Industry updates | December 2022
Please take note of the following industry updates that may be relevant to you and your business.
COMPLIANCE AND ADMINISTRATION
Due dates for reporting and payments- December 2022:
TAX ADMINISTRATION
1. State of play on administrative penalties
With SARS’ modernisation plans and the increased collection of third-party data, a taxpayer’s ability to comply with their regulatory requirements of submitting returns has become more accessible. For this reason, SARS has become stricter with their submission deadlines and have commenced with the imposition of administrative penalties where taxpayers fail to comply. Some of the penalties that SARS imposes are:
• Late submission of an income tax return
An administrative penalty for the late submission of an income tax return is levied under section 210 of the Tax Administration Act, No. 28 of 2011 (TAA).
Currently, the penalty imposed for the late submission of an income tax return in respect of an individual or company is as follows:
- Personal income tax (PIT): With effect from 1 December 2022, a penalty will be imposed when the taxpayer has failed to submit one or more income tax returns in respect of the 2007 and subsequent years of assessment.
- Corporate income tax (CIT): The penalty is imposed where the company has failed to submit an income tax return for years of assessment ending during 2009 and subsequent years, specifically where SARS has issued the company with a final demand referring to the public notice requiring the submission of the outstanding income tax return, and the company failed to submit the return within 21 business days of the date of issue of the final demand.
The abovementioned administrative penalties are based on a taxpayer’s taxable income and can range from R250 up to R16 000 per month where a taxpayer fails to remedy the non-compliance.
• Late submission of an EMP501 reconciliation:
If an employer submits an EMP501 reconciliation late, administrative penalties will be charged. The penalty is equal to 1% of the PAYE liability and increases by 1% each month up to 10% of the PAYE liability.
• Penalty for late payments:
A percentage-based late payment penalty of 10% is levied in respect of the late payment of VAT, PAYE, UIF, SDL and provisional tax.
2. SARS has published a Binding General Ruling on the Securities transfer tax implications on the re-use of collateral
On 17 November 2022, SARS published the Binding General Ruling 61 (BGR61). BGR 61 clarifies the Securities Tax Transfer (STT) consequences when a taxpayer re-uses collateral received for another purpose.
The STT consequences canvassed in BGR 61 relate to transactions both when the requirements of a ‘collateral arrangement’ have been complied with and when not, specifically in relation to every transaction within a chain where the same collateral is re-used.
Succinctly put, the Ruling contained in BGR 61 requires that in determining whether a transfer of listed shares by a transferor to a transferee as collateral falls within the exemption from STT under section 8(u), each arrangement must be separately measured against the requirements of a ‘collateral arrangement’ as defined.
Taxpayers are cautioned and reminded that to the extent that a transaction does not comply with all the relevant requirements, only that transaction will not be a collateral arrangement for the parties concerning the arrangement and will be subject to STT. The Ruling clarifies that any prior qualifying collateral arrangements entered into using inter alia the same listed shares will not be impacted by the non-complying transaction.
Taxpayers are encouraged to access BGR 61 to obtain greater detail regarding the rationale and discussion penned by SARS.
It is noteworthy to mention that BGR 61 will apply with effect from 17 November 2022 and is valid until it is withdrawn, amended, or the relevant legislation is amended.
3. SARS releases the final interpretation note on the funding requirements of ‘section 30B’ associations
If a membership-based organisation complies with the requirements in section 30B of the Income Tax Act, No. 58 of 1962 (the Act), SARS may approve that organisation as a tax-exempt organisation.
The requirements are predominantly focused on establishing that the organisation in question does not have a profit motive and that it does not provide any monetary gain or material advantage for any individual member.
There is great variety, not only in the scope of activities that a membership body may perform for the benefit of its members but also in the ways that the organisation may elect to fund itself.
SARS initiated a consultation process on 16 September 2021 by issuing a draft Interpretation Note, whereupon the public was requested to comment. The focus of the consultative process was to establish the interpretation and application of the ‘funding’ requirement contemplated in section 30B(2)(b)(ix) of the Act. SAIT made a written submission on 5 November 2021.
On 14 November 2022, SARS issued the (now final) Interpretation Note 125 (IN 125). IN 125 provides guidance on the interpretation and application of the ‘funding’ requirement as outlined above. Essentially, section 30B(2)(b)(ix) requires that substantially the whole of an entity’s funding must be derived from its annual or other long-term members or from an appropriation by the government.
IN 125 provides guidance and clarification on, inter alia:
• The meaning of ‘substantially the whole’ of an entity’s funding;
• The tax treatment of funding derived from sources other than from members or an appropriation by government; and
• The prescribed sources of funding.
- Domonique Ramos | 07 December 2022