Introduction - South African Institute of Professional ...

Introduction

v20160615

• SARS is continually modernising it’s systems in order to provide more efficient

and effective services to the taxpayers.

• In line with this requirement SARS will be implementing the changes made to

legislation that impact personal income tax and need to be incorporated into

the systems for filing season.

• In this presentation we will also look at the legal changes being implemented as

well as any system enhancements and process updates that will be

implemented for the 2017 filing season.

Changes to be implemented

We will be looking at the following enhancements in this presentation:

PIT Legislative Amendments

• Section 10(1)(k)(i) Changes: Exemptions of local dividends.

• Dividends deemed to be income in terms of s8E and s8EA

• Section 12H: Learnership agreements

• New Paragraph 2A of the Seventh Schedule: Taxable benefit of the fringe

benefit tax that a partner is deemed to be an employee of a partnership.

• Section 11D: Research & Development


• Section 11(k): Retirement fund contribution deduction

• Paragraph 1 of the Fourth Schedule: Definition of Provisional taxpayer

• Paragraph 19 of the Fourth Schedule: Estimate of taxable income to be made by

provisional taxpayers

• Section 9H: Ceased to be a RSA resident

• Section 6quin: Foreign Tax Credits Refunded / Discharged


Further to the legal changes, certain changes will be implemented that are not legal

changes but are a critical component to a successful 2017 filling season.

These changes are as follows:

• Section 10(1)(o)(ii) container adjustments

• Medical container enhancement

• Retirement annuity fund contributions container enhancement

• Foreign rental income and foreign tax credit

• Donations i.r.o. s18A

• Unemployed changes


• ITR12 declaration of unemployed periods

• Farming Schedule enhancement

• Trust Income: Income distributed/vested as a beneficiary of a trust or deemed

to be taxable in terms of section 7

• Investment income, local rental income, capital gains, trading schedule

• Travel container on ITR12 enhancements

• Declarations under “Other”

• Amend/Reject return validation

Legal changes

Section 10(1)(k)(i) Exemptions of local dividends

Section 10(1)(k)(i) has been amended with effect from the 01 March 2017 and

apply in respect of amounts received or accrued on or after that date.

It was proposed that the exemption in section 10(1)(k)(i) be amended to specifically

exclude certain dividends in respect of a restricted equity instrument scheme.

Such dividends will be treated as ordinary revenue.

Thus, a new paragraph (jj) was introduced as a proviso to section 10(1)(k)(i).

Before we look at the amendments to this section we need to look at Section 8C.

Background Amounts in cash or in kind which are received or accrued in respect or by virtue of

services or employment are treated, as a point of departure, as ordinary revenue

this includes these share incentive schemes.

Share incentive schemes form an important component of employee remuneration

packages, which provide benefits to employer and employee alike.

It is in the nature of these share schemes to only provide benefits (real and

potential) to participants while they remain employees of the company for a

specified term. To this end, restrictions in one form or another are invariably

introduced into the rules of the schemes to limit any benefit, should employer and

participant part ways under less than optimal circumstances.

Background

Section 8C includes in a taxpayer’s income any gains (profits) or losses made on the

vesting of equity instruments, which were acquired by virtue of employment or the

holding of any office of director, on or after 26 October 2004.

Any gain made upon the vesting of any equity instrument as contemplated in Section

8C is deemed to be an amount of remuneration that is payable to the employee by the

person by whom the right was granted or from whom the equity instrument was

acquired, under paragraph 11A(1) of the Fourth Schedule to the Act.

Section 8C prescribes the requirements, circumstances, exclusions, valuation

methodology as well as procedural matters relating to the inclusion or deduction of

amounts that relate to the vesting of equity instruments in the hands of employees.

Background

It is the vesting of an equity instrument that results in a gain or loss to be included

in or deducted from the income of the taxpayer i.e. the event that triggers taxation

in the hands of the taxpayer is the vesting of an equity instrument (usually when

the restriction is lifted).

How is this gain or loss determined?

