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April 2016

INTRODUCTION

The High Court ruling that some 700 criminal charges against Jacob Zuma are to be reinstated had little impact on the SA/$ exchange rate. However, the victory of Donald Trump in the Republican Party Presidential nomination race appears to have had the effect of weakening our currency. One hopes that further developments in the United States will not add to our economic woes as described below.

DEADLINES

Annual Duty – one calendar month to the day after the incorporation date

Promotion of Access to Information Act manual – 31 December 2021 extended yet again!

Submission of EMP501 Reconciliation of PAYE payments and issue of tax Certificates (IRP & IT3(a)) for 2016 due by 31 May 2016

Special Voluntary Disclosure Programme – 1 October 2016 to 31 March 2017

Tax returns

Tax clients should note that unless we receive all the relevant data and documentation at least fourteen days before the applicable submission deadline we cannot be held responsible for any punitive action taken against them by SARS.

Excel Tips

If you have several workbooks open, there is a keyboard shortcut to select the one that you wish to activate it. By pressing Alt W W, the Switch Window list is displayed on the View tab. You may then, by using the arrow keys, move to the workbook required and press enter. Alternatively, simply press the number in the list that refers to the listed item that you require.

TAXATION

Annual income tax returns

More and more emphasis is being placed by SARS upon the timely lodgement of returns. Filing season for annual tax returns usually starts during July and from that point onwards tax practitioners are under extreme pressure to meet the deadlines set by SARS. The late submission, to us, of a client’s data may aggravate that pressure and impact upon the achievement of those targets.

It is for this reason that we advocate the early preparation of a file containing the documentation that we will require to prepare your return. Financial institutions and medical aid societies are set the same deadline dates for preparation of tax certificates as are set for employers for the preparation of IT3(a) and IRP5 certificates. Therefore, all certificates required from these entities for the preparation of your tax return should be received by you no later than 31 May 2016.

If these have not been received by the middle of June, we suggest that you follow up the matter with the relevant body.

Clients with revenue from sources other than employment, pensions, retirement annuities and investments should have already started accumulating data supporting the preparation of an income statement relative to that activity. Apart from trading activities, the most common source is from rentals.

In that regard, the documents should include:

·         Estate agents collection statements, if applicable

·         Levy and rates statements

·         Bond statements

·         Invoices in respect of any repairs or maintenance carried out during the tax year

·         Invoices covering advertising costs. Where a property has not been let throughout the year, it is necessary to be able to prove that every effort has been made to remedy this in order to avoid the disallowance of a portion of the expenses

·         Documents supporting a claim for any other expense relating to the rented property.

Employee Tax Certificates

SARS has stated that employees will no longer be allowed to make alterations to pre-populated tax certificates on their personal income tax returns. Where these details are found to be incorrect, the employee will have to get their employer to correct and resubmit the certificate. This may well delay the submission of the employee's tax return and a subsequent levying of penalties. Therefore, it is vital that employers ensure that all details are correct before uploading to efiling.

Special Voluntary Disclosure Programme

In his budget speech, the Finance Minister announced an opportunity for taxpayers to voluntarily disclose their offshore assets and income. Given that there is a global standard for the automatic exchange of information between tax authorities, it is advisable to take advantage of this programme to regularise both tax and exchange control affairs.

Applications may be submitted from 1 October 2016 to 31 March 2017.

Although details of the methodology of the application are still to be announced, It is worthwhile repeating the details that were released in the media statement of 24 February 2016 and summarised in our February 2016 issue, as follows:

·         Applicable to companies and individuals but not to trusts

·         Donors, deceased estates and beneficiaries of foreign discretionary trusts may participate if they elect to have the trust’s offshore assets and income deemed as their own

·         Awareness of a pending audit or investigations in respect of foreign assets and income prohibits participation

·         Amounts obtained by SARS through an international exchange of information procedure will be excluded

·         Only 50% of the amount used to fund the offshore acquisition will be included in taxable income

·         Investment returns prior to 1 March 2010 will be exempt but those thereafter will be included in taxable income

·         Any tax debt arising from such disclosure will be subject to interest with effect from 1 March 2010

·         Successful applications will not give rise to any understatement penalties and SAR will not pursue criminal prosecutions

·         Exchange Control contraventions prior to 29 February 2016 will be covered by the amnesty

·         Any persons who are subject to a current investigation by the reserve bank will be excluded

·         A levy of 5% of the current market value at 29 February 2016 of repatriated assets and 10% of current market value at 29 February 2016 of assets that are kept offshore may be imposed

·         The levy must be paid from foreign sourced funds and an additional 2% will be imposed where those funds are insufficient to meet the 5 or 10% levy

·         Foreign capital allowances may not be utilized to reduce the leviable amounts nor may the levy be reduced by any fees or commissions.

BUSINESS

Applying for finance

It does not matter how well an application is documented and motivated, an adverse credit rating can result in a rejection. Finance houses are increasingly using the services of credit bureaus when reviewing a credit application. Therefore, it is advisable to obtain an annual credit report from one of the credit bureaus before submitting the finance application. One such report per annum may be obtained free of charge. In one instance, an application was rejected because of an adverse report in respect of an amount owing to a cell phone company. The company had reversed the charge on cancellation of the contract but, despite this, the accounts department had automatically handed the matter to the bureau. The banks concerned were not prepared to reverse the rejection despite an explanatory letter from the cell phone company. In this instance, the applicant had to take the matter up with the banks’ senior management and the delays caused by this process almost lost him the deal for which the finance was required.

ECONOMY

According to a number of commentators, South Africa’s economic recovery remains fragile. Contributing factors are electricity and water supply constraints and weak commodity prices.

The electricity problem could worsen during the coming months as winter takes hold. This factor has already caused a not insignificant loss of production in our manufacturing sector and this is likely to worsen as over demand places strain on the national grid.

The impact of the drought on the country’s water supply has already resulted in large losses in the agricultural sector resulting in decreases in the quality of fruit and in the export of agricultural products. This also effects local consumer inflation.

Weak commodity prices coupled with reduced demand from foreign countries that are experiencing similar growth restrictions has forced commodity prices downwards.

These factors and others have resulted in the lowering of the SA economic growth rate and a gradual increase in the inflation rate both of which have also been impacted by the current political instability.

In addition, fuel price pressure adds to inflation and household borrowing increases as the spending power of take-home pay decreases. These factors alone could escalate wage increase demands and production costs fuelling a further rise in inflation. Analysts predict that the SA Reserve Bank will be motivated to increase the repo rate by as much as 100 points over the remainder of this year.

These factors all enforce the call, in our previous issue, for a period of belt tightening.

TAILPIECE 

You can’t do anything about the length of your life, but you can do something about its width and depth”. – H.L.Mencken