Individual Tax

In order to understand how to complete your tax return correctly, there are some concepts you need to take note of to understand what you are filling in on your tax return.  It is often advertised that certain taxpayers are not liable to submit their tax returns when they meet a certain criterion.  These taxpayers might consider themselves one of the lucky few, but since nine out of ten times these taxpayers will qualify for a tax refund they should reconsider their tax position.  This is due to certain deductions, rebates and exemptions allowed against their income (which was already taxed by way of PAYE on the full amount by their employer).  Here is a brief overview on some of the concepts:

Employment salary will be disclosed on your IRP5 certificate issued by your employer. The IRP5 certificate distinguishes between the various classes of employment earnings and benefits. It also discloses contributions to pension-, provident- or medical aid funds. Finally, the IRP5 certificate discloses PAYE that has been withheld from your monthly salary and paid over to SARS;

If any allowance is paid or advance granted by the employer to the employee for the use of his or her private motor vehicle for the employer’s business purposes, then employees are entitled to claim a deduction against the travel allowance for business travelling done throughout the year.

This is any allowance paid by the employer to the employee to cover accommodation, meals or incidental costs where the employee is, due to the duties of his or her office or employment, obliged to spend at least one night away from his or her usual place of residence (within or outside the republic).

Business profits are taxable on a net basis. This means you can deduct certain expenses against income received from your business income, which will include certain wear-and-tear allowances. Examples would be a person trading as a sole proprietor, who carries on a farming business in his personal name or receives rental income.

This is one of the few allowable deductions that are still available and that make sense. An employee or taxpayer may still claim a deduction for contributions to certain approved pension or retirement annuity funds. Your broker should be able to advise you regarding the allowable claims, but watch out for operators that just try and sell their products without checking that you will actually qualify for the deduction.

The implications of these investments are often complex. The manner in which these investments are structured may often result in a taxpayer not “receiving” or “accruing” anything. There are certain deeming provisions in the South African system that one should be careful off. These sections deem you to earn something even though you have not earned or received it under normal income tax rules.

Income received from offshore employers or for offshore employment

South African residents are taxed on their worldwide income; however there are certain exemptions in the Income tax Act for SA residents working offshore and either receiving income from a foreign employer or a local employer. These provisions could be complex and Double Tax Agreements could have a crucial influence. 

Understanding al the concepts, rules, regulations and legislation which could impact an individual taxpayer’s tax liability is an unfair task for someone who has no such background. These are often complex matters and require professional advice and assistance. Aretè tax consulting offers a streamlined, easy, quick and professional solution. 

Send an e-mail with your name and contact details to info@arete-tax.com with the subject “my tax return” and we will respond to you by requesting information and completing and submitting your tax return with our professional expertise.

After you have completed your studies, moved from company or just went through the motions the last couple of years, your financial situation could have changed drastically.  Whatever the reason, you are entering the corporate world and your new or current employer will provide you with a number of options as to how to structure your salary.  These options can range from travel allowances or company vehicles to the percentage of your pension fund contributions.  What will the consequences and effects of these choices be, and how will it affect your tax liability, retirement provisions and the net pay you receive at the end of the month?  We will assist you in structuring your salary in such a way that it meets your personal needs and requirements, whilst still benefiting from the possible tax benefits.

After submitting your tax return, SARS will issue a taxpayer with an assessment (ITA34).  If a taxpayer does not agree with the outcome of the assessment, he / she has the right to object.  Objections are done in the form of a NOO1 or ADR (Alternative Dispute Resolution) 1.  In the HR Computek (Pty) Ltd v SARS (South African Revenue Service) case it was made clear that, a taxpayer is restricted to disputing an assessment on the grounds raised by its objection.  Therefore it is crucial to draft objections strategically and with due care, considering all facts. These documents could end up in court as legal documents and should be drafted in such a manner. Our team is more than capable to assist taxpayers in this regard.

If a dispute could not be resolved by way of objection and appeal (ADR2), an ADR hearing could be the next step. An ADR hearing is essentially a mini trial without the formal procedures of a court, in a last attempt by both SARS and the taxpayer to resolve the dispute before ending up in court. An ADR hearing will normally end up in a settlement with both parties meeting each other halfway or agreeing that the other was correct. However, it is impossible to negotiate or even know if you are willing to negotiate if you are not fully aware of the all the options available to you and the technical strength of your argument. While most of us indeed dread the prospect of going to court, it may be worthwhile not to settle on anything less than what you believe to be due. Where you have a strong argument that is strategically well placed, SARS (South Africa Revenue Service) is unlikely to force taxpayers to court. We are able to assist and handle these matters on your behalf.