Subject to certain exceptions, the gain is the amount by which the market value on

the date of vesting exceeds any consideration paid in respect of the equity

instrument.

Conversely, the loss is the amount by which the consideration paid exceeds that

market value on the date of vesting.

Example

Sherwin is employed by JJ Johns LTD and acquired shares in JJ Johns LTD for

R100, when the shares had a value of R100. In terms of the agreement,

Sherwin is not allowed to sell the shares for two years. After a period of two

years the market value of the shares is R150.

Solution

Section 8C comes into operation because Sherwin acquired the shares by

virtue of his employment with JJ Johns LTD.

The shares in JJ Johns LTD are restricted equity instruments since there is a

restriction imposed on the disposal of the shares. The shares will only vest in

Sherwin after the two-year period, when the restriction expires.

The gain of R50 (R150 – R100) is included in Sherwin’s income in the year of

assessment in which the shares vest in him.


Section 10(1)(k)(i) now specifically excludes, from the current dividend exemption,

any dividend in respect of a restricted equity instrument as defined in section 8C

(previously discussed) that was acquired in the circumstances contemplated in

section 8C if that dividend is derived directly or indirectly from, or constitutes –

a) An amount transferred or applied by a company as consideration for the

acquisition or redemption of any share in that company (a share buy back

scenario);

b) An amount received or accrued in anticipation or in the course of the winding

up, liquidation, deregistration or final termination of a company; or


c) An equity instrument that is not a restricted equity instrument as defined in

section 8C, that will, on vesting be subject to that section.

In other words this is an unrestricted equity instrument that will be subject to

8C (at some point – going to be taxable). The divided that is received from this

instrument will not be exempt.

Paragraph a example (explanatory memo)

Mr Eager, an executive director of Last Hope Ltd, holds a restricted equity instrument

in the Last Hope Employee Share Trust that will remain restricted for a period of 5

years after that instrument was awarded to Mr Eager. It entitles him to dividends

derived from 10 000 of the equity shares in Real Hope (Pty) Ltd that are held by the

trust while the restrictions governing that equity instrument apply and the transfer of

those shares once those restrictions fall away. Real Hope (Pty) Ltd is a subsidiary of

Last Hope Ltd.

Real Hope buys back 90 per cent of the shares held in it by the trust at R200 per share

4 years after the award of that restricted equity instrument. The trust distributes an

amount of R1 800 000 to Mr Eager as a dividend in respect of his restricted equity

instrument.

Solution

The dividend of R1 800 000 will not be exempt as it is derived from the consideration

paid by Real Hope in respect of the share buy-back. This result will apply irrespective

of whether the consideration in respect of the share buy-back consists of cash or an

asset in kind.

Definition of ‘‘remuneration’’

These dividends that have been received from restricted equity instruments, as we

have seen, do not qualify for an income tax exemption and are taxable on

assessment of the directors and employees.

As a result the definition of remuneration has been amended to include such

dividends in the remuneration of the employee which implies that Employees Tax

becomes applicable to them.

Source Codes

New employment source codes have been created for these dividends.

Code English Description Afrikaans Description

3719 / 3769 Dividends received i.r.o. a restricted

equity instrument

Dividende ontvang tov beperkte

ekwiteitsinstrumente

3720 / 3770 Dividends received i.r.o. services

rendered

Dividende ontvang tov dienste

gelewer

3721 / 3771 Dividends received on vesting of

equity instruments

Dividende ontvang met vestiging van

ekwiteitsinstrumente

Source Codes

Currently provision is only made for code 4582 on the IRP5 which reflects the

“remuneration” portion (80% or 20%) of the amounts (100% of the allowance or fringe

benefit value) reflected under the following source codes:

• 3701 Travel allowance

• 3802 Use of motor vehicle acquired by employer NOT via Operating Lease

• 3816 Use of motor vehicle acquired by employer via Operating Lease

• 3702 Reimbursive travel allowance

The foreign source codes were included under the description of 4582 in par 7 Source Code

Descriptions of the PAYE: BRS V 15.1.0.

