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FAQ - 2 August 2017

02 August 2017   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

1. Are membership fees deductible for income tax purposes?

Q: Membership fees for professional bodies are taken out by an individual. When this individual is a director of a private company providing tax services, is the membership fees allowed as deductible expense?

A: Section 23(m) of the Income Tax Act prohibits any deduction under section 11 (the membership fees paid by the individual to a professional body) if the expenditure relates to any employment of, or office held by, any person in respect of which he or she derives any remuneration, as defined in paragraph 1 of the Fourth Schedule.  This prohibition doesn’t apply if the person is “an agent or representative whose remuneration is normally derived mainly in the form of commissions based on his or her sales or the turnover attributable to him or her”. 

Under paragraph 13(2)(b) of the Seventh Schedule to the Act, no value is placed on the value of any taxable benefit derived by reason of the fact that an employer has paid subscriptions due by his or her employee to a professional body, if membership of such body is a condition of the employee's employment.  The employer (the company) would be able to deduct the expense under section 11(a). 

2. Has there been changes to the treatment of pension fund contributions?

Q: There is an instance on the IRP 5 where the employer’s pension fund contribution was not shown. On the 2017 IRP5 the employer’s contribution is shown as income. Has a change occurred in employer contributions to pensions?

A: The Income Tax Act was amended.  The law changed with effect 1 March 2016 (covered in SAIT's update).

In terms of paragraph 2(l) of the Seventh Schedule to the Income Tax Act a taxable benefit is 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:

(l) the employer has made any contribution for the benefit of any employee to any pension fund, provident fund or retirement annuity fund.   Paragraph 12D contains the valuation rules. 

With regard to the contribution section 11(k) of the Income Tax Act allows as a deduction for the employee (with certain limitations) any amount contributed by an employer of the person for the benefit of the person, to the extent that the amount has been included in the income of the person as a taxable benefit in terms of the Seventh Schedule, by deeming it to have been contributed by the person. 

Paragraph 2(4)(a) of the Fourth Schedule allows for this amount contributed to be taken into account when the balance of remuneration is determined. 

The employer makes a deduction under section 11(l).  

Disclaimer: Nothing in this query and answer 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 answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. It remains your own responsibility to consult the relevant primary resources when taking a decision.


 

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