Our top tips for NPO employers and employees
- Tax free reimbursive travel allowance, where business kilometers are less than 12,000 (previously 8,000) per annum, increased from R3.29 per km to R3.55 per km.
- Subsistence allowances have been increased for travel within South Africa which include at least one night away from home:
R397 per day for meals and incidental costs;
or R122 per day for incidental costs only.
when travelling outside the Republic, the daily amounts are listed on SARS website – there are some changes from 1 March 2017.
- There are no changes to taxation on fringe benefits enjoyed by employees – including those related to low- or no-interest loans and private use of an organisational vehicle or accommodation.
- The Employment Tax Incentive (ETI) has been extended to 28 February 2019. The incentive applies to workers aged between 18 and 29 earning above minimum wage but less than R6,000 per month.
- Annual tax table bands for individuals and rebates were increased by 1% from 1 March 2017.
- The tax threshold, below which no income tax is payable, increased from R75 000 to R75 750 in total per annum for individuals under 65 years of age.
- Monthly medical scheme contribution tax credits increase to R303 for each of the taxpayer and first dependent and R204 for each additional dependent.
- Retirement fund contributions (including contributions to pension, provident or retirement annuity (RA) funds)are deductible up to a maximum of 27.5% of the higher of remuneration or taxable income, but the deduction is subject to a limit of 27.5% of the amount of taxable income before capital gains and any section 18A donation deduction.
- Significant amendments have been made to the UIF Act that provide for a wider range of people to claim unemployment benefits and also make it easier to claim benefits.
- The maximum earnings limit has also been increased with effect from 1 April 2017.
Old Rate 2016 – R178 464 PA or R14 872 per month with a maximum deduction R148.72
New rate 2017 – R212 539 PA or R17 712 per month with a maximum deduction R177.12 month.
- As announced in the 2016 Budget Speech, the withholding tax on service fees, which was set to come into effect from 1 January 2017, was withdrawn so there is no longer a need to deduct withholding tax on payments by SA residents to non-residents who render certain technical and professional services in South Africa. However, such payments may be “reportable” … read more below.
SARS Public Notice 140 (3 February 2016) contains a new list of Reportable Arrangements (“RA’s”) in terms of the Tax Administration Act (TAA); reportable arrangements act as an early warning for SARS in respect of various types of arrangements that could pose a risk to the fiscus. However, RA’s do not necessarily allow SARS to act in terms of the general anti-avoidance provisions in the Income Tax Act.
One notable RA relates to services rendered by a non-resident to a South African resident or by a non-resident to a non-resident who has a permanent establishment (PE) in South Africa, to which PE the services relate. To be reportable:
1. The services must be rendered to a South African resident or to a South African PE of a non-resident.
2. A non-resident or employee, agent or representative of that person must have been or be anticipated to be, physically present in South Africa in connection with or for the purpose of rendering the services.
3. The expenses incurred or expected to be incurred in respect of the services on or after 3 February 2016 must exceed, or be expected to exceed, R10 million and must not constitute “remuneration” as defined in the Income Tax Act.
RA’s cover a wide range of services. The term “services” is defined to mean consultancy, construction, engineering, installation, logistical, managerial, supervisory, technical or training services. SARS will arguably not use the information provided in this category to assess whether the non-resident has, or will be, creating a PE in South Africa. This appears to be an issue that has concerned SARS for some time as, if a PE is created, South Africa would generally have the right to tax profits attributable to the PE and collect VAT and employees’ tax.