The foreign source codes are now to be excluded from the description of 4582 and a new

source code has been introduced for foreign sources.

Source Codes

A new source code 4583 is introduced, similar to code 4582, but which reflects the

“remuneration” portion of the amounts reflected under the following foreign

source codes:

• 3751 Travel allowance i.r.o. foreign service

• 3852 Use of motor vehicle acquired by employer NOT via Operating Lease

i.r.o. foreign service

• 3866 Use of motor vehicle acquired by employer via Operating Lease i.r.o.

foreign service

• 3752 Reimbursive travel allowance i.r.o. foreign service

4583 Value of ‘foreign remuneration’ for calculation

of 11(k) purposes

Waarde van ‘buitelandse besoldiging’

vir berekening van 11(k)

Dividends deemed to be income in terms of S8E and S8EA

The wizard question “Did you receive interest (local and foreign), distributions from

a Real Estate Investment Trust (REIT), and taxable foreign dividends” will be

changed to “Did you receive interest (local and foreign), distributions from a Real

Estate Investment Trust (REIT), taxable foreign dividends and/or dividends deemed

to be income n terms of section s8E & s8EA? (Excluding amounts received as a

beneficiary of a Trust/s)”

If the answer is “Yes” to the question a sub-container “Dividends deemed to be

income in terms of s8E and s8EA” will be displayed in the Investment Income

container.

Dividends deemed to be income in terms of S8E and S8EA

A new source code 4292 will be introduced for dividends deemed to be income in

terms of s8E and s8EA. On assessment, amounts declared under source code 4292

will not qualify for the interest exemption but qualify for 50/50 split for taxpayers

married in community of property.

Section 12H: Learnership agreements

The learnership tax incentive was introduced to encourage skills development and

job creation, by providing an additional tax deduction for formal, SETA-registered

training programmes.

The review of the programme indicated that the incentive delivers on its objectives

where it is accessible to employers and training programmes are relevant to needs

of employers.

In its current form, the incentive will only be available for learnership registered

before 1 October 2016. National Treasury proposed a continuation of the

programme until a sunset date of 31 March 2022.


Also, the current design targets all skills levels equally but the economic situation

and skills development priorities have shifted since, and government support

should target workers that are most vulnerable to unemployment due to a lack of

relevant qualifications.

Therefore, the values of the claims were adjusted in order to target the incentive to

crucial training, in line with DHET policies.

While all registered learnership's will still qualify for the incentive, SARS proposed

targeting prioritises learners without basic to intermediate qualifications by

providing a higher value of tax claims. The prior qualifications of the learner

entering into the learnership agreement will determine the value of the claim.


Also, the current design targets all skills levels equally but the economic situation

and skills development priorities have shifted since, and government support

should target workers that are most vulnerable to unemployment due to a lack of

relevant qualifications.

Therefore, the values of the claims were adjusted in order to target the incentive to

crucial training, in line with DHET policies.

While all registered learnership's will still qualify for the incentive, SARS proposed

targeting prioritises learners without basic to intermediate qualifications by

providing a higher value of tax claims. The prior qualifications of the learner

entering into the learnership agreement will determine the value of the claim.


Table 1: Proposed Learnership Tax Incentive claim values

In order to augment the future evidence base for policy evaluation, National

Treasury and the SARS are discussing the most appropriate mechanism to collect

more information on claims and learners. The intention is to make reporting

compulsory for claimants of the learnership tax incentive.

The amendments are deemed to have come into operation on 1 October 2016 and

apply in respect of learnership agreements entered into on or after that date.

Qualification Proposed Current

Persons without disability NQF 1- 6 NQF 7 – 10 =

R40 000 R20 000

R30 000

Persons with disability NQF 1- 6 NQF 7 – 10 =

R60 000 R50 000

R50 000


Due to the fact that the new legislation is only applicable to learnership agreements

entered into on or after 1 October 2016, the current line items will be retained for

learnership's entered into before 1 October 2016 and that the below new line items

only applicable to learnership agreements entered into on or after 1 October 2016.

