RSA Other Legislative Changes

Before 1 March 2019, an employee could not affect tax-free transfers from an employer provident fund to an employer pension fund immediately prior to retirement.

Backdating to 1 March 2019, the amendment allows employees to affect tax-free transfers from an employer provided provident fund into an employer provided pension fund immediately prior to retirement, if both funds are provided by the same employer.

Currently, if the employer does not submit a return by –

• such dates as prescribed by the Commissioner by notice in the Gazette, and

• if the employer ceases to carry on business or ceases to be an employer, within 14 days after the employer ceased to carry on business or ceased to be an employer,

the Commissioner may impose a penalty (which is a percentage based penalty imposed under Chapter 15 of the Tax Administration Act) for each month that the employer fails to submit a return which in total cannot exceed 10% of the total amount of employees’ tax deducted or withheld or which should have been deducted or withheld by the employer from the remuneration of employees.

From 15 January 2020, the amendment clarifies that the penalty may also be imposed where the employer submits a return that is not in the prescribed form and manner (i.e. an incomplete return).

Remuneration is generally taxable on accrual or receipt/payment, whichever event occurs first. However, in the case of ‘variable remuneration’, PAYE must be withheld on the date which the amount is paid to the employee.

Before 1 March 2020, ‘variable remuneration’ was defined as only:

• overtime,

• bonuses,

• commission,

• an allowance or advance paid in respect of transport expenses such as a travel allowance, and

• leave paid out.

From 1 March 2020, the following items are added to the definition of ‘variable remuneration’ and PAYE must be withheld when these amounts are paid to the employee:

• reimbursive travel allowance,

• any night shift allowance,

• any standby allowance, and

• certain business reimbursements.

According to section 7B, PAYE must be withheld from a travel allowance/advance/reimbursement when it is paid to an employee.

However, there was an inconsistency when an employee claimed travel expenses on assessment for business travel; for example, when an employee travelled in February but was paid in March, the travel deduction for February could be claimed against the following year’s travel allowance/advance/reimbursement.

Therefore, a deduction was forfeited as the distance to which the allowance/advance/reimbursement paid related, was not travelled in the year of assessment the reimbursement was paid and the employee could not claim this specific business travel deduction on assessment.

From 15 January 2020, in order to correct this inconsistency, the amendment aligns a person’s kilometres travelled for business with the payment of the allowance/advance/reimbursement received in relation to the said travel.

Before 1 March 2020, there was no exemption for non-deductible contributions for provident fund and provident preservation fund when determining the taxable portion of annuities.

From 1 March 2020, any non-deductible contributions are allowed as an exemption when determining the taxable portions of annuities.

To calculate the right of use of motor vehicle fringe benefit value, the ‘determined value’ of the motor vehicle must be used in the formula.

From March 2015, the value to be used as the ‘determined value’ is the ‘retail market value’ as determined by the Minister in a regulation.

The regulation is only applicable to vehicles acquired or manufactured from March 2015.

Please see Government Gazette 38744, published on 28 April 2015, for more information.

However, there was an anomaly in this regulation – it did not make provision for a ‘retail market value’ where an employer (who is not a motor vehicle manufacturer, motor vehicle importer, motor vehicle dealer or motor vehicle rental company) acquired the motor vehicle at no cost (for example a donation).

On 17 January 2020, a new regulation was published by the Minister of Finance, which is effective March 2020.

This regulation amends this anomaly and clarifies that where the employer is not a motor vehicle manufacturer, motor vehicle importer, motor vehicle dealer or motor vehicle rental company, in respect of any year of assessment, and the motor vehicle was acquired at no cost, the market value of that vehicle must be used as the ‘retail market value’ to calculate the taxable value.

Please see Government Gazette 42961 for more information.

Both the Income Tax Act (ITA) and Employment Tax Incentive Act (ETIA) allows special tax incentives for companies that operate (carry on a business) within a SEZ. In order to be a qualifying employee for ETI, certain criteria must be met.

One of the criteria is that the employee must be 18 to 29 years old on the last day of the calendar month, unless the employee renders services mainly within a SEZ to an employer who operates through a fixed place of business within a SEZ, then the employee can be any age.

In order to qualify for the tax incentive in terms of the Income Tax Act, the employer must meet certain requirements, however, before March 2020 the Employment Tax Incentive Act did not make provision for the same requirements.

From March 2020, in order to ensure that the SEZ policy is applied in a uniform manner in both the Income Tax Act and Employment Tax Incentive Act,

• the definition of ‘special economic zone’ is amended to align with the definition in the Income Tax Act, and

• it is clarified that in order to claim ETI for employees of any age due to the SEZ criteria, the company should be a qualifying company as contemplated in the Income Tax Act under the SEZ regime and the employee renders services to that employer mainly (more than 50%) within the special economic zone in which the qualifying company that is the employer carries on trade.

From 15 January 2020, the amendment clarifies that the Director General of the Department of Higher Education and Training, instead of SARS, is regarded as the person most capable of evaluating whether an employer has been classified under the jurisdiction of the correct SETA.

This amendment subsequently allows the Director-General to direct that a SETA selection by an employer is not binding in certain circumstances.

From 15 January 2020, the amendment aligns the refund provisions in the Skills Development Levies Act with section 190(4) of the Tax Administration Act.

Therefore, a refund (levy, interest or penalty) in terms of the Skills Development Levies Act must be made by the SETA (or approved body from the funds of the SETA) within five years from the date the payment was made or where that refund was claimed by the employer within the five year period, but not paid by the SETA within that period.

From 15 January 2020, the amendment aligns the refund provisions in the Unemployment Insurance Contributions Act with section 190(4) of the Tax Administration Act.

Therefore, a refund (contribution, interest or penalty) in terms of the Unemployment Insurance Contributions Act must be made by the Unemployment Insurance Commissioner from the Unemployment Insurance Fund within five years from the date the payment was made or where that refund was claimed by the employer within the five year period, but not paid by the Fund within that period.