President Cyril Ramaphosa has signed a number of new tax and finance-related bills, including the Tax Rates and Amounts Act, as well as the Tax Law Amendment (Tax Rate Act), the Tax Law Amendment Act (TLAA) and the Tax Administration Law Amendment Act (TALAA).
The laws that came into force on January 20th deal mainly with administrative and technical issues. However, they also introduce changes that South Africans should be aware of in everyday life, says Jean du Toit, Head of Tax Technical at Tax Consulting SA.
“Taxpayers need to speak to their advisors to understand these changes and special attention needs to be paid to the administrative changes that are now required by law,” he said.
“The most important change that applies to all taxpayers is the one that criminalizes negligence. These and other administrative changes mean that taxpayers are kept at a higher level, which serves as an indicator for everyone to take responsibility for their tax affairs. “
Here are the top 10 changes South African taxpayers should know about:
Withdrawal from pension funds when emigrating
As of March 1, 2021, after the emigration process is completed, taxpayers will no longer have access to their retirement benefits through the South African Reserve Bank, commonly known as “Financial Emigration”.
After that date, taxpayers will only be able to access their retirement benefits if they can demonstrate that they have been non-resident for tax purposes for an uninterrupted period of three years.
It is important that taxpayers continue to have access to their retirement benefits under the old scheme if they submit their application for financial emigration on or before February 28, 2021. If you fail to meet this deadline, your retirement benefits will be blocked for a period of at least three years
Anti-avoidance rules for trusts strengthened
The anti-avoidance rules to curb tax-free transfers of assets to trusts have been tightened to avoid persistent loopholes.
The change addresses structures in which individuals subscribe to low or no return preferred stock in a company owned by a trust associated with the individual.
Ongoing changes to these rules again challenge the notion that fiduciary structures are tax efficient.
Reimbursement of business travel expenses to employees
Employees are not subject to tax on an amount their employer has paid as an advance or reimbursement for meals and incidental expenses if the employee is required to be away from home for business reasons – provided it does not exceed the amount published in that Government gazette.
The TLAA includes a change that extends treatment to expenses for meals and other incidental expenses while the employee is on a day trip.
Du Toit said this will only apply if the employer’s policies specifically provide and allow such reimbursement.
Relief for expats confirmed
Due to the travel restrictions in the context of the Covid-19 pandemic, the daily requirement for exemption from foreign employment has been reduced from a total of 183 days to 117 days.
The relaxation only applies to the total number of days, and the requirement that more than 60 of the days spent outside South Africa must have been consecutive continues to apply.
This change is not an integral part and only applies for a period of 12 months for the evaluation years ending from February 29, 2020 to February 28, 2021.
Scholarships provided by the employer
The Income Tax Act provides for exemption from bona fide scholarships or scholarships granted by employers to employers or their relatives.
In the past, employees used this exemption as a mechanism to structure their compensation package to reduce their tax liability.
The exemption no longer applies if the employee’s compensation package is subject to an element of the salary sacrifice. Here, part of your remuneration is reduced or forfeited due to the granting of such a scholarship or scholarship.
Tax treatment of doubtful debts
The doubtful provision for debt relief has been changed to create parity between taxpayers who apply IFRS 9 and those who do not.
If the taxpayer does not apply IFRS 9, the amount of the allowance is calculated taking into account all collateral available for that debt.
Rollover amounts that can be claimed under the EIT
The Employment Tax Incentive Act was amended to encourage tax compliance.
The amendment specifies that excess ETI entitlements from employers who are not tax compliant will no longer be carried over to the end of the PAYE transition period.
The conditions under which SARS can provide a rating based on an estimate have been expanded. SARS can now issue an estimated assessment if the taxpayer does not respond to a request from SARS for relevant material.
The change also prevents the taxpayer from objecting to the estimated assessment until the taxpayer responds to the request for material.
SARS may withhold your refund if you are under a criminal investigation
According to the Tax Administration Act, SARS is entitled to withhold refunds from taxpayers under certain circumstances.
The TALAA extends these provisions to determine that SARS is entitled to withhold any refund owed to you until the investigation is complete if you are subject to a criminal investigation within the meaning of the Tax Administration Act.
Criminal penalties for minor tax offenses
So far, a taxpayer was only guilty of a criminal offense for non-compliance with the Tax Administration Act if he had “deliberately” failed to fulfill his tax obligations.
With the new amendments, non-compliance becomes a criminal offense if it is the result of negligence on the part of the taxpayer.
“In other words, intent is no longer required. If you are not compliant because of ignorance of your obligations, you may be convicted of a crime. These crimes are fined or imprisoned for up to two years, ”said Du Toit.
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