Paragraph 2A of the Seventh Schedule

The insertion of the new paragraph 2A of the Seventh Schedule provides clarity

that for purposes of the application of fringe benefit tax, a partner is deemed to be

an employee of a partnership.

Form changes

The question in the Trading Schedule will be changed. “Did you make any pension

contributions as a deemed employee?” to “Did you or the partnership make any

pension / provident/ retirement annuity fund contributions for your benefit as a

deemed employee of the partnership?”


As seen above if the answer is yes to the question, the taxpayer must indicate as to

whether contributions were made to a pension, provident and/or retirement

annuity fund. At least one contribution must be selected but multiple selections

can be made.

If the above has been complete 3 new sub-containers (depending on the

selection(s) for Pension Fund, Provident Fund and/or Retirement Annuity Fund) will

be created for each fund.


All the fields are mandatory. The taxpayer

must complete the contributions claimed

for RAF against the 4006 code in the return.

Section 11D: Research & Development

Section 11D as a line item on the Individual return was deleted with the

implementation of Filing Season 2016.

Please note: Section 11D is amended to make provision for an exception with

regards to the prescription period of 3 years for an assessment where the pre-

approval of the R&D was delayed by the Dept. of Science & Technology. If pre-

approval of R&D is delayed prescription should not apply.

A manual ADR1 process will have to be followed to include the Section 11D

deduction for an assessment where the prescription period of 3 years has lapsed

due to the pre-approval delay of the R&D by the Dept. of Science & Technology.

Section 11(k) Retirement fund contribution deduction

From 1 March 2016, the tax treatment of contributions to retirement funds was

amended to be harmonized across all retirement funds. Previously, deductions to

retirement annuity funds were only allowed to be set off against “non-retirement

funding income” (which included passive income such as interest or royalties, but

excluded taxable capital gains), while deductions to pension funds could only be set

off against “retirement funding income” (which represented income from

employment and did not include passive income).

The harmonisation of the tax treatment of contributions in section 11(k) allowed

for a deduction against income from “carrying on a trade”, which unintendedly

excluded passive income.


This resulted in members of retirement annuity funds who were using the

deduction against passive income to no longer able to deduct their contributions

against the passive income.

To correct this anomaly and to allow retirement annuity members to continue to

receive a deduction and fully align the treatment between all retirement fund

members, the deductions for contributions to all retirement funds should be

allowed to be set off against passive income but please note, for the section 11(k)

deductions the passive income does not include taxable capital gains.


How is the deduction calculated?

When calculating the taxable income for the 27.5% of the greater of taxable income

or remuneration, or R350 000 purposes this taxable income must include the CGT.

But when determining how much to deduct, the deduction of section 11(k) must be

limited to the taxable income determined without adding the CGT.

Example

Mr Thrift receives remuneration of R75 000 for part-time work over the course of the

2016/17 year of assessment. He also receives R10 000 in interest from a money market

account and sells unit trusts to receive a capital gain of R750 000. The value of the taxable

capital gain is R300 000. Before the end of the year he contributes R100 000 to his

retirement annuity fund.

The maximum allowable deduction for the contribution to the retirement annuity fund is

limited to either 27.5 per cent of the greater of taxable income or remuneration, or

R350 000. Mr Thrift’s taxable income of R385 000 in this case is higher than his

remuneration and his maximum allowable deduction is thus R105 875.

Solution

The R100 000 retirement annuity fund contribution is below the maximum allowable

deduction and may be deducted against income from “carrying on a trade” and passive

income (but excluding taxable capital gains). Mr Thrift can deduct R85 000 (remuneration

and interest income). The R15 000 in contributions that was not deductible can be carried

over to be deducted in a subsequent year of assessment.

Definition of Provisional taxpayer

Currently certain employers in SA are under no obligation to register as employers.

They are exempt from registration as employers. These are employers who are not

registered in terms of paragraph 15. If foreign employers in South Africa do not deduct

PAYE, local employees should pay provisional tax in terms of the Fourth Schedule.

