FAQ - 27 July 2016
27 July 2016
Posted by: Author: SAIT Technical
Author: SAIT Technical
1. Who is liable for
transfer duty on the sale of a property?
Q: My question
relates to whether a deceased / heir will be liable for VAT or transfer duty
upon transfer of property?
A: For purposes
of the guidance that follows we accept that the enterprise previously carried
on by the vendor continued to be carried on by or on behalf of the executor of
his estate or anything was done in connection with the termination of the
enterprise. No value-added tax
consequences then arose on death of the person only. The relevant law is found in section 53.
You are correct that the parties are connected persons in
relation to each other. The definition,
in section 1(1) of the Value-Added Tax Act, provides that "connected persons”
(a) any natural person (including the estate of a natural
person if such person is deceased or insolvent) and -
(i) any relative of that natural person (being a relative as
defined in section 1 of the Income Tax Act) or the estate of any such relative
if the relative is deceased or insolvent…”
Section 10(4) of the Act will apply to the distribution of
property in the estate to the spouse. We
accepted that the spouses were not married in community of property. The estate will have to account of output
tax, at the tax fraction of the open market value, of the goods (property)
distributed to the spouse.
The SARS VAT413 guide deals with the Value-Added Tax
consequences on death.
No Transfer Duty will apply to any of the property
transferred to the heirs.
2. What is the
subsistence allowance for foreign travel?
Q: I am unsure
what is for accommodation plus what for incidental cost? If a company pays for
accommodation, then what can the employees claim for meals etc.? I can only see
a split for local travel.
A: The word
"subsistence” has been deleted from the Act a long time ago (in 2002) and the
Act, specifically in respect of travel outside the RSA, refers to "meals and
incidental expenses’ only.
The Gazetted amounts are for meals and other incidentals for
local and foreign travel, or incidentals only for local travel, and do not
cover accommodation for either local or foreign travel. As a result, to the
extent a recipient receives an allowance or an advance for accommodation, the
recipient must apply the actual method to determine the amount that will be
allowed to be deducted from that allowance, or relevant portion of the
allowance, for accommodation.
The amounts, determined by SARS in Government Gazette, No.
39724 (24 February 2016), and deemed to have been actually expended by a
recipient to whom an allowance or advance has been granted or paid and where
the accommodation, to which that allowance or advance relates, is outside the
RSA are to enable the employee to defray the cost of meals and incidental
costs. They are not split into a meals
and incidental cost component.
If the employee deducts actual expenditure, the deduction
will also be considered in aggregate.
3. What constitutes a
taxable fringe benefit?
Q: Our client has
paid fees to a drug rehabilitation center on behalf of an employee as part of a
disciplinary proceeding? Is this a taxable fringe benefit?
A: The relevant
law is found in paragraph 2(j) and 12B of the Seventh Schedule.
Paragraph 2, of the Seventh Schedule, in its opening
paragraph then states that "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”. Subparagraph
(j) applies where the employer has, directly or indirectly, incurred any amount
in respect of any medical, dental and similar services, hospital services,
nursing services or medicines provided to the employee or his or her spouse,
child, relative or dependant.
It doesn’t appear that any of the no value provisions of
paragraph 12B arises.
It may be possible to argue that the benefit was not granted
"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” as
mentioned above. The problem however is
that the "in respect of the employee’s employment with the employer” is much
wider and may well include it.
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.