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Feedback summary of the 2015 Annexure C workshops

Wednesday, 10 December 2014   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

SARS and National Treasury held its public workshops on the Annexure C public submissions for the 2015 Budget Review on the 8th and 9th of December 2014. The purpose of these workshops were to address some of the concerns raised by the public which were limited to matters such as unintended consequences and minor & miscellaneous technical corrections in legislation. It therefore excluded submissions and discussions on major tax proposals or policy matters.


SAIT’s Technical Department attended the workshops and was represented by Erich Bell (Acting Head of Tax Technical) and Pieter Faber (SAIT Technical Executive). The discussions at these workshops do not create any binding undertakings on either SARS or National Treasury but rather serve as a method for them to get further input and clarity on concerns raised by the public. The proceedings were conducted based on the agenda of matters drafted by National Treasury and therefore only covered matters on which National Treasury still required further clarity on.


The workshops accordingly did not deal with all the public submissions, however, the discussions with National Treasury ("NT”) and SARS were very constructive and SAIT encourages members to contribute even more to the legislative process. The submissions made by SAIT can be found on the website under "Tax Technical” at the following link:


Set out below are some of the matters discussed at the workshop:




1. Withholding tax on interest – Interest


NT have confirmed that interest is limited to the common law concept and not the expanded concept of interest in section 24J of the Income Tax Act (No. 58 of 1962) ("ITA”). This is seen as an interpretative matter that does not need legislative amendment.


2. Withholding tax on interest – Retirement fund interest


NT will look at adding an exemption in section 50D to exclude interest payable by a retirement fund to a previous member on delay of the benefits payment.

3. Withholding tax on interest – "Payor”


SARS & NT are of the opinion that the provision does not need to change to clarify whether the withholding obligation is on the issuer of the debt or the intermediary agent actually paying as the latter party is making the actual payment to the non-resident and therefore should withhold.


4. Section 24J related finance charges – "adjusted initial amount”

NT have noted that the wording "in terms of such instrument” may be too restrictive to allow the deduction of payment of related finance charges to third parties and will look at the proposal to amend the wording to "in respect of such instrument”.

5. Research and development 100 per cent deduction

NT have noted that a separate meeting will be held with interested parties to look at the various submissions on the R&D incentive. This can include reintroducing a 100 per cent deduction which does not have to comply with the current pre-approval regime.

6. Cross issue of shares

NT will not accept a proposed deletion of paragraph 11(2)(b) of the Eighth Schedule to the ITA but will relook at its wide ambit and whether it can be legislatively narrowed without allowing the mischief to be prevented.

7. Transfer pricing secondary adjustment

NT have noted the proposal that a distribution which is an actual dividend should be excluded as a deemed dividend for the purposes of section 31.

8. Withholding tax on royalties – declaration by foreign person

SARS are working on issuing a guidance regarding the requirements of the declaration for the exemption from withholding.



1. RAF withdrawal by non-residents

NT have indicated that they see no reason why non-residents should be prohibited to withdraw lump sums on return to their home country and conceded that it does create inequity. NT will look at amending the definition of "retirement annuity fund” to accommodate such withdrawals.

2. Section 10(1)(q) exclusions to termination repayment

NT will consider adding retrenchment to the list of exclusions as to when the bursary becomes repayable on termination of studies prior to completion.

3. Section 10(1)(q) study expenses reimbursement

NT will relook the submission that employees can become entitled to the bursary exemption either on prepayment or reimbursement by the employer and whether this can be dealt with by interpretation. NT were, however, adamant that the obligation would still have to be in terms of an agreement and would not extend to studies being reimbursed after the fact as disguised bonuses.

4. De minimis for annuitisation of RAF

NT/SARS are planning on increasing the threshold for exclusion to the compelled annuitisation to R150 000. However, this amount should be the aggregate of all RAFs held and not per amount as it realises to avoid abuse. NT will with the industry have to consider how the de minimis is enforced on the aggregate basis.

5. Medical Insurance

It is a NT policy matter that insurance products will all be treated the same, namely no deduction and no income inclusion. The submissions that tax relief be granted for foreign medical insurance products or local insurance products will not be accepted and relief will only apply to medical scheme contributions or similar foreign scheme contributions.

6. Additional medical tax credits for over 65 and disabled

NT have viewed it as a favourable request that the additional medical credit in terms of section 6B(3)(a)(i) and (b)(i) of the ITA also be allowed for employees’ tax purposes and provisional tax purposes for persons over 65 years of age and those with disabilities as these amounts will be known amounts on a month to month basis and validation fall within the current practice framework.

7. Variable remuneration

Concerns were raised that the limitations in section 7B were too prescriptive and an option to use it should be introduced. It was during the workshop as alternative also proposed that section 7B should be matched to the EMP201 submission date rather than the end of the calendar month. NT undertook to consider the proposals.

8. E-tolls

NT confirmed that e-tolls remain as a reimbursement of actual business expenses by employers.

9. Company car value – vehicle dealers and manufacturers

NT will be discussing this with the industry on 15 January 2015 to obtain more information before a decision is taken on amending the current provisions in respect of the value of the vehicle.

10. Tax free savings – dividend tax returns

It was not NT’s intention that individuals who receive exempt dividends in a tax free investment account should submit a dividends tax return to SARS. NT is considering adding an exemption to the return requirements.

11. Distribution or set-off of losses in trusts

NT will not consider amending this anti avoidance measure as it was introduced after rampant abuse and the risk is too great of further abuse.

12. Employer gifts of small value to employees

The proposal would have to be divided between gifts related to employment and those that are not. NT will consider the proposal of a de minimis amount for either both or one of these after discussions with SARS. They will also relook at the proposal for cash or assets to be provided for long service and bravery awards.

13. Short term foreign visitors

The proposal was to exclude for PAYE and income tax return submissions for persons who entered and rendered services in SA for less than 30 days similar to the UK. NT will first have to discuss this with SARS but will consider the matter.


1. Software excluded from electronic services

The exclusion of software from the definition of electronic services retains inequity between foreign and local suppliers. SARS will relook at the scope of the definition and how it can be expanded to include this discrepancy.

2. Indeterminable amounts on connected party supplies

The practical difficulties with the timing of unquantified connected party supplies were noted by NT. However, NT would have to consider any mischief that would result from allowing the deferral in these instances and whether it should be subject to some timing anti avoidance provision.

3. Zero rating for services rendered in loop structures

NT have noted that in essence the consumption remains in SA where a foreign person appoints a SA resident vendor to render services in SA to a SA resident vendor on its behalf and that, similar to moveable property should be zero rated. NT will, however, need more facts regarding these types of transactions before considering an amendment.

4. Payments basis - threshold and scope

The current threshold of R2,5 million and the scope of application of the payment basis is currently being considered by the Davis Tax Committee and NT will relook at the matter after recommendations have been made by the committee.

5. Professional subscriptions fees

NT have identified this as a policy matter as there are concerns regarding the equity of the income tax treatment as well. NT will have to consider all the matters after discussions were held in this regard to form a policy view going forward.

6. Courtesy cars

NT have noted that courtesy cars are not limited to short term insurers but are provided by other persons as well for example panel beaters. SARS/NT would first like to investigate how these supplies have been treated in practice and which industries are affected before addressing the matter legislatively.  

7. Business Rescue relief

NT have reaffirmed that the policy is as communicated in the Budget Review 2014 to assist these companies from a tax perspective as well and they are not considering approaching the Department of Trade and Industry to exclude tax debts from the business rescue proceedings. This is, however, a complex matter for both income tax and VAT and NT will have to do further work to deal with the matter.




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