In terms of paragraph (c) of the definition of a provisional taxpayer however, a person

can become a provisional taxpayer upon notification by the Commissioner. A method

for doing so would be for SARS to send letters to the various employers informing

them that all local recruits employed by them are regarded as provisional taxpayers.

However, notification of the local recruits employed by foreign employers is

cumbersome and administratively onerous for SARS.

Definition of Provisional taxpayer

In many cases SARS may not even have some of the personal information of the

local recruits on record. This will require SARS to obtain all the necessary

information from the employers and thereafter inform the employees that they are

provisional taxpayers.

The amendment was aimed at avoiding this administratively onerous task by

providing that any person who derives, by way of income, remuneration from an

employer that is not registered in terms of the Fourth Schedule, be included in the

definition of provisional taxpayer. This change now regards employees employed by

these employers as provisional taxpayers.

Paragraph 19 of the Fourth Schedule: Deemed nil estimate

Currently, if an estimate for the second provisional tax period is not submitted

before the due date of the subsequent provisional tax payment, the provisional

taxpayer is deemed to have submitted an estimate of nil taxable income, thereby

triggering a penalty under paragraph 20 i.e. the Act allows a Provisional taxpayer

seven months within which to submit an estimation of taxable income (IRP6) for

the second period provisional tax period before the system deems this submission

to be nil.

This provision has now been amended to reduce the current seven months to four

months within which to submit an estimation of taxable income (IRP6).

Paragraph 19 of the Fourth Schedule: Deemed nil estimate

The proposed change implies that if the estimation of a provisional taxpayer (IRP6)

is not submitted within four months after the last day of the tax year (window

period) the estimation is deemed to be “nil” for purposes of par 20 penalties

(penalty for underpayment of provisional tax as a result of underestimation).

Please note: Where the Taxpayer’s 2nd period provisional tax return (final IRP6) has

been processed, but the process date is more than 4 months after the financial

year end of the taxpayer the system will override this return will be deemed to be a

nil estimate (estimated income for the taxpayer will be deemed as zero).

Section 9H: Ceased to be a RSA resident

Section 9H, if a taxpayer ceases to be a resident of the RSA during any year of

assessment that taxpayer must be deemed to have;

i. Disposed of certain of their assets for a fair market value on the day before

that taxpayer so ceased to be a resident, and

ii. Reacquired the assets on the next day for the same market value on which

that taxpayer so ceased to be a resident.

iii. When a taxpayer ceases to be a resident the YOA of that taxpayer is deemed

to end on the day before becoming a non-resident.

Section 9H: Ceased to be a RSA resident

The form will be changed as follows:

A question has to be added on the Wizard to determine whether a taxpayer has

ceased to be a resident in the current year of assessment. “Mark with an "X" if you

ceased to be a resident of the RSA during this year of assessment.”

If marked, the form will create a date field on the non-resident container –

Please state the date on which you ceased to be a resident: (CCYYMMDD).

Please note, the form will only allow for a date that falls in the year of assessment

for which the Return is completed.

If marked with an “X”, the form will create a CGT container. The taxpayer may

capture a CGT amount but it is not mandatory.

Section 6quin: Foreign Tax Credits Refunded / Discharged

Due to Section 6quin being repealed from 2017 YOA and included in Section 6quat

(1C), the return needs to split between the recoupment of foreign source income

and South African source income.

Currently we only cater for recoupment of foreign tax credits recouped in terms of

section 6quat(1C) under source code 4249 for 2016 year of assessment. However a

source code for foreign tax credit on income from South African source was not

catered for in the 2016 tax return.

The 4249 field description will be updated to “Specify the portion of the amount so

refunded / discharged as was previously allowed by SARS as a deduction from an

South African source of income in terms of s6quat(1C)” (Source Code: 4249).

Section 6quin: Foreign Tax Credits Refunded / Discharged

A new field with a new source code for the taxpayer to “Specify the portion of the

amount so refunded / discharged as was previously allowed by SARS as a deduction

from foreign income in terms of s6quat(1C)” (Source Code 4291) will be added.

