FAQ - October 31
31 October 2013
Posted by: Author: SAIT Technical
Author: SAIT Technical
1. PAYE & Income Tax
Employer appoints new employee. He is required to relocate to a new town in order to be able to work for the company. The employer pays the employee R 20 000 in order to help the employee relocate. Should this amount be added to the payroll and is this amount taxable?
In terms of section 10(1)(nB) of the Income Tax Act (the Act), a benefit that an employee may have enjoyed by reason of the fact that his employer has borne certain expenditure incurred
- in consequence of his relocation from one place of employment to another, or
- on his appointment or his termination of employment may be exempt from normal tax.
In terms of this provision, when an employer has borne the following expenses they will be exempt from normal tax:
- The transportation of the employee, members of his household and personal goods from his previous place of residence to his new place of residence.
- Costs as the Commissioner may allow that have been incurred by the employee on the sale of his previous residence and in settling in permanent residential accommodation at his new place of residence.
- The cost of hiring temporary residential accommodation for the employee and members of his household during a period that ends 183 days after his transfer took place or after his date of appointment.
The following items are exempt from tax if the employer reimburses the employee for the actual expenditure incurred. They must be reflected under the code 3714 on his IRP 5 certificate:
- Bond registration and legal fees.
- Transfer duty.
- Cancellation of bond expenses.
- Agents commission on the sale of his previous residence.
2. Dividends tax
I have to complete a DTR02 and DTR01 for a client who took up the opportunity of transferring their holiday home out of a Close Corporation into the members' personal hands. The dividend/distribution is exempt from dividends tax but I cannot seem to find the place on the form to show that it is exempt? It is a "dividend in specie" can you please advise me as to where this exemption is reflected on the forms?
The dividends tax exemption is contained in section 64FA(1)(c).
64FA. Exemption from and reduction of tax in respect of dividends in specie.—
(1) Where a company declares and pays a dividend that consists of a distribution of an asset in specie, that dividend is exempt from the dividends tax to the extent that it constitutes a distribution of an asset in specie if—
(a) . . . (Not applicable)
(b) . . . (Not applicable)
(c) the dividend constitutes a disposal as contemplated in paragraph 51A of the Eighth Schedule. Effective date Section 64FA comes into operation on 1 April 2012.22 A distribution of a qualifying residence in specie will constitute the disposal of a residence for the purposes of section 64FA(1)(c).
A sale of the residence to a person at less than market value will give rise to a dividend as defined in section 1, to the extent that it comprises – "any amount transferred or applied by a company that is a resident for the benefit or on behalf of any person in respect of any share in that company”.
Space is provided on the return to enter reason for exemption under "Exemption Claimed” from a pre-populated list however, "FA” does not populate on the list. We will bring the fact that "FA” does not populate on the list to SARS’s attention.
3. Capital Gains Tax - Subdivision of property
This query relates to an acre of land with a house on it, subdivided into 2 quarter acres, plus half an acre with the house on it.
If my client subdivided the property that is his primary residence and sold off a portion of the land, is he liable for Capital Gains Tax?
I believe he should pay Capital Gains Tax, but the estate agent who sold the land says he is not liable for it because the land was part of his primary residence.
Under para 46(c) of the 8th Schedule ot the Income Tax Act the exclusion is not available when land is disposed of separately from the ‘residence’. It is provided that the land must be ‘disposed of at the same time and to the same person as that residence’. You may also want to consider whether the proceed on the sale of the land may constitutes revenue instead of capital
4. Compliance with the TAA with regard to SAIT membership
I have a business, we only do personal tax returns, I have a staff complement who deal with clients in terms of receiving information and completing tax returns. All tax returns completed come through my desk where I sign them off before submission takes place.
Any tax queries except for general queries i.e. what is required for a tax return submission, is also handled by myself.
All clients are on the one efiling profile belonging to me as a Tax Practitioner. Is this situation okay with me only being registered with SAIT as a Tax Practitioner
S 240(2) of the TAA:
(2) The provisions of this section do not apply in respect of a person who—
(a) provides the advice or completes or assists in completing a document solely for no consideration to that person or his or her employer or a connected person in relation to that employer or that person;
(b) provides the advice solely in anticipation of or in the course of any litigation to which the Commissioner is a party or where the Commissioner is a complainant;
(c) provides the advice solely as an incidental or subordinate part of providing goods or other services to another person;
(d) provides the advice or completes or assists in completing a document solely—
(i) to or in respect of the employer by whom that person is employed on a fulltime basis or to or in respect of that employer and connected persons in relation to that employer; or
(ii) under the direct supervision of a person who is registered as a tax practitioner in terms of subsection (1).