FAQ - 27 February 2014
25 February 2014
Posted by: Author: SAIT Technical
Author: SAIT Technical
1. Employment Tax Incentive
the Employment Tax Incentive available for non profit organisations such as a
church where Pay- As-You-Earn is applicable on salaries?
A: Eligible employers
An employer is
eligible to receive the employment tax incentive if the employer—
registered for the purposes of the withholding and payment of employees’ tax by
virtue of paragraph 15 of the Fourth Schedule to the Income Tax Act; and
(b) is not—
(i) the government of the
Republic in the national, provincial or local sphere;
(ii) a public entity that is
listed in Schedule 2 or 3 to the Public Finance Management Act, 1999 (Act No. 1
of 1999), other than those public entities that the Minister of Finance may
designate by notice in theGazette on such
conditions as the Minister of Finance may prescribe by regulation;
(iii) a municipal entity
defined in section 1 of the Local Government:Municipal Systems Act, 2000
(Act No. 32 of 2000); and
c) is not disqualified from receiving the incentive—
It is my understanding that only the entities described in s 3
of the Act are disqualified. PBO’s are not expressly listed in this section as
a disqualified entity.
2. Rollover tax for asset purchased within 12 months
Q: For rollover CGT, if an asset was disposed involuntarily,
must the replacement asset be of the same nature or what types of assets can
be purchased? In addition must the gain be used for replacement of the full
receipt amount of the asset sold?
A: Persons who were dispossessed of their land as a result of
racially discriminatory laws or practices may seek compensation under the
Restitution of Land Rights Act 22 of 1994. The compensation may be in the form
of a restitution of a right to land, an award or compensation.
person who has submitted a claim for land restitution effectively disposes of
his or her claim for the amount of the award or compensation received.
capital gain or loss on disposal of this nature must be disregarded.
This provision does not apply to a person whose land is
expropriated under the Restitution of Land Rights Act. Although para 64A refers
to ‘compensation’, this is not compensation paid to the person whose land is
expropriated. The type of compensation envisaged in para 64A is that which is of
the same nature as a ‘restitution of a right to land’ and ‘an award’, that is,
it is compensation paid to a land claimant. A person whose land is expropriated
may, however, be entitled to roll-over relief under para 65.
Paragraph 65 enables a person to elect to defer a capital gain
when an asset has been disposed of by way of operation of law, theft or
destruction. The words ‘operation of law’ were substituted for the word
‘expropriation’ by the Revenue Laws Amendment Act 45 of 2003. Black’s Law
Dictionary489 describes these words as follows:
of law. The means by which a right or a liability is created for a party
regardless of the party's actual intent .’
words are wider than ‘expropriation’ and would cover, for example, a property
disposed of pursuant to the gazetting of a land claim under the Restitution of
Land Rights Act 22 of 1994. In other words, it is not required of a taxpayer to
contest such a claim through the courts in order to secure the roll-over relief
conferred by para 65. The relief would not, however, apply to a person who
disposes of an asset under the mere threat of the lodging of a claim under any
A person can elect that para 65 apply to the disposal of an
asset (other than a financial instrument) under the following conditions:
The asset must be disposed of by way of operation of law (for
example, expropriation), theft or destruction.
• Proceeds must accrue to the person by way of compensation (for
example, an insurance payout).
• The proceeds must
be equal to or exceed the base cost of the asset (that is, a capital gain or
break-even situation). When a capital loss arises this provision does not
apply, as most persons would want to claim the capital loss in the year of
assessment in which it arises. This provision also applies when the proceeds
are equal to the base cost of an asset. This is necessary because despite not
having a capital gain, a person may have a recoupment under s 8(4), and one of
the pre-requisites for the equivalent relief provided by s 8(4)(e) is an
election under para 65 or 66.
If less than all the proceeds are expended in acquiring a replacement asset
para 65 will not apply. It is possible, however, to acquire a replacement asset
costing more than the proceeds realised upon the disposal of the old asset.
The relief applies when an amount at least equal to the receipts and accruals
from the asset disposed of ‘has been’ or ‘will be’ expended to acquire one or
more asset referred to in the provision as ‘replacement asset or assets’. The
description of the new assets as replacement assets is intended to be more than
just a label. The replacement asset must fulfill the same function as the old
asset. For example, if a person receives compensation for the expropriation of
a farm and invests the proceeds on loan account in a company, para 65 will not
new farm must be acquired. It is also worth noting that the new asset must be
‘brought into use’ – a clear indication that the provision is directed at
tangible replacement assets. The use of the words ‘has been’ indicates that it
is possible to acquire a replacement asset before disposing of the old asset.
When the replacement asset is acquired in advance of the involuntary disposal
of the old asset, there should be a causal link that confirms that the new
asset is indeed a ‘replacement’.
All the replacement assets must be from a deemed South African source under s
South African immovable property (including shares in a property company under
other asset of a resident not forming part of a PE outside South Africa and
which is not subject to foreign taxation, and
other asset of a non-resident that forms part of a PE in South Africa.
3. VAT on motor vehicles and Employee Tax Incentive
Q: 1. VAT on double cab vehicles
- A client approached me to say he
heard that you can now claim the VAT on the purchase of a double cab vehicle.·
- When researching the SARS website and contacting SARS
– the only information they provide me is the VAT 420 guide which still shows
that you cannot claim VAT on a double cab
2. Employee Tax Incentive
- With regard to the new employee
incentive scheme that SARS has introduced, I have tried to establish that if
your Emp 201 return results in a refund – does SARS refund the employer?
(One can assume that on average they will receive a refund every month for the
first year while that employee is employed) ·
- When contacting SARS they can’t tell me either as they
are not sure how the new mandate works either
A: (1) I am
not aware of any amendments or proposed amendments to Section 17(2)(c) of the
VAT Act, nor the definition of ‘motor vehicle’ therefore the status quo is the
same – a double cab bakkie falls within the definition of ‘motor vehicle’ and
therefore an input tax will be denied.
(2) The ETI has its own refund
mechanism contained in ss 9 and 10 of that Act. In terms of s 9, any surplus
would be carried forward to the next month. In the event that a surplus was
carried forward for a continuous period of 6 months, then a refund may be made
in terms of s 10. The problem with this is that s 10 has not yet come into
1998 tax free lump sums from Public Sector Funds
transferred government Pension fund to Pension Preservation Fund in August 1995. Would the funds still be deductible or would chages effective from 01
March 2006 over-ride?
actual lump sum benefit received from a PSPF in consequence of a taxpayers
withdrawal, retirement or death is not taken into account in calculating the
taxable amount (represented by A in formula C (par2A of the 2nd
Schedule)). The amount attributable to pensionable service prior to 1 march
1998 retains its tax free status.