The wizard question will be updated to allow for s6quat deductions. Applicable

from 2017 to “Were any foreign tax credits refunded/discharged during the year of

assessment for which a rebate/deduction was allowed during a previous year of

assessment?”

FILING SEASON 2016 - NON LEGAL CHANGES

Section 10(1)(o)

Exemption from income tax: Remuneration for foreign services.

The 4041 field description will be updated from “Amounts taxed on IRP5 but

comply with exemption in terms of s10(1)(o)(ii)” (Source Code: 4041) to

“Remuneration taxed on IRP5 but comply with exemption in terms of s10(1)(o)(ii)

(excluding s8A/8C gains and dividends)” (Source Code: 4041)

Section 10(1)(o)

As well as adding the following fields with new source codes for 2017 YOA onwards:

• Remuneration taxed on IRP5 but comply with exemption in terms of s10(1)(o)(i)

(Source Code: 4033) – this is the exemption that specifically applies to officers

or crew members of a ship.

• Remuneration (s8A/8C gains) taxed on IRP5 but comply with exemption in terms

of s10(1)(o)(ii). (This amount is restricted to s8A/8C gains, but excluding

dividends) (Source Code: 4032).

Section 10(1)(o)

The following is required when a taxpayer inputs a deduction amount greater than

“0” to any of the 3 fields above:

1. Remuneration taxed on IRP5 but comply with exemption in terms of

s10(1)(o)(i) next to source code: 4033

A new and mandatory “Qualifying criteria for Section 10(1)(o)(i)” container will be

created for the taxpayer to provide additional information relating to services

rendered as an officer or crew member on a ship outside SA.

Section 10(1)(o)

2. Remuneration taxed on IRP5 but

comply with exemption in terms of

s10(1)(o)(ii) (excluding s8A/8C gains

and dividends) (Source Code 4041)

A new and mandatory “Qualifying criteria

for section 10(1)(o)(ii) exemption

(excluding s8A/8C gains and dividends)”

container will be created for the taxpayer

to provide additional information

Section 10(1)(o)

3. “Remuneration (s8A/8C gains excluding dividends) taxed on IRP5 but comply

with exemption in terms of s10(1)(o)(ii)”. (This amount is restricted to s8A/8C

gains, but excluding dividends) (Source Code: 4032).

A new and mandatory “Qualifying criteria for Section 10(1)(o)(ii) exemption

relating to s8A/8C gains (excluding dividends)” container will be created for the

taxpayer to provide additional information.

Please note: The taxpayer can have more than 1 s8A/8C gains excluding dividends

applicable during this year of assessment with different source periods.

Section 10(1)(o)

Due to the above form changes,

the residency container has

become obsolete and therefore

deleted.

The answers to these containers

will determine whether the

taxpayer qualifies for the

exemption in terms of s10(1)(o).

Medical container enhancement

The new fields and questions added will assist SARS in conducting better risk

assessment and identifying cases that must be routed for audit for further

investigation.

• The wizard questions will be updated as follows:


• Depending on the which question is

answered a new sub-container will be

created.

• The question “In how many medical

schemes were you the principal/main

member during this year of

assessment?” is a mandatory question.

The “Details of Medical Scheme” sub-

container will be created and repeated

based on the number of times indicated.


The Medical Scheme Name fields are a free text field and is mandatory. The

medical scheme number field will be pre-populated and locked if SARS has this

information from third party data. The “State the total number of dependants

(including yourself) per month” field will also be pre-populated if SARS has the

information. If the system pre-pops the total number of dependants per month

based on 3rd party data, the taxpayer cannot increase the number of dependants

but can adjust downwards. The taxpayer must complete the “State the medical

contributions made by yourself and/or your employer to this scheme” field. The

source code 4040 has been changed to 4005.


A tooltip will be inserted for this field: In the case of a pensioner, please ensure that

any medical subsidies from former employers (source code 4493 on IRP5/IT3(a)) are

not included in this amount.

