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FAQ - 17 February 2016

16 February 2016   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

1. How does the exemption work for residential accommodation provided to expatriates?

Q: Please can you assist with residential accommodation provided to expatriates? Is the R25 000 exemption only valid for 2 years?

A: It is paragraph 9(7A) of the Seventh Schedule to the Income Tax Act that applies where accommodation is provided by an employer to an employee away from the employee’s usual place of residence outside the RSA.  

The R25 000 and the two year period are separate or distinct provisos.  

The paragraph provides for a ‘no rental value’ to be placed where two conditions are met – the accommodation is provided:

(a) for a period not exceeding 2 years from the date of arrival of that employee in the Republic, for the purposes of performing the duties of his or her employment; or

(b) if that accommodation is provided to that employee during the year of assessment and that employee is physically present in the Republic for a period of less than 90 days in that year.  

From the facts provided your request relates to first (item (a)).  In terms of paragraph 9(7B) the "provisions of subparagraph (7A) (a) do not apply: 

(i) if that employee was present in the Republic for a period exceeding 90 days during the year of assessment immediately preceding the date of arrival referred to in subparagraph (7A); or 

(ii) to the extent that the cash equivalent of the value of the taxable benefit derived from the occupation of the residential accommodation exceeds an amount equal to R25 000 multiplied by the number of months during which subparagraph (7A) applies.”  

The Explanatory Memorandum, at the time this was introduced into the Act, explained it as follows:

"Long-term stay: accommodation exemption

It is proposed that residential accommodation provided by an employer to an expatriate be provided tax-free for a two-year period. The tax-free period commences on the date of arrival of the employee in the Republic for the purpose of performing the duties of his or her employment.

Anti-avoidance

The exemption does not apply if the person was in South Africa for a period of 90 days in the tax year prior to the year in which that person arrives in South Africa to perform the duties of employment.

Monetary cap

In order to limit the potential cost to the fiscus, a monthly monetary cap of R25 000 is placed on the value of the tax-free accommodation. To the extent that the value of the employer-provided accommodation exceeds the cap multiplied by the number of months the benefit is granted, the excess will be taxable in the hands of the employee.”  

2. Can SARS change our zero-rated export transaction to a standard rated transaction?

Q: An export sale took place and the tax invoice was made out in a later VAT period than the SAD500.  This was due to the fact that the installation of the product can take a few months.  SARS has now disallowed the zero rate export and charged normal VAT on this transaction.  Even after our objection, SARS has pulled a debit order from the client’s account to retrieve the amount owing.  Is this correct?

A: We will in the first instance deal with the tax debt.  We accept, for purposes of the guidance that follows, that when you say that "SARS has pulled the debit order ” you mean that the there was a VAT217 (assessment) that created a tax debt, that no request to suspend the debt due to the dispute between SARS and the vendor and that SARS had consequently started the collection process.  We don’t know if SARS gave due notice of this as is required by law (section 179(5) after 8 January 2016).  The problem is that the law enables SARS to collect the tax debt even if it is under dispute and the vendor would only be able to prevent that if a suspension of debt request was made.  In terms of the Tax Administration Act an objection doesn’t suspend the obligation to make payment – the vendor must request suspension.  

From the facts it is not clear on what grounds SARS changed the rate of zero percent to the standard rate.  With regard to the entitlement to use the rate of zero percent, section 11(3) requires that the vendor must obtain and retain such documentary proof substantiating the vendor’s entitlement to apply the said rate under those provisions as is acceptable to SARS.  In this regard SARS has set out the acceptable documentation in Interpretation note 30 (we accept that it was not a paragraph (d) export).  The customs documentation is part of the required documents, but also the proof of payment.  

In order to apply the zero rate to the supply of movable goods that are to be exported, the vendor must obtain the required documentary proof within a period of 90 days calculated from the date the movable goods are required to be exported from the RSA (as contemplated in 5.1 and 5.2 of the Interpretation note).   In the event that the required documentation is not obtained by the vendor within the prescribed period set out in paragraph 7(a) of the Interpretation Note, the requirements of section 11(3) are not met and the tax therefore could not have been levied at the zero rate under section 11(1).  As a result, the vendor is required to account for output tax on the supply.  

The Interpretation Note makes provision for circumstances where the above doesn’t apply – for instance where the vendor has entered into a written contract with the recipient for the payment of the consideration for the supply to be made after or over a period exceeding the 90 days but not exceeding six months.  

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.  


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