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October 2016

 

INTRODUCTION

Articles, touching on the persecution of the finance minister, seem to be published on a daily basis. Many might think that the matter is being milked to death by the media. And to some extent, that appears to be the case. However, the fact of it is that the outcome of the saga will have long term repercussions for the man in the street.

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!

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

2016 Tax returns

Submissions by non-provisional taxpayers at a SARS office – 25 November 2016

Efiling by non-provisional taxpayers – 25 November 2016

Provisional taxpayers by Efiling – 31 January 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 a large range to select, you could click and drag with the mouse. But dragging is slow. A quicker way is to click the first cell in the range then use the mouse wheel to get to the last cell in the range then hold down the shift key and click that cell.

TAXATION

Common Reporting Standards(CRS)

The CRS is a set of global standards that regulate how tax authorities in participating countries share information relating to the financial affairs of their taxpayers. The introduction of these standards signal the end of privacy in relation to a person’s financial assets.

These standards will have a profound effect on high worth individuals. It is likely that these persons will have to comply with more onerous reporting requirements in the not to distant future .Over 100 countries have already agreed to comply with this standard.

By the middle of next year, financial institutions will be sending information to the South African Revenue Services who, no doubt, will use the data to improve its collections. Any individual, who had an offshore investment of in excess of one million US Dollars on 1 January 2016, will come to SARS’ attention by the middle of next year. Any new accounts opened during 2016, regardless of the amount, will also be reported to SARS. All other accounts will be reported to SARS by the middle of 2018.

Any person who has withheld information from SARS regarding their offshore accounts, no matter how small, are urged to take advantage of the Special Voluntary Disclosure Programme which will be available up to 31 March 2017.

Notional input tax

Section 1(1)(b) of the Value Added Tax  defines notional input tax as “an amount equal to the tax fraction… of the lesser of any consideration in money given by a vendor for or the open market value of the supply (not being a taxable supply) to him by way of a sale …of any second-hand goods situated in the Republic …where the goods or services are acquired wholly for the purposes of consumption, use or supply in the course of making taxable supplies”.

Thus, where a vendor acquires a business from a non-vendor, the purchase price of a business exclusive of any amount charged for goodwill will fall within the ambit of this section,

The following document must be retained in support of a claim for notional input tax:

·         VAT 264 form

·         Proof of payment

·         Where the seller is a natural person, the seller’s identity document

·         Where the seller is a not natural person, a copy of the formal registration document

BUSINESS

Scam Alert

As the festive season rapidly approaches so do the efforts of the unscrupulous to deprive you of your hard-earned cash. Therefore, it may be opportune to remind you of two of the scams in the hope that you may avoid being a victim.

·  We paid a cheque into your account by mistake. You repay the money but the cheque bounces.

·   Change of bank details. The fraudster acquires your client list and sends them an official looking letter stating that you have changed your bank details and providing the clients with the “new” ones.

Guard your data as best you can.

Data security is of paramount importance.

Protection of Personal Information Act (POPI)

Considering the previous article, it may be opportune to consider this act which aims to legislate minimum requirements for the protection of personal information by regulating how information is processed, stored, secured and, finally, destroyed.

Although not operational as yet, the appointment of members of the Information Regulator were approved by parliament on 7 September 2016. Therefore, it can be expected that the act will become effective during 2017.

It is advisable to become fully acquainted with the provisions of the Act and to determine at what levels you are currently compliant. Thereafter, a programme should be put in place to implement full compliance.

Some steps to consider are:

·    Examining employee and third party service provider agreements to determine whether the information contained incorporates matters that could render you in breach of the Act

·    Obtaining cyber liability insurance to manage the risks associated with a security beach and, specifically, infringement of the Act.

·    Training staff to recognise possible attempts to breach your business security. It should be emphasised that user names and passwords should not be divulged to anyone without prior authority from an immediate superior and even then every effort should be made to verify the authenticity of the request and the true identity of the person authoring the release of the information.

·    Devising an easily understood security policy which should include prohibiting the release of customer and employing information to third parties without authorisation by a senior member of management.

·    A procedure for reporting incidents. This should include notifying all parties whose data may have been breached in order to afford them an opportunity to tighten their security by changing access information such as passwords.

·     Engaging an outside firm of risk assessors

ECONOMY

The Pravin Gordhan saga, to Mr Average SA, may appear to be so much political hot air. However, one needs to ask oneself some serious questions relating to the consequences of the possible outcome.

Will a conviction for fraud be handed down and if so will that event lead to further downgrades of the country’s credit rating. It seems that further questions need to be answered before the downgrade issue is addressed. Undoubtedly, if the case is thrown out of court, the Minister’s credibility will not be impaired and this will to some degree have some bearing on the grading decision. But will a loss of face by the President over this issue result in a change of policy or even a restructuring of the ruling party which, in itself, may lead to greater investor confidence?

Looking at the numbers quoted in the 2016 Mid Term Budget Policy Statements it is apparent that the Ministry of Finance will find it very difficult to raise the additional R 43 billion that its needs to meet its expenditure targets.

Granted there are a number of initiatives afoot to raise additional funds. However, it is unlikely that the Special Voluntary Disclosure Programme, the proposed changes to the legislation relating to trusts, the sugar tax or the tyre levy will meet the amount required.

So where will it come from? Personal income tax, VAT and corporate tax account for 80% of tax revenues. Raising the VAT rate will be politically detrimental and would probably lead to civil unrest which is presently at a high level. Further, an increase in corporate tax rates would deter foreign investment.

The subject of a wealth tax has been much in the news of late and this may well be the way to go, But that may have the effect of a brain drain which would also have a negative impact of economic growth.

Little prominence was give to the need to combat corruption and wasteful expenditure by government departments and State Owned Enterprises. However, this should be targeted to make a contribution of state coffers

Therefore, it seems inevitable that personal tax rates will be restructured.

TAILPIECE

“Two things are infinite: the universe and human stupidity I’m not sure about the universe”. – Albert Einstein