of goods or services.

 The application of section 8

(15) and whether a supply of goods or services constitutes a single supply.

 Confirmation that the issuing of a tax invoice, debit or credit note complies with

actions contained in agreements which have already been concluded, except requests for VAT rulings or extension thereof if the facts, provisions of the relevant legislation and the applicable legal principles remained the same.

 Applications in respect of

which the applicant has not rendered all tax returns or paid any tax by the due date, unless arrangements acceptable to SARS have been made.

Real knowledge is to know the extent of one’s ignorance. Confucius

Page 12

The Professional

Umkhulu Consulting is a treasury support company that provides a link between companies and banks, managing the risk of the company for them. As we are independent we are impartial to all banks. The service we offer is tailor made to the client’s needs. Our main expertise is on the foreign exchange side of a company’s business. They use our services because we are independent, have expertise in the treasury field and work out a great deal cheaper than employing someone in house. We work for a wide range of import and export companies. Similar companies to us, dwell on the volume in ZAR that they transact. However, we look at how many employees are positively affected by what we do and this stands at around 250,000 employees. Make sure you are dealing with a registered tax practitioner to protect yourself and your business.

We are also practicing tax practitioners purely to assist individuals that want to avail themselves of either their R1m discretionary or R10m investment allowance. We guarantee a transparent and competitive service in this area. We are also a specialist in getting approvals for amounts above R10m. On this side of the business we offer to apply for the client’s FIA001 application and transact the foreign exchange. We would be happy to assist with the forex side of the overall transaction. For more information please write to [email protected]

Replaced binding private rulings Please note that the following Binding General Rulings were amended due to changes in legislation or policy guidance provided in other policy documents:  BPR 005—Whether dividend income received by a trust retains its nature in the hands of the beneficiaries on distribution thereof, by the trust, in the same tax year. (Changes in legislation)  BPR 006—The application of section 24C in the context of a repair and maintenance contract (Interpretation Note 78—Allowance for future expenditure on contracts)  BPR 011—Transfer of a pre-1 March 1998 amount from a pension fund as an own contribution to other retirement funds (Changes in legislation)  BPR 016—Loans from subsidiary company to a holding company (Changes in legislation)  BPR 017—The supply of a trophy , accommodation and services to a person who is not a resident of the Republic (Interpretation Note 81: Supply of goods and services by professional hunters and taxidermists to non-residents)  BPR 020—Impact that the transfer of an amount of share premium of a company to another reserve of that company has on the nature of the share premium. (Changes in legislation)  BPR 022—Taxation aspects of bonuses and penalties payable in terms of an employees’ bonus incentive and retention scheme (Changes in legislation)

Volume 7, Issue 4

Page 13

6 1 0

2

The 2016 Tax Indaba will be held between 5 and 9 September 2016 at the Vodaworld Conference Centre in Midrand. Even though the full list of individual speakers still need to be finalized, the programme covers diverse tax areas to make sure that there is something for everyone. Persons can choose to attend the whole indaba or register for a specific day. The programme covers the following:

Day 1:The Tax Landscape

Including opening address by the Commissioner Tom Moyane and presentations on the SA Fiscal Policy, SA Political Economy, Post 1994 Tax Policy, Funding SA’s Future, International tax evasion and Balancing Government enforcement against tax payers rights.

Day 2: Corporate Tax and Serving SMMEs

General panel discussion by heads of tax (accounting firms) as well as other discussions covering the following: Challenges of Independent (Small) Practice, Anti-avoidance tools,Tax challenges facing small “service” companies. Other topics to be covered include Incentives, Company Start-ups, Taxation of executives/directors, Company profit withdrawal, Client assurance, Company break-ups, Group structured sales, Company insolvency, terminations and rescues, Carbon tax and Small business overlyburdened or under-enforced.

Day 3: Indirect Tax and Estate Planning

Panel discussion on Fiscal Citizenry as well as general panel discussion by Heads of Tax (Law Firms). Other topics to be covered include: VAT Registration ,The SVDP and other Regularisation of Offshore Holdings, VAT and the Digital Economy ,VAT on Cross-Border Services, Estate Planning and Small Business, VAT implications when disposing of business enterprises, Tax Compliance Status System and Tax Clearance Certificates, Immovable property transfers; Tax and Savings options; Apportionment and Intra-Group payments, Use of discretionary trusts, VAT reforms—Desirable and viable and future for trusts.

Day 4: International Tax / Employee Tax & Payroll

Panel discussion by Professional member bodies and Tax Practice as well as Tax Directors of companies, Other topics include SA’s CFC regime, International Reporting, Fringe benefits: Uses and risks, Permanent establishments: Latest developments, Daily payroll challenges, Cross border services, Best Expat employees, BEPS and Retirement reform. The Keynote Address will be presented by the UIF Commissioner.

Day 5:Tax Administration and Industry Panel Discussions

The last day of the Indaba will give attendees the choice to attend tax administration sessions or industry panels. Tax administration topics include Resolving tax disputes, Litigating tax disputes, Penalties and interest, Personal liability to SARS (Tax ethics), Prescription and the Closing address by the Tax Ombud. On Industry side, there will be panel discussions dealing with the following industries: Mining, Manufacturing, Banking, Farming and Retail.

Pricing Register

1 Day 2 Days 3 Days 4 Days 5 Days

Before 10 July 2016

2,240 4,256

6,048

7,616

8,512

Between 11 July and 9 August 2016

2,680 5,122

6,926

8,592

9,544

After 10 August 2016

2,800 5,320

7,560

9,520 10,640

Booking Procedure IAC members wishing to attend the Tax Indaba may use the IAC Booking Code which will be communicated shortly.

