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FAQ - 1 November 2017

01 November 2017   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

1. Is an employer liable for SDL (Skills Development Levy) for temporary employees?

Q: I have temporary employees, which I do not declare SDL for and now I have to submit EMP501 reconciliation for 201708. Was I correct in not declaring SDL for these employees?

A: In terms of section 1 of the Skills Development Levies Act, 1999, “unless the context otherwise indicates:

"employee" includes an employee as defined in the Fourth Schedule to the Income Tax Act;

"employer" includes an employer as defined in the Fourth Schedule to the Income Tax Act;”. 

Section 4, of that Act, then provides that the “levy is not payable by-

(b) any employer where section 3(1)(a) or (b) applies and during any month, there are reasonable grounds for believing that the total amount of remuneration, as determined in accordance with section 3(4), paid or payable by that employer to all its employees during the following 12 month period will not exceed R500 000;”.  

As defined, in paragraph 1 in the Fourth Schedule to the Income Tax Act: 

"employee" means –

(a) any person (other than a company) who receives any remuneration or to whom any remuneration accrues; any person who receives any remuneration or to whom any remuneration accrues by reason of

(b) any services rendered by such person to or on behalf of a labour broker;

(c) any labour broker;

(d) any person or class or category of person whom the Minister of Finance by notice in the Gazette declares to be an employee for the purposes of this definition; 

We accept that paragraph (d), ‘temporary employment services – section 198 of the Labour Relations Act’ doesn’t apply in your case.  This doesn’t exclude a person earning below the ‘tax threshold”.  SARS confirms this when they say, in the Guide (Skills Development Levies) that:

“Remuneration for SDL purposes is defined as remuneration for Employees’ Tax purposes (this means after taking the allowable deductions into account which the employer may have deducted for purposes of calculating employees tax, including remuneration of employees who earn less than the tax threshold), but does not include …”

2. When an employee buys shares from their employment company, what are the tax implication?

Q: When the employee started with the company, she had an opportunity to buy shares. How should the tax be treated?

A: For purposes of the guidance that follows we accept that the ‘equity instrument’ acquired by the employee didn’t vest at the time the shares were acquired (when she had ‘an opportunity to buy the shares’).  In other words, the shares were restricted equity instruments. 

The basic principle is then that, in terms of section 8C(1) of the Income Tax Act, the taxpayer (the employee) must include in (or deduct) from his or her income for a year of assessment any gain (or loss) determined in respect of the vesting during that year of any equity instrument, if that equity instrument was acquired by that taxpayer by virtue of his or her employment. 

Under paragraph 11A(4), of the Fourth Schedule to the Income Tax Act, the employer must ascertain from SARS the amount to be deducted or withheld in respect of the section 8C gain.  

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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