Feedback summary of the 2015 Annexure C workshops
10 December 2014
Posted by: Author: SAIT Technical
Author: SAIT Technical
SARS and National
Treasury held its public workshops on the Annexure C public submissions for the
2015 Budget Review on the 8th and 9th of
December 2014. The purpose of these workshops were to address some of the
concerns raised by the public which were limited to matters such as unintended
consequences and minor & miscellaneous technical corrections in
legislation. It therefore excluded submissions and discussions on major tax
proposals or policy matters.
Department attended the workshops and was represented by Erich Bell (Acting
Head of Tax Technical) and Pieter Faber (SAIT Technical Executive). The
discussions at these workshops do not create any binding undertakings on either
SARS or National Treasury but rather serve as a method for them to get further
input and clarity on concerns raised by the public. The proceedings were
conducted based on the agenda of matters drafted by National Treasury and
therefore only covered matters on which National Treasury still required
further clarity on.
accordingly did not deal with all the public submissions, however, the
discussions with National Treasury ("NT”) and SARS were very constructive and
SAIT encourages members to contribute even more to the legislative process. The
submissions made by SAIT can be found on the website under "Tax Technical” at
the following link: http://www.thesait.org.za/?page=SubmissionstoSARS.
Set out below are
some of the matters discussed at the workshop:
1. Withholding tax
on interest – Interest
NT have confirmed
that interest is limited to the common law concept and not the expanded concept
of interest in section 24J of the Income Tax Act (No. 58 of 1962) ("ITA”). This
is seen as an interpretative matter that does not need legislative amendment.
2. Withholding tax
on interest – Retirement fund interest
NT will look at adding an exemption in section 50D
to exclude interest payable by a retirement fund to a previous member on delay
of the benefits payment.
3. Withholding tax
on interest – "Payor”
SARS & NT are
of the opinion that the provision does not need to change to clarify whether
the withholding obligation is on the issuer of the debt or the intermediary
agent actually paying as the latter party is making the actual payment to the
non-resident and therefore should withhold.
4. Section 24J related finance charges – "adjusted
NT have noted that the wording "in terms of such
instrument” may be too restrictive to allow the deduction of payment of related
finance charges to third parties and will look at the proposal to amend the
wording to "in respect of such instrument”.
5. Research and development 100 per cent deduction
NT have noted that a separate meeting will be held
with interested parties to look at the various submissions on the R&D
incentive. This can include reintroducing a 100 per cent deduction which does
not have to comply with the current pre-approval regime.
6. Cross issue of shares
NT will not accept a proposed deletion of paragraph
11(2)(b) of the Eighth Schedule to the ITA but will relook at its wide ambit
and whether it can be legislatively narrowed without allowing the mischief to
7. Transfer pricing secondary
NT have noted the proposal that a distribution
which is an actual dividend should be excluded as a deemed dividend for the
purposes of section 31.
8. Withholding tax on royalties – declaration by
SARS are working on issuing a guidance regarding
the requirements of the declaration for the exemption from withholding.
INDIVIDUALS AND TRUSTS
1. RAF withdrawal by non-residents
NT have indicated that they see no reason why
non-residents should be prohibited to withdraw lump sums on return to their
home country and conceded that it does create inequity. NT will look at
amending the definition of "retirement annuity fund” to accommodate such
2. Section 10(1)(q) exclusions to termination
NT will consider adding retrenchment to the list of
exclusions as to when the bursary becomes repayable on termination of studies
prior to completion.
3. Section 10(1)(q) study expenses reimbursement
NT will relook the submission that employees can
become entitled to the bursary exemption either on prepayment or reimbursement
by the employer and whether this can be dealt with by interpretation. NT were,
however, adamant that the obligation would still have to be in terms of an
agreement and would not extend to studies being reimbursed after the fact as
4. De minimis for annuitisation of
NT/SARS are planning on increasing the threshold
for exclusion to the compelled annuitisation to R150 000. However, this
amount should be the aggregate of all RAFs held and not per amount as it
realises to avoid abuse. NT will with the industry have to consider how the de
minimis is enforced on the aggregate basis.