Page 14

The Professional

Registration of tax practitioners Section 240 of the Tax Administration Act 28 of 2011 requires all persons who provide tax advice or assist in completing a tax return for another person to register with the South African Revenue Service (SARS) as a tax practitioner within 21 business days after the date on which that person first provided advice or assistance. Only natural persons may register as a tax practitioner and they must be members of a recognised controlling body. As at 31 July 2015 the following institutions are registered with SARS as recognised controlling bodies:

 Institute of Accounting and Commerce (IAC);  South African Institute of Chartered Accountants (SAICA);  South African Institute of Professional Accountants (SAIPA);  South African Institute of Tax Professionals (SAIT);  Chartered Institute of Management Accountants (CIMA);  Association of Chartered Certified Accountants (ACCA);  Chartered Secretaries Southern Africa (CSSA);  Association of Accounting Technicians of Southern Africa [AAT(SA)];  A law society;  General Council of the BAR of South Africa; and  The Independent Regulatory Board for Auditors (IRBA). Each of these institutions has its own entry requirements, although SARS sets the minimum entry requirement as an NQF level 4 qualification (matric certificate) with at least 5 years of practical experience. Applicants have to undergo an entry exam or entry evaluation to assess their competency. Tax practitioners must also be in possession of a tax clearance certificate (TCC) and must comply with the following continuous professional development (CPD) requirements:

 Nine structured tax hours; and  Six unstructured tax hours per annum. It is important to note that some of the controlling bodies have made it compulsory for members to have Professional Indemnity Insurance. All this is done to protect the public from unscrupulous tax practitioners. Before the compulsory registration of tax practitioners there were about 35 000 tax practitioners in South Africa. After the new requirement, (1 July 2015), requiring tax practitioners to register with a controlling body, this number dropped to about 17 000. A question begs to be asked: What happened to the other 18 000 tax practitioners who did not register with a controlling body? Did they simply stop providing tax services to the public or are they still practicing, albeit illegally? It recently came to light that some of these practitioners are still providing tax services; however they are unable to submit tax returns to SARS as they are not registered, so they do so under their client’s profiles and access details. This is illegal, particularly if they are charging for their services. Should you suspect this is happening to you, ask your tax practitioner to provide you with his or her registration number and the membership number and name of the professional body with which he or she is registered. Using a registered tax practitioner who has Professional Indemnity Insurance means that you can have some recourse against the practitioner and recover some or all of your monies from the practitioner if there is a loss due to negligence or fraud. It is important to use qualified, registered tax practitioners who are compelled to have Professional Indemnity Insurance and who keep abreast of the latest tax legislation by complying with continuous professional development.

Written by: Ehsaan Nagia (CEO– IAC)

Volume 7, Issue 4

Page 15

Welcome to our new members Independent Accounting Professional ( Reviewer) / Tax Practitioner Practice Number

Surname

Name

AO652993

Basson

Jasper Nicolaas

Financial Accountant in Practice (Accounting Officer) / Tax Practioner Practice Number

Surname

Name

AO655374

Raphasha

Mahlodi Dannis

Tax Practioner Practice Number

Surname

Name

IAC655336

Annandale

Marise

IAC655392

Banda

Stephen

IAC654000

Mhangani

Amukelani Shane

Life is not about finding yourself. Life is about

Technical Accountants Membership No

Surname

Name

IAC655381

Njara

Portia Ezethu

IAC655382

Sosibo

Siviwe

IAC655383

Mabindla

Zizipho

IAC655384

Mevana

Mziyanda

IAC655385

Cekiso

Yonela

IAC655386

Kabalaza

Mnoneleli

IAC655387

Ntshuntsha

Vuyokazi Antonette

IAC655388

Dondashe

Yena Likho

Students Membership No

Surname

Name

IAC655393

Mkutswana

Yolanda

IAC655394

Mbete

Nolonwabo Unathi

creating yourself. George Bernard Shaw

INSTITUTE OF ACCOUNTING AND COMMERCE

A dynamic world-class professional accounting institute The Institute of Accounting and Commerce (IAC) is a professional accounting institute. Established in 1927, it is registered in South Africa as a non profit company (NPC). It is fully self-funded and conducts its business from its Head Office in Cape Town. MISSION STATEMENT

Primary Business Address 252 Rosmead Avenue Wynberg 7780 Phone: (021) 761 6211 Fax: (021) 761 5089 E-mail: Prakash Singh [email protected] QUERIES General: Abeeda Busch [email protected] Membership Soraya Busch [email protected] Bronwyn Benjamin [email protected] Finance Duncan Stark [email protected] Valencia Williams [email protected]

It is the aim of the Institute of Accounting and Commerce to promote actively the effective utilisation and development of qualified manpower through the achievement of the highest standards of professional competence and ethical conduct amongst its members.

IAC technical Helpline Phone: (021) 761 6211 Fax: (021) 761 5089 E-mail: Prakash Singh [email protected] Ehsaan Nagia [email protected]

Staff Profile - Bronwyn Benjamin

GM & Technical Prakash Singh [email protected] CEO & Technical Ehsaan Nagia: [email protected] Office Hours: Monday - Thursday 08:30 - 16:30 Friday 08:30 - 16:00

www.iacsa.co.za

Bronwyn Benjamin joined the IAC Team on the 1 March 2016 as the new COMPLIANCE OFFICER