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FAQ - 12 October 2016

12 October 2016   (1 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

1. What are rules in terms of retirement annuity withdrawal when emigrating?

Q: If a person permanently leaves South Africa without officially emigrating can they withdraw a retirement annuity under the age of 55 for up to R500 000 without paying tax? 

A: The general rule is that a member of a retirement annuity fund is not entitled to the payment of any annuity or lump sum benefit contemplated in paragraph 2(1)(a) of the Second Schedule prior to reaching normal retirement age.  An exception is provided for in (dd) of proviso (x) to the definition in section 1(1) of the Income Tax Act.  As the withdrawal is contemplated we provide to proposed version thereof:

“(dd) the payment of a lump sum benefit contemplated in paragraph 2(1)(b)(ii) of the Second Schedule where that member—

(A) is a person who is or was a resident who emigrated from the Republic and that emigration is recognised by the South African Reserve Bank for purposes of exchange control; or

(B) departed from the Republic at the expiry of a visa obtained for the purposes of—

(AA) working as contemplated in paragraph (i) of the definition of ‘visa’ in section 1 of the Immigration Act, 2002 (Act No. 13 of 2002); or

(BB) a visit as contemplated in paragraph (b) of the definition of ‘visa’ in section 1 of the Immigration Act, 2002 (Act No. 13 of 2002) issued in terms of paragraph (b) to the proviso of section 11 of that Act by the Director-General, as defined in section 1 of that Act,

and is not regarded as a resident by the South African Reserve Bank for purposes of exchange control;”.

2. Are transactions between connected entities subject to VAT?

Q: Is a stock transfer (trading stock) between two entities owned by the same holding company subject to VAT?

A: The supply between the two controlled group companies of goods (the trading stock) is a taxable supply and the output and input tax applies as set out in your facts.  Section 8(25) of the Value-Added Tax Act, for a disposal of an asset by a transferor company to a transferee company (section 45 of the Income Tax Act), requires it to be the supply of an enterprise.  The companies may well want to elect out of section 45 if it is.  

3. When is a tax payment due after assessment of IT14?

Q: In this instance SARS assessment returns (ITA34) reflect a due date. SARS is requesting that payment is made at the end of the month following return assessment, despite deadline date of end January 2017. Is this correct?

A: In terms of section 162(1) of the Tax Administration Act, tax must be paid by the day notified by SARS.  This is done on the IT34, by way of a note – see the following as an example of such a note (which we assume the taxpayer received in your case): 

“Payment should be made by 2017-01-31 after which interest will accrue on this assessment as from 2016-11-01”.  

This note confusing, but we agree that if the taxpayer received such a note, payment would only be due by 31 January 2017.  We submit that the note, copied above, is relevant and not the due date, which was a date used before the introduction of the Tax Administration Act or the second date.  

The date to make payment is relevant for the levying of interest, if the taxpayer is not a provisional taxpayer – see section 187(3), but that is not effective yet.  The interest may well then start running from the due date.  

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. 

Comments...

David Kop says...
Posted 13 October 2016
Poor answer to question 1. The answer is no you cannot withdraw unless you emigrate. Also the payment is a withdrwawal not a retirement. As such the withdrawal tax table applies i.e R 25,000 taxes at 0%

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