4/5
TAX
GUIDE
kpmg.co.za
01
Income Tax:
Individuals
02
Income Tax:
CORPORATE TAXPAYERS
03
11
Income Tax:
INTERNATIONAL TAXPAYERS
26
Indirect Tax:
vat/trade and customs
29
04
contents
INCOME TAX:
INDIVIDUALS
INCOME TAX:
CORPORATE
TAX PAYERS
INCOME TAX:
INTERNATIONAL
TAXPAYERS
INDIRECT TAX:
VAT/TRADE
AND
CUSTOMS
Rates of tax
0-
174 550
R
18% of each
174 551 -
272 700
31 419 +
174 550
272 701 -
377 450
55 957 +
272 700
377 451 -
528 000
87 382 +
377 450
528 001 -
528 000
673 100
195 212 +
Tax rates for previous year (year of assessment ending 28 February 2014)
Taxable income
Rates of tax
0 -
165 600
165 601 -
258 750
29 808 +
165 600
258 751 -
358 110
53 096 +
258 750
358 111 -
500 940
82 904 +
358 110
500 941 -
500 940
638 600
R
18% of each
185 205 +
Tax Thresholds
Age
Below age 65
70 700
67 111
Age 65 to below 75
110 200
104 611
123 350
117 111
Trusts, other than special trusts, will continue to be taxed at a flat rate of 40%.
Tax Rebates
2014/15
2013/14
Primary rebate
12 726
12 080
Secondary rebate
7 110
6 750
Tertiary rebate
2 367
2 250
Allowances
Subsistence Allowances and Advances
Where the recipient is obliged to spend at
least one night away from his or her usual
place of residence on business and the
accommodation to which that allowance
or advance relates in South Africa and the
allowance or advance is granted to pay for:
For overseas
costs, the
applicable rate
per country is
available on the
SARS website
under Legal & Policy /
Secondary Legislation /
Income Tax Notices / 2014.
Travel Allowance
A log book confirming business kilometres
travelled must be maintained in order
to claim any deduction for business
kilometres. PAYE must be withheld by
the employer on 80% of the allowance
granted to the employee. The percentage
may be reduced to 20% if the employer is
satisfied that at least 80% of the use of the
motor vehicle for the tax year will be for
business purposes.
Maintenance cost
(c/km)
0 80 000
25 946
92.3
27.6
46 203
103.1
34.6
66 530
112.0
38.1
84 351
120.5
41.6
102 233
128.9
48.8
120 997
147.9
57.3
139 760
152.9
71.3
139 760
152.9
71.3
(3) R 1 750.
Any excess may be carried forward to the
following year of assessment.
|6
Rates of tax
0-
500 000
500 001 -
700 000
700 001 -
1 050 000
R
0% of amount
0+
500 000
700 000
Retirement fund lump sum benefits consist of lump sums from a retirement fund on
death, retirement or termination of employment due to redundancy or termination of the
employers trade.
Severance benefits consist of lump sums from or by arrangement with an employer due
to termination of a persons office or employment where:
a) the person is over the age of 55; or
b) the termination is due to the person becoming permanently incapable of holding
office ore employment due to sickness, accident injury or incapacity through infirmity
of mind or body; or
c) the termination is due to
i) the persons employer having or intending to cease to carry on the trade in respect
of which the person was employed or appointed; or
ii) the person having become redundant in consequence of a general reduction in
personnel or a reduction in personnel of a particular class by the persons employer,
provided that where the persons employer is a company, the person did not at any
time hold more than 5% of the issued shares or members interest in the company.
Taxation of lump sum benefits upon withdrawal from a retirement fund prior to
retirement
The tax-free lump sum benefit upon withdrawal from a retirement fund prior to retirement
is increased from R22 500 in the 2013/14 tax year to R25 000 in the 2014/15 tax year.
