Korporatiewe Beheer – Voorgestelde wysigings aan die maatskappywet
March 27, 2019

2019 Budget and tax: Certain amendments to take note of

Last month’s budget speech brought about minimal changes to personal tax tables, tax rates of trusts, companies and VAT, only to mention a few. There were however quite a few changes in the amendment acts, things that will have a major impact in the way taxpayers we are paying and calculating taxes going forward.

This month we will have a look at some of these changes:

  1. Employment Tax Incentive (ETI)

Given the success of the ETI scheme, it has been extended by 10 years to 28 February 2029 and the eligible income bands have been adjusted upwards from 1 March 2019.

  • Employers are now entitled to claim the maximum value of R1 000 per month for employees earning up to R4 500 monthly (previously R 4000); and
  • The maximum monthly income earned by employees to qualify for the ETI has also increased from R6,000 to R6,500 per month.
  • The new tax tables have been included for your convenience:
Monthly remuneration (R) Per month during the first 12 months of employment Per month during the next 12 months of employment
0 – 1 999      . 50% of monthly remuneration 25% of monthly remuneration
2 000 – 4 499      . R1 000 R500
4 500 – 6 499      . R1 000 – (0.5 x (monthly remuneration – R4 500)) R500 – (0.25 x (monthly remuneration – R4 500))
6 500 – and more Nil Nil
  1. Funds managed by Bargaining Councils [i]

Last year, SARS clamped down on these bargaining councils who were not tax complaint as they found that these Bargaining Councils were not paying over Pay As Your Earn (PAYE) on behalf of the employees in this sector. SARS instituted a tax relief plan for these Bargaining Councils wherein they had to pay 10% of all outstanding PAYE before the end of September 2018.

This year the focus is on the employer contributions on behalf of the members of the bargaining councils and the amendments are effective from 1 March 2019.

  • Employer contributions to funds for the benefit of employees is a taxable fringe benefit in the employee’s hands and is subject to PAYE.
  • The value of the taxable fringe benefit is the amount of the contribution made by the employer on behalf of the employee.
  • This is not applicable to the extent that the contributions are made to a pension or provident fund.
  • Where the employee makes contributions to the fund, no PAYE should be withheld as the contributions can only be made from the employee’s post-tax income.
  • Any payments received from the funds by members should be tax free.
  1. Cryptocurrency

The definition under section 1 of the Income Tax Act has been amended to include cryptocurrencies as a financial instrument (any dealings in cryptocurrency is now a financial instrument). In addition, taxpayers who deal in cryptocurrency (like bitcoins) will now be treated as a suspect trade, which relates to section 20A of the Income Tax Act and deals with the ringfencing of assessed losses.

It is important to bear in mind that section 20A will only be applicable to taxpayers who pay tax at the marginal rate, currently 45%. Therefore, if you do not pay tax at the marginal rate you do not have to be worried about the ringfencing of assessed losses when dealing in cryptocurrencies.

  1. Doubtful debt allowance[ii]

For companies not using International Financial Reporting Standards (IFRS) 9 accounting standard for financial reporting purposes, the Act has been amended to calculate the doubtful debt allowance as:

  • 40% of debts in arrears for 120 days or more in arrears; PLUS
  • 25% of other debt in arrears for 60 days or more.

and the allowance must still be added back in the following year of assessment.

The Commissioner may, on application by a taxpayer, issue a directive that the 40 % may be increased up to 85% after considering

  • The history of a debt owed to that taxpayer, including the number of repayments not met, and the duration of the debt
  • Steps taken to enforce repayment of the debt
  • The likelihood of the debt being recovered
  • Any security available in respect of that debt
  • The criteria applied by the taxpayer in classifying debt as bad; and
  • Such other considerations as the Commissioner may deem relevant

The effective date of the amendment is for years of assessment commencing on or after
1 January 2019.

  1. South African taxpayers and the exemption on foreign employment income (Expat tax)

From 1 March 2020, South African residents who spend more than 183 days in employment outside the country will be subject to South African tax on any foreign employment income that exceeds R1 million.

Therefore, if you work abroad and earn R1,5 million per year the maximum amount that would potentially become taxable is R500 000, subject to the normal tax tables for individuals.

Do not hesitate to contact us (tax@asl.co.za or 021 840 1600) if you have any questions regarding the legislative amendments or if you would like your tax matters to be reviewed. We would like to talk to you to determine how we can address these needs.

[i] New paragraphs 2(m) and 12E of the Seventh Schedule

[ii] Section 11(j) of the Income Tax Act, No 58 of 1962