Tax is not always black or white; at times, a transaction could be a borderline situation.  It is however critical to insure you stay on the favourable side of the law.  The biggest mistakes made by taxpayers are often the lack of tax planning.  You cannot change the facts and nature of a transaction after it has been completed.  Proper research helps taxpayers to understand the tax liability they face and the time such liability will become liable.  It also enables taxpayers to plan ahead (refer to tax planning for more information).  Examples could be capital vs revenue transactions, Double tax Agreements, Resident vs Source taxation rights and permanent establishment issues (International transactions), anti-avoidance rules, tax deductions etc.

Our consultants offer professional opinions, and are trained and able to understand, interpret and apply tax laws to unique and a specific set of facts and transactions. 

However, sometimes a tax opinion is just not enough certainty, especially when dealing with high risk and/or high value transactions.  It would therefore be worthwhile to apply for an advance tax ruling from SARS.  This is accomplished through the advance tax ruling system, in which SARS will then issue a taxpayer with a “binding private/class ruling”, meaning that SARS will be bound to the ruling of a specific transaction and will enable taxpayers to plan their transactions with certainty.  In order to persuade SARS in issuing a favourable ruling require persuasive writing skills, good interpretation and application of the legislation and case law, and specialist knowledge.  Our tax team will therefore not only draft applications from scratch, but will also review and provide assistance and valuable insights in order to up the probability for a favourable ruling.

Whether you are investing in property, shares or other capital assets and making profits thereon, you will be liable to pay tax on those profits.  The thousand or million dollar question might be how it will be taxed.  SARS might see your profits as revenue and not capital, which is the reason why it might be the million or thousand dollar question in tax.  Let us help you plan your capital investments.

Different rules apply for South African resident and foreign employees.  Our domestic law stipulates that if you are a South African resident for tax purposes, you will be taxed on your worldwide income.  However, if you are a non-resident you should only be taxed on income from a South African source.  How to determine when you will be considered a resident or when income will be considered to be sourced in South Africa can be a complex process. Double Tax Agreements should also be considered where applicable.

For South African residents who work abroad, the basic rule is that, should your affairs be planned well, you will normally not have to pay any additional taxes in South Africa.  This is because of the way our system is structured and takes into account the various exemptions and relief available. However, where tax matters are not planned and income tax submissions are not kept up to date, we know of many instances where the tax authorities enjoyed a bit of a windfall.

 

The problem that most foreign persons in South Africa face is that local employers and tax practitioners (often the South African Revenue Services as well!) want to treat you like normal South Africans. This is not correct nor in your best interest. Depending on your circumstances, different rules apply to you and these rules will always be to your benefit. Planning for expatriate employees in South Africa is of the utmost importance. It will pay to ensure that you are not tax resident in South Africa.

Whatever your circumstances or situation, we have the knowledge and expertise to assist and advise you to plan ahead and to make use of the possible exemptions, deductions and rebates to your disposal.

The purpose of a tax directive is to enable SARS to instruct an employer / fund administrator how to deduct employees' tax from certain payments to a taxpayer or for a fixed tax rate for an individual who earns commission income.  Employees can request a tax directive from SARS via the channels provided by SARS.  We are able to assist such employees with the process.

In addition to cases being selected for audit based on risk, taxpayers may also be selected for audit on a random or cyclical basis.  An SARS audit involves the SARS auditor carrying out certain preliminary checks, often in conjunction with the associated risks SARS identified.  SARS will then gather information.  During the information gathering process, information is collected to review and make a determination of the relevant identified risk.  This is a key phase of the audit where a cooperative approach by taxpayers will assist in managing the audit time-frame.  It is also during this phase that any adjustments to the audit scope are likely to occur.  To the extent that they do, these will be explained to the taxpayer.

Understanding what SARS are looking for and how the process works, can save the taxpayer and SARS valuable time and frustration.  When the audit process is, finalised SARS will either issue a letter to the taxpayer advising that the audit has been concluded and they are happy, or they will adjust your assessment and issue an additional assessment, which can also result in interest and penalties.  The taxpayer will then be allowed to give reasons why interest and penalties should be remitted. 

We can assist you throughout the process, which will streamline the process and subsequently save valuable time and money.  We also assist you in drafting technical reasons as to why penalties and interest should be remitted and where we feel it is worthwhile to object to SARS’s findings, assist in drafting objections (refer to objection section).  

Often the biggest mistake made by taxpayers is the lack of planning. You cannot change the facts and nature of a transaction after it has been completed. Therefore, the tax liability is based on those facts and the nature on which the transaction was embarked or concluded on. Proper planning beforehand will help you understand the tax liability, the timing of the tax liability, disclosure requirements and, most importantly, possible options or alternatives. However, one should be reminded that simulating a transaction merely to mask its true nature and purpose will not help, as the ‘substance over form’ rule is available to SARS, so that force will be given to the true transaction and not the simulated or sham transaction that the taxpayer professes it to be. 

Whether it is estate planning, capital transactions or any other transaction or future tax benefits which might be applicable to your situation, we will be able to assist you in structuring and planning your affairs in the most tax efficient way.