7 | 2014/15 Tax Guide
Taxable income
R
Rates of tax
0-
25 000
25 001 -
660 000
660 001 -
990 000
R
0% of amount
25 000
Inclusion rate %
Statutory rate %
Effective rate %
33.3
0 40
0 13.3
Companies
66.6
28
18.6
Small business
corporations
66.6
0 28
0 -18.6
66.6
28
18.6
Non-residents
(immovable property
situated in or interest
in property-rich entity
with immovable assets
situated in South Africa)
66.6
28
18.6
66.6
40
26.6
Other Trusts
Exclusions:
Annual individual and special trust
exemption R30 000.
On death, the exclusion granted to
individuals during the year of death
R300 000.
The exclusion on a primary residence
R2 million.
Purpose
Application
Is employed in an industry as
designated by the Minister of Finance
in the Gazette and
R0 - R2 000
R2 001 - R4 000
R4 001 - <R6 000
Year 2
R1 000
R500
INCOME TAX:
Corporate Taxpayers
General corporate tax proposals
Debt Reduction Rules
The Debt Reduction Rules were
significantly amended as part of the 2012
Income Tax Amendments. In terms of
these amendments the reduction of debts
for no or insufficient consideration will be
applied firstly to reduce the tax cost of
assets acquired with that debt and / or to
reduce capital losses. Only in instances
where a deduction or allowance has been
claimed and the asset is either no longer
held or the tax cost is less than the amount
of the debt reduction will an immediate tax
charge be triggered. The reduction in the
tax cost effectively defers any tax charge
until the date that the asset is disposed
of. Capital Gains Tax is no longer levied
where the debt compromised was used to
acquire assets of a capital nature. Further
amendments are proposed in the Budget
where debt is partially or fully discharged
through the implementation of a business
rescue. It is proposed that tax relief
measures be considered for companies
undergoing business rescue and other
forms of debt compromise in order to ease
their burden.
Public-private partnerships
The Income Tax Act requires that land be
owned in order to claim capital allowances
on qualifying improvements. When
Government enters into public-private
partnerships, it makes land
available to the private party.
The inability to claim a
capital allowance on
improvements to
the land because
the land is not
owned, affects
the financial
viability of the
project. It is
proposed that
the merits
of allowing
deductions
where the
taxpayer is not the
owner of the land will
be considered.
Industry specific
proposals: Financial Services
Long-term insurance
The reform of the income tax regime
was announced in the 2013 Budget,
particularly with regard to risk business
no longer being taxed in the policyholder
funds, but rather in the corporate fund. No
legislation was tabled to give effect to this
announcement in 2013, and this specific
reform was reiterated in the 2014 Budget.
In addition, the taxation rate of 30% being
applied irrespective of the income level of
policyholders in the individual policyholder
fund, is also being reviewed.
| 12
The application of the section 24JB fair value rules for financial instruments.
Michael Rudnicki
M: +27 83 377 6492
E: michael.rudnicki@kpmg.co.za
Instruments
It is proposed that certain policies issued
by insurers, such as endowment, smooth
or stable bonus products that have a
guaranteed value for policyholders be
excluded from the scope of the provisions
of the Income Tax Act which deal with
the incurral and accrual of interest on
instruments.
| 14
INCOME TAX:
Corporate Taxpayers
Incentives
Small and Medium enterprise
development
It is proposed that the turnover tax regime
for micro business should be retained, but
that the requirements should be simplified,
that turnover up to R335 000 should
not be taxed and that the maximum tax
rate should be reduced from 6% to 5%.
Other suggestions include doing away
with the requirement for businesses to
opt in to the regime for three years and
requiring annual, rather than bi-annual tax
returns. It is further recommended that
the reduced tax regime for small business
corporations be replaced with an annual
refundable tax compliance rebate (subject
to certain conditions). It is proposed that
grants received by small and mediumsized enterprises should be tax exempt,
regardless of the source of the funds.
Philanthropic foundations
The Income Tax Act provides a tax incentive
for donations to qualifying public benefit
organisations, including philanthropic
foundations. These foundations aim to
build up and maintain sufficient capital to
provide financial support to worthy causes
carried out by public benefit organisations.