5. Medical Insurance
It is a NT policy matter that insurance products
will all be treated the same, namely no deduction and no income inclusion. The
submissions that tax relief be granted for foreign medical insurance products
or local insurance products will not be accepted and relief will only apply to
medical scheme contributions or similar foreign scheme contributions.
6. Additional medical tax credits for over 65 and
NT have viewed it as a favourable request that the
additional medical credit in terms of section 6B(3)(a)(i) and (b)(i) of the ITA
also be allowed for employees’ tax purposes and provisional tax purposes for
persons over 65 years of age and those with disabilities as these amounts will
be known amounts on a month to month basis and validation fall within the
current practice framework.
7. Variable remuneration
Concerns were raised that the limitations in
section 7B were too prescriptive and an option to use it should be introduced.
It was during the workshop as alternative also proposed that section 7B should
be matched to the EMP201 submission date rather than the end of the calendar
month. NT undertook to consider the proposals.
NT confirmed that e-tolls remain as a reimbursement
of actual business expenses by employers.
9. Company car value – vehicle dealers and
NT will be discussing this with the industry on 15
January 2015 to obtain more information before a decision is taken on amending
the current provisions in respect of the value of the vehicle.
10. Tax free savings – dividend tax returns
It was not NT’s intention that individuals who
receive exempt dividends in a tax free investment account should submit a
dividends tax return to SARS. NT is considering adding an exemption to the
11. Distribution or set-off of losses in trusts
NT will not consider amending this anti avoidance
measure as it was introduced after rampant abuse and the risk is too great of
12. Employer gifts of small value to employees
The proposal would have to be divided between gifts
related to employment and those that are not. NT will consider the proposal of
a de minimis amount for either both or one of these after
discussions with SARS. They will also relook at the proposal for cash or assets
to be provided for long service and bravery awards.
13. Short term foreign visitors
The proposal was to exclude for PAYE and income tax
return submissions for persons who entered and rendered services in SA for less
than 30 days similar to the UK. NT will first have to discuss this with SARS
but will consider the matter.
1. Software excluded from electronic services
The exclusion of software from the definition of
electronic services retains inequity between foreign and local suppliers. SARS
will relook at the scope of the definition and how it can be expanded to
include this discrepancy.
2. Indeterminable amounts on connected party
The practical difficulties with the timing of
unquantified connected party supplies were noted by NT. However, NT would have
to consider any mischief that would result from allowing the deferral in these
instances and whether it should be subject to some timing anti avoidance
3. Zero rating for services rendered in loop
NT have noted that in essence the consumption
remains in SA where a foreign person appoints a SA resident vendor to render
services in SA to a SA resident vendor on its behalf and that, similar to
moveable property should be zero rated. NT will, however, need more facts
regarding these types of transactions before considering an amendment.
4. Payments basis - threshold and scope
The current threshold of R2,5 million and the scope
of application of the payment basis is currently being considered by the Davis
Tax Committee and NT will relook at the matter after recommendations have been
made by the committee.
5. Professional subscriptions fees
NT have identified this as a policy matter as there
are concerns regarding the equity of the income tax treatment as well. NT will
have to consider all the matters after discussions were held in this regard to
form a policy view going forward.
6. Courtesy cars
NT have noted that courtesy cars are not limited to
short term insurers but are provided by other persons as well for example panel
beaters. SARS/NT would first like to investigate how these supplies have been
treated in practice and which industries are affected before addressing the
7. Business Rescue relief
NT have reaffirmed that the policy is as
communicated in the Budget Review 2014 to assist these companies from a tax
perspective as well and they are not considering approaching the Department of
Trade and Industry to exclude tax debts from the business rescue proceedings.
This is, however, a complex matter for both income tax and VAT and NT will have
to do further work to deal with the matter.