FAQ - 5 May 2015
06 May 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
1. Can SARS’ interest charge per section 89quat be
Q: Is interest
under section 89 a statutory charge which cannot be waived?
As far as I understand 89quat(2) interest is reversible
under Section 89quat(3) if the Commissioner is satisfied that the interest
payable in terms of Section 89quat(2) is a result of circumstances beyond the
control of the taxpayer. There is however no specific Section under Section 89
reversing Section 89 interest.
A: The deletion
of both section 89(2) and section 89quat from the Income Tax Act is not
effective yet and they are still effective in their present form. You are correct that section 89 does not
allow for SARS to reverse interest levied under section 89.
SARS makes the following comment in Interpretation note 68:
"Remittal of interest: A taxpayer may request a senior SARS
official to direct that so much of the interest as is attributable to
prescribed circumstances beyond the taxpayer’s control, is not payable by the
taxpayer. These circumstances are limited to a natural or human-made disaster,
a civil disturbance or disruption in services; or a serious illness or accident
[see section 187(6) read with 187(7)]. As section 187(6) refers to interest
imposed under section 187(1), the remittal only applies to interest payable on
a tax debt in respect of understatement penalties or a jeopardy assessment as
set out above.
Section 187(1) also regulates the accrual of interest on
refunds payable by SARS. However, because section 188(3) did not come into
operation such interest will only accrue once section 188(3) comes into
We submit that section 187(6) of the Tax Administration Act
applies. It reads as follows: If a
senior SARS official is satisfied that interest payable by a taxpayer under
subsection (1) is payable as a result of circumstances beyond the taxpayer’s
control, the official may, unless prohibited by a tax Act, direct that so much
of the interest as is attributable to the circumstances is not payable by the taxpayer.
A request can therefore be made in terms of section 187(6)
(of the Tax Administration Act) to reverse the interest levied under section 89
(of the Income Tax Act or a Tax Act).
2. Deposit paid by employer for employee’s new
residential accommodation: is it taxable?
Q: With reference
to section 10(1)(nB), will the following expenditure paid by the employer on
behalf of the employee being relocated qualify for exemption?
Deposit payable on the new rental contract in
Penalty fee payable on the old rental contract.
Legislation refers to a situation with real ownership with a bond but is silent
on rental contracts.
A: In order for
such costs to qualify for the exemption, they would have to fall within the
ambit of sec 10(1)(nB) of the Income Tax Act (No. 58 of 1962) (hereinafter
referred to as ‘the Act’), which states the following:
‘any benefit or advantage accruing to any employee (as
defined in paragraph 1 of the Seventh Schedule) by reason of the fact that his
employer (as defined in the said paragraph), has, in consequence of the
transfer of the employee from one place of employment to another place of
employment or the appointment of the employee as an employee of the employer or
the termination of the employee’s employment, borne the expense—
of transporting such employee, members of his
household and the personal goods and possessions of himself and the members of
his household from his previous place of residence to his new place of
of such costs as the Commissioner may allow
which have been incurred by the employee in respect of the sale of his previous
residence and in settling in permanent residential accommodation at his new
place of residence ...’
of hiring residential accommodation in an hotel
or elsewhere for the employee or members of his household during the period
ending 183 days after his transfer took effect or after he took up his
appointment, as the case may be, if such residential accommodation was occupied
temporarily pending the obtaining of permanent residential accommodation.’
The penalty fee payable on the old rental contract can only
fall within the provisions of sec 10(1)(nB)(ii), as it was not incurred for
purposes of subparagraph (i) (transportation of the employee, members of
his/her household and their possessions) or subparagraph (iii) (hiring of
residential accommodation before obtaining ‘permanent residential
In sec 10(1)(nB)(ii), the legislature specifically referred
to ‘... in respect of the sale of his previous residence ...’ If one ascribes
an ordinary meaning to the word ‘sale’, it would imply that the residence
should have been owned by the taxpayer and therefore not hired by him/her. This
is even more evident when one considers the wording of the Guide for Employers
in respect of Employees Tax (2015 Tax Year) which states the following:
‘The following items are exempt from tax if the employer
reimburses the employee for the actual expenditure incurred:
Bond registration and legal fees paid in respect
of a new residence that has been purchased;
Transfer duty paid in respect of the new
Cancellation fees paid of the cancellation of
bond on the previous residence; and
Agent’s commission on sale of previous
From the guide’s wording (the four bullet points above) one
can see that expenditure incurred by the employee to obtain ownership in
respect of the new residence (bullet point 1 and 2 above) or to dispose of
his/her ownership in the old residence (bullet point 3 and 4 above), would
qualify for the exemption.
The deposit paid on the new rental contract may qualify for
the exemption if it qualifies as an ‘expense’. Given the fact that the deposits
are normally refundable, it is unclear whether the deposit would qualify as an
expense. You would therefore have to consider the terms of the lease contract
to determine if the deposit would qualify as an expense, in which case the
deposit on the new residence may qualify for the sec 10(1)(nB)(ii) exemption.
As stated above, it would appear as if the penalty paid on
the old rental contract would not fall within the provisions of sec
10(1)(nB)(ii). The deposit might qualify for the exemption in terms of sec
10(1)(nB)(ii), provided that it qualifies as an ‘expense’. The taxpayer would
however still be allowed to claim the other relocation expenses provided for in
sec 10(1)(nB) of the Act.
Should the employee intend to buy a residence in his new
location, then you may make use of the provisions of sec 10(1)(nB)(iii), but
this would only be available if the property is only temporarily being hired in
anticipation of buying a permanent residence and may not be used for the first
six months of hiring accommodation (where there is no intention to buy a
3. Transportation for employees to go to and from
the office: is it a fringe benefit?
Q: When an
employer transfers his employees to and from work in a company vehicle, is this
seen as a fringe benefit to the employees?
If it is, how is the value of this benefit calculated?
A: Para 2(e) of
the Seventh Schedule to the Income Tax Act (No. 58 of 1962) (hereinafter
referred to as ‘the Act’) may have the implication that such a service would
constitute a taxable benefit and states the following:
‘For the purposes of this Schedule and of paragraph (i) of
the definition of "gross income” in section 1 of this Act, a taxable benefit
shall be deemed to have been granted by an employer to his employee in respect
of the employee’s employment with the employer, if as a benefit or advantage of
or by virtue of such employment or as a reward for services rendered or to be
rendered by the employee to the employer—
(e) any service (other than a service to which the
provisions of subparagraph ( j) or (k) or paragraph 9 (4) (a) apply) has at the
expense of the employer been rendered to the employee (whether by the employer
or by some other person), where that service has been utilized by the employee
for his or her private or domestic purposes and no consideration has been given
by the employee to the employer in respect of that service or, if any
consideration has been given, the amount thereof is less than the amount of the
lowest fare referred to in item (a) of subparagraph (1) of paragraph 10, or the
cost referred to in item (b) of that subparagraph, as the case may be ...’ (own
However, in terms of par 10(2)(b), the value of the benefit
may be zero if it consists of the following:
‘any transport service rendered by any employer to his
employees in general for the conveyance of such employees from their homes to
the place of their employment and vice versa’
From the facts provided, it would appear as if no value will
be placed on the possible fringe benefit due to the application of par 10(2)(b)
of the Seventh Schedule to the Act.
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