They have been required to distribute up
to 75% of the money they generate within
a year, unless they can demonstrate that
the funds accumulated will be used for
specific qualifying purposes. Because
this requirement has been affecting the
sustainability of these foundations, it is
proposed to relax this requirement while
ensuring that foundations distribute
15 | 2014/15 Tax Guide
INCOME TAX:
Corporate Taxpayers
Environmental Taxes
Carbon Tax
Climate change
As part of South Africas commitment to
reducing greenhouse gas emissions, the
proposed carbon tax and incentives, such
as the energy-efficiency tax incentive, will
provide price signals to encourage the
economy on a path of low-carbon growth
over the long-term.
Environmental conservation
The incentive for land owners to enter into
an agreement with Government to declare
land as a nature reserve or a national
park will be streamlined, by proposing a
straight-line deduction over a period of 25
years of the adjusted value of the land at
the time of entering into the agreement.
| 16
INCOME TAX:
Corporate Taxpayers
Capital Allowances for Businesses
Buildings
Industrial (used in manufacturing or a similar process)
10
Other
Hotels
Annual Allowance; Erection of building or qualifying improvements
commenced:
Before 4 June 1988
From 4 June 1988 onwards
%
2
5
From 17 March 1993, but only in respect of improvements that do not extend the
existing exterior framework
20
20
Intellectual Property
Costs incurred in acquiring:
Inventions, patents or copyrights
Designs
%
5
10
| 18
INCOME TAX:
Corporate Taxpayers
Research and Development (R&D)
Costs incurred in any year of Assessment:
150
Buildings
40/20/20/20
40/20/20/20
50/30/20
100
50/30/20
Rate of Tax
0% of taxable income
INCOME TAX:
Corporate Taxpayers
An elective presumptive turnover tax applies for microbusinesses (financial years ending
on any date between 1 April 2014 and 31 March 2015):
Turnover
Liability
R0 - R150 000
0%
BRIGITTE WEBB
M: +27 82 718 8820
E: brigitte.webb@kpmg.co.za
ELIZABETH LOMBAARD (Cape Town)
M: +27 82 719 1988
E: elizabeth.lombaard@kpmg.co.za
INCOME TAX:
Corporate/Individual Taxpayers
Tax Calendar
Provisional tax individual / company
1st Payment within 6 months after
previous tax year
2nd Payment on tax year end
3rd Payment Voluntary payment made
within 7 months after tax year end (if tax
year end is 28/29 February), or voluntary
payment made within 6 months after year
end (if tax year end falls on any other date).
Individuals who on the last day of the year
of assessment will be below the age of
65 years who do not carry on a business
and whose taxable income will not exceed
R70 700 or whose taxable income from
interest, foreign dividends and rental will
be R20 000 or less will be exempt from
provisional tax.
Individuals who on the last day of the year
of assessment will be over the age of 65
years are exempt from provisional tax if
they are not directors or private companies
and only receive employment income,
| 22
INCOME TAX:
Corporate/Individual Taxpayers
Interest Rates
Rate of interest
Fringe benefits - interest-free or low-interest loan
(official rate)
Rate of interest
Rate (from
1 May 2014)
8.5% p.a.
9% p.a.
4.5% p.a.
5% p.a.
8.5% p.a.
9% p.a.
8.5% p.a.
9% p.a.
8.5% p.a.
9% p.a.
8.5% p.a.
9% p.a.
Fixed-amount penalties
There are a number of obligations that a taxpayer is legally required to comply with, and a
fixed amount penalty is imposed when a taxpayer does not comply with an obligation.
The amount of the penalty imposed in a penalty assessment will increase automatically
for each month, or part thereof, that the person fails to remedy the non-compliance within
one month after:
the date of the delivery of the penalty assessment, if SARS is in possession of the
current address of the person and is able to deliver the assessment, but limited to 35
months after the date the date of assessment of the penalty; or
the date of the non-compliance if SARS is not in possession of the current address of
the person and is unable to deliver the penalty assessment, but limited to 47 months
after the date of non-compliance.
The table below reflects examples of what could attract a fixed-amount administrative
non-compliance penalty.
