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FAQ - 5 May 2015

Wednesday, 06 May 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

1. Can SARS’ interest charge per section 89quat be waived? 

Q: Is interest under section 89 a statutory charge which cannot be waived?

As far as I understand 89quat(2) interest is reversible under Section 89quat(3) if the Commissioner is satisfied that the interest payable in terms of Section 89quat(2) is a result of circumstances beyond the control of the taxpayer. There is however no specific Section under Section 89 reversing Section 89 interest.

A: The deletion of both section 89(2) and section 89quat from the Income Tax Act is not effective yet and they are still effective in their present form.  You are correct that section 89 does not allow for SARS to reverse interest levied under section 89. 

SARS makes the following comment in Interpretation note 68:

"Remittal of interest: A taxpayer may request a senior SARS official to direct that so much of the interest as is attributable to prescribed circumstances beyond the taxpayer’s control, is not payable by the taxpayer. These circumstances are limited to a natural or human-made disaster, a civil disturbance or disruption in services; or a serious illness or accident [see section 187(6) read with 187(7)]. As section 187(6) refers to interest imposed under section 187(1), the remittal only applies to interest payable on a tax debt in respect of understatement penalties or a jeopardy assessment as set out above.

Section 187(1) also regulates the accrual of interest on refunds payable by SARS. However, because section 188(3) did not come into operation such interest will only accrue once section 188(3) comes into operation.”

We submit that section 187(6) of the Tax Administration Act applies.  It reads as follows: If a senior SARS official is satisfied that interest payable by a taxpayer under subsection (1) is payable as a result of circumstances beyond the taxpayer’s control, the official may, unless prohibited by a tax Act, direct that so much of the interest as is attributable to the circumstances is not payable by the taxpayer. 

A request can therefore be made in terms of section 187(6) (of the Tax Administration Act) to reverse the interest levied under section 89 (of the Income Tax Act or a Tax Act). 

2. Deposit paid by employer for employee’s new residential accommodation: is it taxable?

Q: With reference to section 10(1)(nB), will the following expenditure paid by the employer on behalf of the employee being relocated qualify for exemption?

1.       Deposit payable on the new rental contract in new location.

2.       Penalty fee payable on the old rental contract. Legislation refers to a situation with real ownership with a bond but is silent on rental contracts.

A: In order for such costs to qualify for the exemption, they would have to fall within the ambit of sec 10(1)(nB) of the Income Tax Act (No. 58 of 1962) (hereinafter referred to as ‘the Act’), which states the following:

‘any benefit or advantage accruing to any employee (as defined in paragraph 1 of the Seventh Schedule) by reason of the fact that his employer (as defined in the said paragraph), has, in consequence of the transfer of the employee from one place of employment to another place of employment or the appointment of the employee as an employee of the employer or the termination of the employee’s employment, borne the expense—

(i)                    of transporting such employee, members of his household and the personal goods and possessions of himself and the members of his household from his previous place of residence to his new place of residence; or

(ii)                  of such costs as the Commissioner may allow which have been incurred by the employee in respect of the sale of his previous residence and in settling in permanent residential accommodation at his new place of residence ...’

(iii)                 of hiring residential accommodation in an hotel or elsewhere for the employee or members of his household during the period ending 183 days after his transfer took effect or after he took up his appointment, as the case may be, if such residential accommodation was occupied temporarily pending the obtaining of permanent residential accommodation.’

The penalty fee payable on the old rental contract can only fall within the provisions of sec 10(1)(nB)(ii), as it was not incurred for purposes of subparagraph (i) (transportation of the employee, members of his/her household and their possessions) or subparagraph (iii) (hiring of residential accommodation before obtaining ‘permanent residential accommodation’).

In sec 10(1)(nB)(ii), the legislature specifically referred to ‘... in respect of the sale of his previous residence ...’ If one ascribes an ordinary meaning to the word ‘sale’, it would imply that the residence should have been owned by the taxpayer and therefore not hired by him/her. This is even more evident when one considers the wording of the Guide for Employers in respect of Employees Tax (2015 Tax Year) which states the following:

‘The following items are exempt from tax if the employer reimburses the employee for the actual expenditure incurred:

               Bond registration and legal fees paid in respect of a new residence that has been purchased;

               Transfer duty paid in respect of the new residence;

               Cancellation fees paid of the cancellation of bond on the previous residence; and

               Agent’s commission on sale of previous residence.’

From the guide’s wording (the four bullet points above) one can see that expenditure incurred by the employee to obtain ownership in respect of the new residence (bullet point 1 and 2 above) or to dispose of his/her ownership in the old residence (bullet point 3 and 4 above), would qualify for the exemption.

The deposit paid on the new rental contract may qualify for the exemption if it qualifies as an ‘expense’. Given the fact that the deposits are normally refundable, it is unclear whether the deposit would qualify as an expense. You would therefore have to consider the terms of the lease contract to determine if the deposit would qualify as an expense, in which case the deposit on the new residence may qualify for the sec 10(1)(nB)(ii) exemption.


As stated above, it would appear as if the penalty paid on the old rental contract would not fall within the provisions of sec 10(1)(nB)(ii). The deposit might qualify for the exemption in terms of sec 10(1)(nB)(ii), provided that it qualifies as an ‘expense’. The taxpayer would however still be allowed to claim the other relocation expenses provided for in sec 10(1)(nB) of the Act.

Should the employee intend to buy a residence in his new location, then you may make use of the provisions of sec 10(1)(nB)(iii), but this would only be available if the property is only temporarily being hired in anticipation of buying a permanent residence and may not be used for the first six months of hiring accommodation (where there is no intention to buy a residence ).

3. Transportation for employees to go to and from the office: is it a fringe benefit? 

Q: When an employer transfers his employees to and from work in a company vehicle, is this seen as a fringe benefit to the employees?

If it is, how is the value of this benefit calculated?

A: Para 2(e) of the Seventh Schedule to the Income Tax Act (No. 58 of 1962) (hereinafter referred to as ‘the Act’) may have the implication that such a service would constitute a taxable benefit and states the following:

‘For the purposes of this Schedule and of paragraph (i) of the definition of "gross income” in section 1 of this Act, 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—

(e) any service (other than a service to which the provisions of subparagraph ( j) or (k) or paragraph 9 (4) (a) apply) has at the expense of the employer been rendered to the employee (whether by the employer or by some other person), where that service has been utilized by the employee for his or her private or domestic purposes and no consideration has been given by the employee to the employer in respect of that service or, if any consideration has been given, the amount thereof is less than the amount of the lowest fare referred to in item (a) of subparagraph (1) of paragraph 10, or the cost referred to in item (b) of that subparagraph, as the case may be ...’ (own emphasis added).

However, in terms of par 10(2)(b), the value of the benefit may be zero if it consists of the following:

‘any transport service rendered by any employer to his employees in general for the conveyance of such employees from their homes to the place of their employment and vice versa’


From the facts provided, it would appear as if no value will be placed on the possible fringe benefit due to the application of par 10(2)(b) of the Seventh Schedule to the Act.

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.



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