FAQ - 15 July 2015
15 July 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
1. How do I remove ‘gap cover’ insurance fees from the
medical contribution amounts on an IRP5?
of our clients provided us with her IRP5 and medical aid certificate for us to
submit her Income Tax return. I noticed that the medical deductions per the
IRP5 is higher than the medical aid contributions per the medical aid
I enquired what
caused the difference and heard that the GAP Cover contributions were also
deducted as part of the medical aid contributions. I know that GAP cover is insurance
and not medical expenditure, so the GAP cover contributions may not be
How do I
If I leave it
as it is, our client will get a greater deduction than what is allowed. I am
not able to deduct the difference on the return and only positive amounts are
are not sure what the "medical deductions per the IRP5” are that you refer
to. For the 2015 year of assessment the employer cannot make a deduction
of contributions to a medical scheme from the net remuneration of the employee
– see paragraph 2(4) of the Fourth Schedule to the Income Tax Act.
Paragraph 9(6) allows that there must be deducted from the amount to be
withheld or deducted by way of employees’ tax the amount of the medical scheme
fees tax credit that applies in respect of that employee (in terms of section
employer effects payment of the medical scheme fees as contemplated in section
employer does not effect payment of the medical scheme fees as contemplated in
section 6A(2)(a), at the option of the employer, if proof of payment of those
fees has been furnished to the employer.
The tax credit
applies in respect of fees paid by the taxpayer to a registered medical scheme.
The number of persons (dependants) for whom you make contributions to a medical
scheme will determine the value of the credit. The amount of the medical scheme
contribution tax credit is:
R257 in respect of benefits to the
R257 in respect of benefits the
taxpayer’s first dependent;
R172 in respect of benefits to each
will in all probability not agree to the contributions made to the fund, but
you are correct that the employer, against code 4005 (3810 and 4474), must only
include the actual fees paid by the employer. If the GAP Cover
contributions are not fees it should have been excluded from the amount on the
IRP5. The medical scheme fees tax credit
will be reflected next to source code 4116
only if the medical contributions were paid by the employer.
Your concern is
correct that the amounts reflected on the IRP5 (the wrong ones) may well be
used for the additional medical expenses tax credit and SARS may will only pick
this up if a review is called for. It may therefore be appropriate to
request the employer to correct the IRP5 as the employee has no opportunity to
correct this on the IT12.
2. Is the sale of grass (to be used by a riding school as
animal feed) exempt from VAT?
the sale of grass for horse feed classified under raw materials and thus exempt
A farmer sells
grass for horse feed to a riding school, which does not have a VAT certificate
indicating that all grass purchases are exempt from vat. The farmer is a VAT
is no exemption from value-added tax that would apply where a registered vendor
(the farmer) supplies "horse-feed” to the recipient (the riding school).
We do agree that the rate of zero per cent is not available either.
Section 11(1)(g) provides that a supply may be zero rated if the supply is of
goods used or consumed for agricultural, pastoral or other farming purposes as
are set forth in Part A of Schedule 2, provided such supply is made in
compliance with such conditions as may be prescribed in the said Part.
Item 1 in paragraph 1 of the Schedule refers to animal feed, but then
prescribes the following condition:
of paragraph 1 shall apply only if—
Commissioner, in respect of a vendor registered under this Act, is satisfied
that that vendor, being the recipient of any such goods, carries on
agricultural, pastoral or other farming operations and has issued to him a
notice of registration in which authorization is granted whereby the goods
concerned may be supplied to him at the rate of zero per cent…”
As the riding schools VAT103 doesn’t have the authorisation the condition is not met and the supply is to be charged at the standard rate (14%).
3. How is transfer duty calculated when someone buys an
interest in a property-owning company?
you please let me know the process for sorting out a transfer duty problem
(deemed transfer duty, actually).
One of my
clients owned 50% interest in a property-owning close corporation and has
recently bought the other 50% interest, so that he now owns 100% of the
members’ interest. We have asked a conveyancer to assist with the payment
of deemed transfer duty but this isn’t going very well (the deemed transfer
duty calculation is four times what it should be). If possible we would
like to deal with someone other than the call centre regarding this query.
please let me know whether we can contact a SARS branch manager or anyone else
to assist in this regard?
can contact the SARS branch manager. In SARS’s Transfer Duty Guide (2013
version) it is stated that "general queries on transfer duty matters and
transactions lodged on eFiling should be sent to ETD@sars.gov.za and technical queries and
refund applications can be forwarded to TransferDuty@sars.gov.za. The
guide is available at the following link:
We are not sure
what you mean by "deemed transfer duty”. From the facts we accept that
the "50% interest in property owning close corporation” is in fact a "member's
interest in a residential property company” (as envisaged in paragraph (d) of
the definition of ‘property’ in section 1 of the Transfer Duty Act. The
term ‘residential property company’ is also defined in section 1 of the
Act. The sale (or acquisition) thereof is a ‘transaction’, as defined in
section 1 of the Act – see paragraph (b).
duty is then levied on ‘the value of (any) property’ which is principally the
consideration payable by the person who has acquired the property or the
declared value of the property – see section 5(1).
provides for certain amounts to be added to the consideration. It is
quite possible that the SARS is (or will be) of opinion that the consideration
payable or the declared value is less than the fair value of the property in
SARS may then
determine the fair value of that property, and thereupon the duty payable in
respect of the acquisition of that property will have to be calculated - in
essence the duty is based on the greatest of the fair value (so determined) or
the consideration payable or the declared value – see section 5(6).
You will notice
that the definition of fair value (in section 1) in this regard would be the
fair market value of the property held by the CC without taking into account,
amongst others, any loan as is attributable to the member’s interest – see
example 10 in the guide referred to above.
Note also that
section 2(5) requires that the transfer duty rates in terms of section 2(1)(b)
cannot be applied directly to the consideration for the individual transaction
(the acquisition of the 50%). The fair value of the entire property must first
be established and only then are the rates applied to that value. See
examples 20 and 21 in the guide.
Disclaimer: Nothing in these queries and answers should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answers, SAIT do not accept any responsibility for consequences of decisions taken based on these queries and answers. It remains your own responsibility to consult the relevant primary resources when taking a decision.