Duty
Registration
requirements
If there is a change
to registration
details
Returns
Retaining records
Information
gathering
Debt management
MUHAMMAD SALOOJEE
Partner:
Corporate Tax
| 24
INCOME TAX:
Corporate/Individual Taxpayers
The Act specifies precisely what amount is imposed for non-compliance. As can be seen
from the table below, the amount depends on the amount of the taxpayers taxable
income or assessed loss for the preceding year of assessment.
Assessed loss or taxable income for preceding year
R
Penalties
Assessed loss
R
250
0-
250 001 -
500 001 -
1 000 000
1 000
1 000 001 -
5 000 000
2 000
5 000 001 -
10 000 000
4 000
10 000 001 -
50 000 000
8 000
16 000
Understatement penalties
In the case of tax being underpaid because of an understatement made by a taxpayer,
Section 223 of the Tax Administration Act provides for different rates of understatement
penalties based on the type of behaviour or the degree of culpability involved. These rates
are as follows:
Voluntary
Voluntary
disclosure
disclosure
after
before
notification notification
of audit
of audit
Standard
case
If obstructive,
or if it is a
repeat case
Substantial
understatement
10%
20%
5%
0%
(ii)
Reasonable
care not taken in
completing return
25%
50%
15%
0%
(iii)
No reasonable
grounds for tax
position taken
50%
75%
25%
0%
(iv)
Gross negligence
100%
125%
50%
5%
(v)
Intentional tax
evasion
150%
200%
75%
10%
Item
Behaviour
(i)
INCOME TAX:
International Taxpayers
Secondary adjustment for transfer Foreign dividends of CFCs owned
pricing
by individuals
It has been recommended that the
application of the secondary adjustment in
the form of a deemed loan be removed and
the transfer pricing provisions be amended
to state that the secondary adjustment
is deemed to be a dividend or capital
contribution depending on the facts and
circumstances.
| 26
INCOME TAX:
International Taxpayers
Exchange Control
Introduction of foreign member funds
A proposal was made to introduce
foreign member funds which are not
subject to the macroprudential limit.
The introduction of these funds aims to
support South Africa as a hub for African
fund management. These funds will also
introduce a new domestically-regulated
channel that provides foreign exposure to
domestic investors.
It is proposed that these foreign member
funds would be collective investment
schemes and alternative investment funds
(which includes private equity, venture
capital and hedge funds), which may
source funding from:
Non-residents;
Unlisted companies
Tax treatment
International Tax
and Transfer Pricing
International tax solutions and
transfer pricing systems that
work.
ROBYN BERGER (Johannesburg)
M: +27 83 273 7390
E: robyn.berger@kpmg.co.za
NATASHA VAIDANIS (Johannesburg)
M: +27 82 458 1043
E: natasha.vaidanis@kpmg.co.za
DEBORAH TICKLE (Cape Town)
M: +27 82 492 0375
E: deborah.tickle@kpmg.co.za
Documentation
Agents
Contract Prices
Bargaining Councils
Budget highlights
continued
Unlocking Africa
Tax for a Diverse Continent
2014 KPMG AFRICA
TAX CONFERENCE, DAKAR
04 07 June 2014 | Radisson Blu, Dakar, Senegal
KPMG hosts the first Pan African Tax conference in Dakar
in June 2014.
Africa is a key strategic growth imperative for most global
corporates. But, it presents a diverse and complex
operating environment. This conference aims to provide
you with a thorough understanding of the legislative
and regulatory frameworks to help you enter into new
territories or expand into Africa.
KPMG will bring together key decision makers
including senior representatives from the Revenue
Authorities in various countries, senior business
leaders from KPMG clients across the world, senior
KPMG Tax Partners from across the globe and
the continent, as well as senior KPMG Industry
leaders to work together to help navigate your
investment and growth on the continent.
If your company does business across Africa,
or is thinking of expanding into or within
Africa, dont miss this important opportunity
to shape the inputs into your corporates
growth ambitions within Africa.
For more information, contact
KPMGTaxinAfrica@kpmg.co.za