Industry updates | March 2022

Written By Domonique Ramos

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- March 2022:

TAX ADMINISTRATION

1. What is a provisional taxpayer?

The implementation of the new administrative penalties for the late submission of a personal income tax return and the application of differentiated deadlines for the submission of personal income tax returns, elevated the importance of identifying a provisional taxpayer as opposed to an ordinary taxpayer.

SARS requires a taxpayer or tax practitioner to determine the provisional tax status on an annual basis, prior to the submission of the income tax return.

Requirements In terms of the Fourth Schedule to the Income Tax Act, No. 58 of 1962 (the Act), a natural person is deemed to be a provisional taxpayer when:

  • deriving any amount, which does not constitute remuneration or an allowance or advance as contemplated in section 8(1) of the Act;

  • deriving income from the carrying on of any business;

  • deriving taxable income from interest, dividends, foreign dividends, rental from letting fixed property and remuneration from an employer that is not registered for employees’ tax exceeding R30 000; or

  • notified by the SARS Commissioner that they are a provisional taxpayer.

A natural person is not a provisional taxpayer if their taxable income does not exceed the tax threshold. The only exception applies to a natural person deriving income from the carrying on of a business where the person will still be a provisional taxpayer irrespective of the taxable income being below the tax threshold.

Directors of private companies and members of close corporations are regarded as employees, and not automatically deemed to be provisional taxpayers.

Important consideration

The following actions/activities do not necessarily mean that a taxpayer qualifies as a provisional taxpayer (i.e. it does not ‘make’ the taxpayer a provisional taxpayer):

  • The activation of provisional tax on a taxpayer’s eFiling profile;

  • The submission of provisional tax returns; and/or

  • The making of provisional tax payments.

SARS determines the provisional tax status of an individual taxpayer annually on the processing of the ITR12 personal income tax return and ignores the previous year’s status.

2. Increase interest rate

On 27 January 2022, the South African Reserve Bank (SARB) announced that the repo rate would be increased by 25 basis points to 4%.

This increase would also see the prime rate increase to 7.5%. Interest rates in terms of the legislation administered by SARS are split into the following three main categories:

  • Interest charged on outstanding taxes, duties and levies, and those payable in respect of refunds of tax on successful appeals and certain delayed refunds;

  • Interest payable on credit amounts (overpayment of provisional tax) in terms of section 89quat(4) of the Income Tax Act, No. 58 of 1962 (the Act); and

  • Interest applicable to a loan denominated in the currency of the Republic, as described in paragraph (a) of the definition of ‘official rate of interest’ in section 1(1).

3. Budget Speech – tax highlights

Personal Income Tax

The personal income tax brackets and rebates will be adjusted by 4.5 percent, in line with inflation.

 The adjustments will mean that the annual tax-free threshold for a person under the age of 65, will increase from R87 300 to R91 250.

Medical tax credits will increase from R332 to R347 per month for the first two members, and from R224 to R234 per month for additional members. 

Employment tax incentive (ETI)

The employment tax incentive will be expanded through a 50 per cent increase in the maximum monthly value to R1 500. 

We encourage small and medium firms to take up this incentive.  We anticipate that the expansion will provide additional support worth R2.2 billion. 

Corporate Income Tax

Restructuring the corporate income tax system is an important part of the efforts to create a conducive environment for businesses to grow, increase investment and employ more people.

As announced in the 2021 Budget, the corporate income tax rate will be reduced from 28 per cent to 27 per cent, for companies with years of assessment ending on or after 31 March 2023.

This will be complemented by base-broadening measures to ensure that there is no negative impact on revenue.

RAF

For the first time since 1990, there will be no hike in the fuel or Road Accident Fund levy.

Excise duties  

Excise duties on alcohol and tobacco will increase by between 4.5 and 6.5 percent.

The increases mean that:

•        A 340ml can of beer or cider will cost 11c more;

•        A 750ml bottle of wine will be 17c more expensive;

•        A bottle of sparkling wine will cost an additional 76c;

•        And a bottle of spirits will be R4.83 more expensive;

•        A packet of cigarettes will cost an additional R1.03;

•        25 grams of piped tobacco will cost an extra 37c; and

•        A 23-gram cigar will be R6.77 more expensive.

Government also proposes to introduce a new tax on vaping products of at least R2.90 per millilitre from 1 January 2023.

Domonique Ramos | 28 February 2021

Domonique Ramos
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