Individual Income Tax

Individual Income Tax

Welcome to the SARS Tax Workshop The purpose of this presentation is merely to provide information in an easily understandable format and is intended to make the provisions of the legislation more accessible. The information therefore has no binding legal effect and the relevant legislation must be consulted in the event of any doubt as to the meaning or application of any provision.

Individual Income Tax

Points for Discussion Overview Tax Registration Calculation of Tax Liability

Overview Why are we paying taxes? Every government is mandated to provide basic services to Basic services include: citizens Education Health Welfare (Child Grants/Old Age Pensions) Policing Every citizen enjoys the benefits of one or other government basic service

Overview Why are we paying taxes? Government has a social responsibility towards citizens of this country Social responsibility can only be fulfilled if the necessary taxes have been paid by the people earning taxable income in this country

Who needs to register with SARS Individuals: Salary earners Commission earners Travel allowance Members of CCs/Directors of companies Self employed: o Sole proprietor o Partnership Companies/Close Corporations Trusts

Tax Registration

CLIENT INFORMATION SYSTEM Tax Registration What is Client Information System? SARS s Client Information System was implemented in 2014 and allows taxpayers and registered representatives to: register, maintain and view all its associated tax and customs registrations in a consolidated tax profile. From a taxpayer s view, if you are not yet registered for any of the listed taxes you would only be required to visit a branch once to verify your identity, address and bank details. All additional tax registration can be performed from efiling without having to visit a branch again.

CLIENT INFORMATION SYSTEM Tax Registration Client Information System allows for the registration and maintenance of the following Revenue and Customs taxes: Corporate Income Tax (CIT), Trusts (TR) Income Tax (including Provisional Tax) Employee taxes - Pay-As-You-Earn (PAYE), Skills Development Levy (SDL) and Unemployment Insurance Fund (UIF ) Value-Added Tax (VAT & Diesel) Customs and Excise. Please note: From the 2010 Tax Year, it has become compulsory for every employee to register as a taxpayer, irrespective of their income earned.

CLIENT INFORMATION SYSTEM Tax Registration First Time Taxpayers: Make sure you aren t already registered, by first calling and checking with the SARS Contact Centre on 0800 00 7277. Visit the SARS Branch The completion of the IT77 application form is no longer mandatory. The different required supporting documentation for each tax type registration is mandatory. You will be registered and your profile created in real-time, provided there is no unverified information. Once registered you ll receive an email or posted notification to confirm your tax type registration. Employers can register first time Taxpayers on efiling and Easy File provided that the employer is registered for PAYE

Documentation required : Income Tax Registration Individual Proof of Identity Individual: A certified or uncertified copy of a valid identity document, driving license, passport, temporary identity document, asylum seekers certificate, permit together with the original identification Deceased Estate: Copy of the death certificate Death notice in the Government Gazette Copy of the last will and testament, if a valid will and testament is not available, a next of kin's affidavit is acceptable Copy of the liquidation and distribution account Letter of appointment as Executor Inventory

Documentation required : Income Tax Registration Individual Proof of Address: Individual General accounts: Utility account i.e. rates and taxes/ water or electricity account/student fee account/medical aid statement/mortgage statement from mortgage lender/all telephone network account/etoll account/major retail accounts Government documents: Motor vehicle licence documentation/court order/subpoena/traffic Where the place of residence is in the name of a third party, a Confirmation of Entity Residential / Business Address (CRA01) form must be completed by the third party.

Documentation required : Income Tax Registration Individual Bank Details: Individual Original letter from bank not older than one month confirming : 1. account holder s legal name 2. account number 3. account type 4. branch code and 5. the date reflecting the date on which the account was opened Recent bank statement with original bank stamp; ABSA bank estamped statement Internet statement with or without an original bank stamp A clear bank statement drawn from an ATM machine containing all the information such as the account holder s legal name, account number, account type, branch code and must reflect the date the bank account was opened

Documentation required : Income Tax Registration Individual Bank Details: Individual If the wife/husband does not have a bank account and chooses to use his/her spouse s banking details a certified copy of the marriage certificate is required. In instances of a Life Partner, an affidavit must be provided.

Filing Season Changes2016

Filing Season Changes IRP5 Changes: Locking, No of IRP5`s, Mandatory fields Mandatory tick box for contact details Declaration of unemployment periods Differentiate between income and expenses for local business and rental from letting of fixed property Detailed IT48 Farming expenses schedule, IT48 farming expenses and capital development expenditure.

Filing Season Changes New ITR12 rejection letter for banking details amended and captured via the post channel Medical scheme contribution pop-up for code 4040 and 4005 Public Benefit Organisations- PBO reference numbers to be validated, if validations fail, the donations claim will be reduced. Budget speech changes- new tax rates, rebates, medical scheme tax credits, cost scale for employer provided vehicle and travel allowance, CGT inclusion rates and annual exclusion.