The field description “State any medical expenses not recovered from your medical

Scheme via the medical scheme(s) and reflected on the medical certificate(s).

(Other than physical impairment or disability expenses)” will be changed to “State

any medical expenses paid by you that was claimed from your medical scheme and

reflected on the medical certificate (other than physical impairment or disability

expenses).” (Source Code 4020).


This container will have the same

validations as the previous one but

not pre-populated.


A new field will be added for the

claiming of medical expenses paid

but not claimed from any medical

scheme and not reflected on the

medical certificate (Source Code

4034).


Disability container

The taxpayer must answer both questions. Based on the number completed the

sub-container “Details of disability” will be created based on the number of times

indicated in the two blocks above.

All the fields of the sub-container are mandatory.


The following form validation rules will apply:

• For moderate disability: The date completed must fall within the current year of

assessment or in one of the previous 2 years of assessment. E.g. 2017 YOA

return, the date must not be earlier than 1 March 2014.

• For severe disability: The date completed must fall within the current year of

assessment or in one of the previous 4 years of assessment. E.g. 2017 YOA

return, the date must not be earlier than 1 March 2012.

RAF contributions container enhancement

The retirement annuity funds contributions container on the ITR12 return needs to

be relooked to help minimise confusion for the taxpayer and potential fraud to

SARS. The new fields and questions added will assist SARS in conducting better risk

assessment and identifying cases that must be routed for audit for further

investigation e.g. add policy number, name of the Insurer etc. (SARS will also

investigate possibility of pre-population from third party data received).

The wizard question will be updated:

RAF contributions container enhancement

Retirement Annuity Contributions Container: The mandatory sub-container

“Details of Policy(ies)” will be

created and repeated based on the

number of times indicated as a

response to the previous question

All the contribution must add up to

the amount entered under code

4006 including the RAF

contribution declared in the

partnership container.

Foreign rental income

The foreign income container needs to be enhanced to allow for a field on foreign

tax credits on foreign rental income to be declared separately for purpose of the

50/50 split for married in community of property.

Donations to Public benefit organisation

As part of Filing Season 2016 release, PBO validation rules were introduced to

improve risk management on donations made towards an approved Organization.

For this filing season the number of fields are being increased from 5 to 10 for the

taxpayer to declare the organisation(s) to which donations were made. The

corresponding validations will be updated to cater for the change to 10

organisations.

Unemployed changes

The following question is updated on the wizard:

Periods of unemployment

The wording in the container “unbroken period of employment” has been

enhanced to be more explanatory. Taxpayers do not understand this and they

continuously complete this information incorrectly.

Farming Schedule (IT48) and (IT48V)

The farming schedule and farming partnership schedules enables farmers to

declare income from farming operations in accordance with the First Schedule to

the Income Tax Act.

The field “Indicate with an ‘X’ if any of the following paragraphs of the first schedule

of the income tax act applies (Multiple selection applies): Par 13, Par 13A, Par 15,

Par 17, Par 20” has been amended.

If the taxpayer selects Par 20, ITS will route the return for manual assessment.

Trust Income: Section 7

In the case where a taxpayer had a vested interest in an asset held by a trust or

capital gain made by a trust vested in the taxpayer, the return currently does not

allow for the declaration of these amounts as CGT declarations are linked to the

CGT container with certain mandatory fields that are not applicable.

The new return now provides for income received or accrued from a trust to be

declared separately from the other income amounts declared in the return.

The wizard will be updated with the following question:


Other wizard questions will be updated to exclude the trust distributions:


Trust Income Container




Investment income, local rental income, capital gains, trading schedule

The following question has become obsolete due to the automation of manual

assessments in this regard and will be deleted from the return.: “Mark here with an

“X” if any of the amounts declared by you should be excluded from the communal

estate (If married in community of property)”.

Travel expenses container

Wear & Tear

The Income Tax Act allows for vehicle to be written off over period of 7 years when

a taxpayer is claiming a travel deduction against a travel allowance.

