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Thread: Treasury on Taxation Laws Amendment Bills

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    Treasury on Taxation Laws Amendment Bills

    Taxation Laws Amendment Bills

    1 June 2009

    National Treasury releases for public comment a draft of the taxation laws to give effect to the tax proposals announced in the 2009 Budget and outlined in the 2009 Budget Review (available on http://www.treasury.gov.za). A draft of the 2009 Taxation Laws Amendment Bills can be found on the websites of the National Treasury or SARS (http://www.sars.gov.za).

    The draft 2009 Taxation Laws Amendment Bills are published for public comment before the Bills are formally tabled in Parliament. The Standing Committee on Finance (previously the Portfolio Committee on Finance), established in terms of the Money Bills Amendment Procedure and Related Matters Act, convenes informal hearings on the draft bills and considers public comments received. The Bills are then revised by the National Treasury and presented to the Committee, before being formally tabled by the Minister of Finance.

    This procedure has become the established practice for the annual tax legislation to allow members of the public, practitioners and other role players to make inputs. The established procedure continues to apply to these bills, as the new procedure outlined in the Money Bill Amendment Procedure Act only takes effect after the passing of the Appropriation Bill later this year. It is the prerogative of the Standing Committee to apply the new procedure outlined in the new Money Bill Amendment Procedure Act at the appropriate time.

    For technical reasons, the draft tax laws also have to be split into two bills - a money bill (section 77 of Constitution) and an ordinary section 75 (of the Constitution) bill as has been the practice in previous years. There will therefore be no Revenue Laws Amendment Bills in 2009. The Taxation Laws Amendment Bills incorporates the Revenue Laws Amendment Bills, as well as the draft bills published on 19 February 2009 dealing with rates, thresholds and urgent matters.

    The draft legislation deals with a number of matters, notably:

    1. Environmental incentives: The Income Tax Act contains two incentives in support of the environment. The sale of certified emission reductions (also known as carbon emission reductions credits) will be exempt from income tax. Secondly, businesses will obtain notional deductions for income tax purposes for energy efficiency savings from certified baselines based on energy efficiency certificates issued by the National Energy Efficiency Agency.

    Note that the implementation of the environmental levy of two cents per kWh on electricity generated from non-renewable resources as announced in 2008 was delayed and will now take effect on 1 July 2009. The imposition of this levy does not require any new legislation in these draft bills.

    2. Conversion of the Secondary Tax on Companies to the new Dividends Tax: In 2008, the basic rubric for the new Dividends Tax was enacted. The proposed 2009 legislation contains supporting amendments. These amendments prevent taxpayers from converting the taxable sale of shares into tax-exempt pre-sale dividends, and impose the new Dividends Tax in respect of deemed dividends (e.g. loans to connected persons). The legislation also creates an equal playing field for both domestic and foreign shares listed on the Johannesburg Securities Exchange (JSE), and hence the 10 percent charge on dividends will also apply to foreign shares listed on the JSE.

    3. Learnership tax allowance: The tax incentive to encourage employers to train/up-skill their employees through registered learnerships or apprenticeships will be streamlined and further enhanced. If an employee successfully completes a 12 month learnership, his or her employer will be able to claim an additional deduction of R60 000. This will result in a tax relief for the employer of R16 800 per employee. Where an employee successfully completes a three year apprenticeship, the employer will be able to claim an additional allowance of R180 000 at the end of the third year, resulting in a tax relief of R50 400 per employee. A more generous dispensation applies to employers who train employees with disabilities, with employers qualifying for a 66,67 percent higher tax relief than for that for employees without disabilities.

    4. Travel (car) allowances: Repeal of the deemed kilometre method: The deemed kilometre method for deducting travel expenses will be repealed with effect from 1 March 2010. The repeal of this method will eliminate an unintended subsidy for commuting by car (a personal expense). Individuals who use their private vehicles for businesses purposes and who receive a travel (car) allowance will still be able to claim such expense by maintaining a logbook of business kilometres travelled. The PAYE system for travel (car) allowances will be adjusted so that 80 percent of this allowance will be subject to PAYE. The 80 percent rule will prevent under-withholding from taxpayers once the deemed kilometre method is repealed.

    5. Retirement withdrawals: The proposed legislation completes the reform process set in motion in 2008 regarding the taxation of retirement and pre-retirement withdrawal lump sums. Most of the proposed legislation dealing with lump sum tables and clarification of anomalies was published in the first batch of draft legislation in February 2009. The proposed legislation also seeks to simplify the taxation of minor beneficiary funds subject to regulation by the Financial Services Board, and to clarify the law when employers legitimately withdraw employer surpluses from retirement funds.