Legal Changes 2016

Legal Changes: Sec 3(b) Estate Duty From 1/01/2016 Contributions not allowed as a deduction after 01/03/2015 will be taxed as property in the estate for estate duty purposes. Only applies to natural person who die after 1 January 2016 Estate duty carry over letters will be issued to representatives on request. Transfers of Tax Free Investments From 1 /03/2016 Cross Transfer (transfer in & out) on tax free investment account and withdrawal of investment recognized as not affecting the limits. Sec 6(B) Medical Tax Credits- PAYE employees over 65 From 1/03/2016 Additional medical tax credits related to medical scheme contributions only for taxpayers over 65 years and older. Expenses must be taken into account to reduce both monthly PAYE and Provisional Tax.

Legal Changes: Sec 6(1) Normal Tax Amendment provides clarity to the law that normal tax payable means after deducting rebates. If there is any penalty to be levied on the normal tax payable, this penalty must be levied after the rebates. Retirement Reform From 1 /03/2016 Any contribution by an employer to a retirement fund for the benefit of the employee will be taxed as a fringe benefit in the hands of the employee. Amended sec 11(k) general deductions allowed in determination of taxable income. The tax deductible amount for taxpayers will be the greater of 27.5% of remuneration or taxable income but limited to R350 000 per year per assessment. Deduction allowed for Pension, Provident & Retirement Annuity Old Pension and Retirement Annuity Carry overs Contributions in access of the annual limits may be rolled over to future years The de- minimus threshold to purchase an annuity is changed from R75 000 to R247 000

Legal Changes: Sec ca and cb) restraint of trade From 1/03/2016 Description of existing source code updated and a new code created for the amended par (ca) inserted in the definition of gross income with regards to restraint of trade. This affects labour brokers without IRP30 exemption certificates Rebates in respect of foreign taxes on Income from a source within the Republic From 1/03/2016 Section 6quin and Section 6quat changes. The Taxpayer cannot claim foreign tax credit for services rendered in South Africa taxed outside RSA from the 2017 tax year. A Taxpayer can claim a deduction from income for services rendered in South Africa taxed outside the RSA. Sec 11D Deduction in respect of scientific or technological research and development Applies to companies only (ITR14) must be removed from ITR12

Legal Changes: Par 7(1) of the 7 th schedule to Income Tax Act- Determined value Changes in calculation of the determined value. Employers to issue Fringe Benefit calculation letters. A letter must be provided for each employer provided vehicle. Provisional Tax Extending the period submission of the final IRP6. The extension only relates to the penalties for underestimation. Removal of certain exclusions relating to lump sums when the understatement penalty is calculated. Changes to the calculation of the Basic Amount for IRP6`s. Removing the notes relating to cheque payments from the IRP6

Calculation of Taxable Income 2017

Calculation of Taxable Income 2017: Example Salary (RI) R 400 000.00 Bonus R 30 000.00 Other allowances R 20 000.00 Travel allowance (20% - R9600) R 48 000.00 Pension Fund Contributions Employer R 30 000.00 Travel claim R 36 000.00 Pension Fund Contributions Employee R30 000.00 RAF contributions R 74 000.00

Solution Calculation of Taxable Income 2017: 2017 Salary (RI) R 400 000.00 Bonus R 30 000.00 Other allowances R 20 000.00 Travel allowance (20% R9 600) R 48 000.00 Pension fund Fringe benefit R 30 000.00 R 528 000.00 Less: Travel claim -R 36 000.00 Taxable income before retirement contribution deductions R 492 000.00 Less: Retirement funds Contributions: (R30 000 + R30 000 + R74 000) = R134 000 27.5% Greater of 489 600 or 492 000 = R135 300 limit to -R 134 000.00 Taxable income R 358 000.00

Reduction 2017: Based on the current wording of the Act, which will be applicable from 1 March 2016, both sections 11(k) and 18A deductions are at the same level in the tax deduction sequence when calculating taxable income. This is because the wording in section 11(k) and 18A is almost identical. The taxpayer has a choice which deduction he or she wants to take into account first. Any portion of the respective deductions that are in excess of the allowable limitations for the current year of assessment will be carried forward to rank as deductions against the following year s taxable income The Act will be amend so that this is going to be the sequence

Thank you Find out more about our free tax workshops at www.sars.gov.za SARS Contact Centre 0800 00 SARS (7277) Visit your nearest SARS branch (to locate a branch, visit www.sars.gov.za) Open: Monday, Tuesday, Thursday & Friday 08:00 to 16:00; Wednesday 09:00 to 16:00 28