The requirement to add/amend fields will allow taxpayers to capture date of

original acquisition, enhanced validation and ensure that proper assessment rules

are applied for travel expenses declared and to allow for SARS to auto-calculate the

allowable wear & tear.

SARS will also be able to apply the limitation of the cost price as per the regulation

for wear & tear programmatically in order to prevent excessive claims.


Lease Payment

Lease payments will now also be limited to the fixed cost by SARS programmatically

for the category of vehicle as regulated in order to prevent excessive claims.

The wizard question will be updated as follows:


The taxpayer must indicate whether the vehicle was acquired by way of a

purchase agreement or a lease agreement (mandatory).

If purchase agreement selected then the taxpayer cannot claim lease payments in

the “Where records of actual expenditure were kept” sub-container.

If “purchase agreement” is selected then the date of purchase field becomes

mandatory.

If lease agreement was selected, the taxpayer cannot claim finance charges and

wear and tear in the “Where records of actual expenditure were kept” sub-

container.


SARS will limit the maximum vehicle cost

to the allowable amount as per

government gazette and the current

amount is R595000.

If wear and tear is claimed, it can only be

claimed for 7 years from date of

purchase.

The total lease payment will be limited to

the fixed cost linked to the Cost Price or

Cash Value of the vehicle as regulated.

Declarations under “Other”

A pop up info message will be displayed when the “Other” field is clicked as follows:

“Info message:

Please ensure that the item you are capturing in this field has not been included

anywhere else in this section of the return. By capturing an amount in this field you

acknowledge that there is no relevant field that caters for this amount in this

section of the return. If an amount is captured in this field, please ensure that you

supply a detailed description of the expense”

Amend/Reject return validation

When a return is received by SARS, and not all the required Recognition of Transfers

(ROT) have been received in respect of the corresponding tax directives for the

taxpayer for the tax year, the system will route the return for manual intervention.

A message will be returned from SARS back to the requestor – 9863 “Outstanding

recognition of transfer”

A new manual referral reason will be registered on the SARS system– 9863

“Outstanding recognition of transfer”.

PAYE: New source code

The new income source codes will be accepted as part of information on the IRP5

certificates in the return.

Code Description

3923 Transfer of Unclaimed

benefits (PAYE)

3620

(3670)

Resident non-executive

directors (NED) Fees

3621 Non-Resident NED Fees

Section 12t - tax free investments transfers National Treasury in respect of transfers between service providers has amended the

tax free savings accounts regulations for the year beginning 1 March 2017 but transfers

will only be effective from 1 March 2018 (this is done so that the banks and similar

institutions have time to adjust to the new rules).

The validation for the following two fields which are currently on the ITR12 that is in

production will be amended to ensure that these two fields should only be displayed if

the return is completed for the 2019 year of assessment:

• 4246: Tax free investments – transfer in

• 4247: Tax free investments – transfer out

This means that for the 2019 year of assessment and onwards these fields are available

for completion and the codes will be uploaded to ITS.

Audit Letters in Respect of Estate Reform

The letter will be addressed to the executor and the post date of death taxpayer

registration reference number will be used in the letter content if the audit is

triggered due to financial movement postdate of taxpayer’s death. If the audit is

triggered by financial movement pre-death of the taxpayer then the letter will have

the first tax reference number of the taxpayer and it will be addressed to the

taxpayer.

The taxpayer’s reference number before date of death is linked to the post date of

death taxpayer registration number once the estate is registered with SARS. This

will ensure that the Pre/Post death tax reference numbers are linked to a legal

entity irrespective of the date when the return was submitted.

Audit Letters in Respect of Estate Reform

The list of the supporting documents required for post death include the following:

• Detailed financial statements and all supporting calculations for trade

profits/loss (including farming)

• Income statement(s) for other income

• Statement of assets and liabilities

• Rental contract(s)

• Bond statement(s) in respect of property rented out

• Detailed calculation of all other expenses claimed

• Sale agreement/invoice to confirm the proceeds for all assets disposed

• Detailed breakdown of the base cost for all the assets disposed.

Any Questions?

THE END

Thank you

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

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