    6. Estate Duty: The proposed amendments seek to assist middle-income families while deterring Estate Duty avoidance at the upper end. In terms of assisting the middle class, the proposed amendments allow the R3,5 million deduction from Estate Duty to rollover from the deceased to a surviving spouse (so that the surviving spouse can use a R7 million deduction amount on death). In terms of anti-avoidance, the rules close a commonly utilised one-year usufruct arrangement that artificially seeks to undermine the value of inherited property.

    7. Provisional tax: In 2008, the provisional tax system was tightened to require 80 percent accuracy in respect of the second provisional payment when compared to final assessed taxes due. Amid concerns that this requirement may not always be possible (especially for smaller businesses), the 20 percent penalty will be waived in certain circumstances.

    Public Comments and Parliamentary Hearings

    The National Treasury and SARS are scheduled to brief the Parliament's Standing Committee on Finance regarding the draft legislation in mid-June 2009. For further details about the exact date, contact Bradley Viljoen at Parliament at bviljoen@parliament.gov.za or by telephone on 021 403 3759.

    Comments should be submitted to both the Parliamentary Standing Committee on Finance at the above e-mail and directly to the National Treasury to Nomfanelo Mpotulo at nomfanelo.mpotulo@treasury.gov.za by 26 June 2009. To assist in processing these comments, comments should be given in the order listed as per the explanatory memorandum.

    Issued by: National Treasury
    1 June 2009

    More...
    Last edited by Dave A; 02-Jun-09 at 10:30 AM.

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    Site Caretaker Dave A's Avatar
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    The PAYE system for travel (car) allowances will be adjusted so that 80 percent of this allowance will be subject to PAYE. The 80 percent rule will prevent under-withholding from taxpayers once the deemed kilometre method is repealed.
    Hmm. Need to change my formula once this is through.
    Provisional tax: In 2008, the provisional tax system was tightened to require 80 percent accuracy in respect of the second provisional payment when compared to final assessed taxes due. Amid concerns that this requirement may not always be possible (especially for smaller businesses), the 20 percent penalty will be waived in certain circumstances.
    I'm pleased to see this understanding of the difficulty small business could face with this.
    The trouble with opportunity is it normally comes dressed up as work.

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    Platinum Member Marq's Avatar
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    Ha - read the fine print
    the 20 percent penalty will be waived in certain circumstances.
    There is no understanding if you do not know the 'certain circumstances'.

    "Now let me see.... I am looking for your circumstances on my certain list......mmmm"
    "Did the SARS, she say that?"
    "Nooo very sorry, cannot see it here."
    "Try room 404 on the fifth floor, special circumstances department run by my broth....er friend".
    "What you mean there are only two stories in this building"?
    "There's more than two stories and I am telling cho one right now".
    "You sme guys are all the same.....just think we are out to get cho".
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    Site Caretaker Dave A's Avatar
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    Not the level of detail they'd cover in a news release. Perhaps the draft itself will be more forthcoming on the issue.

    By my understanding the crux of the problem is the smaller the income, the smaller the leeway for error. And it gets really tight when you could be either side of zero once the figures are finalised.

    Also, most small business owners are shaky about depreciation and finance charges on fixed assets, so they can be quite far off the mark in their estimate.
    The trouble with opportunity is it normally comes dressed up as work.

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    SARS have always been most amenable when it comes to waiver of penalties - if you have a clean track record and a valid explanation, in my experience they have always been lenient. I imagine (hope?) not much will change.

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    I agree with Morticia. Getting penalties waivered may be a drawn-out process, but more often than not SARS is approachable on that subject.

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    Platinum Member Marq's Avatar
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    Penalty waivering - Must be a new thing or you girls are flashing leg, cause I haven't seen that or heard of that down here in the south eastern corner yet.

    Last time I sat in front of the big sars chief pleading poverty and unfairness and suffering stuff, he suggested that I could get out of the whole problem capital, interest, penalties and all if I just declared myself insolvent (sorry Quinn - not Bankrupt). This way they could write it all off and I could start with a clean slate. Otherwise they could arrange a pay off plan but seeing as that was the third time they had rescheduled it was doubtful that I was going to fit it in with their idea of pay now while you still have your knees routine. That was quite a few years back so could be I was talking to a different regime.
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    Site Caretaker Dave A's Avatar
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    A proposal to increase the portion of a travel allowance that is taxed when the allowance is paid to you will go hand-in-hand with scrapping the deduction based on deemed mileage. From next year, you will have to use your actual mileage recorded in a log-book to claim a deduction against your travel allowance.

    More of any travel allowance your employer pays you to cover work-related travel expenses will be taxed when you are paid the allowance from March 1, 2010.

    The draft Tax Laws Amendment Bill proposes raising, from 60 percent to 80 percent, the portion of the travel allowance that is subject to Pay As You Earn tax. This is likely to affect your take-home pay, unless you already pay more than 60 percent tax upfront.
    full story from Personal Finance here
    So the time to change the payroll program calculation will be from 1st March 2010.
    The trouble with opportunity is it normally comes dressed up as work.

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