CRS SARS TAX TRAINING

Balance of remuneration

Is Remuneration less:• Pension fund contributions• Retirement fund contributions• Income protection premiums• DonationsNote: there are limits to all of these

Annual equivalent

• Rem received x pay periods/periods worked• Eg Remuneration to date R70 000• Periods worked 7• Periods in year 12• Annual equivalent = R120 000

Tax directives (IRP3)

• Issued by SARS• Only valid for the year stated thereon• May not act on photocopies• No deviations• Can be electronic• Must apply % of a directive before taking into

account allowable deductions ( pens, RA etc.)

Skills development levy

• 1% of the leviable amount• Determined on the balance of remunerationExemptions:• Employee employed for less than 24 hours

per month• Learners

Unemployment insurance fund

• 1% of employees remuneration• Based on total amount of remuneration• ER and EE contribute same amount• Earnings limit of R149 736.00 per annum

Standard income tax on employees (SITE)

• Applicable only on annualised net remuneration up to R60 000

• Any income greater than this represents PAYE• Note travel allowances are PAYE

Record keeping

• Remuneration paid• Tax deducted• Income tax reference number• Available for 5 years

RFI vs NRFI

• Retirement funding income is the portion of the employees income that is used in the calculation of employee’s or employer’s contribution to a pension or provident fund

• NRFI is the balance of the remuneration that is not used for retirement funding income

Pension fund contributions

• Limited to the greater of• R1750• 7.5% of retirement funding income• Arrear contributions R1800 annually

Retirement annuity funds

• Greater of • R1750• R3500 less allowable current pension fund

contributions• 15% of Non retirement funding income

Donations

• Maximum of 5% of remuneration after deducting

• Allowable pension fund contributions• Allowable RAF contributions• Allowable income protection policy

premiums

Gratuities

• Is an amount paid to an employee by an employer in respect of termination of service

• Examples:• Normal termination of service as a result of

resignation of discharge;• Retirement or death;• Termination due to retrenchment

Gratuity tax exemptions

• May make use of lifetime exemption R315000 available for exemption of retirement fund lump sums

Conditions:• Must have attained the age of 55 or• Termination is due to ill health or• Is as a result of the employer ceasing trading or

retrenchment.Note: notice pay may not be included in this figure.

Directors of private companies/members of close corporations

• A director is deemed to have received a minimum amount of remuneration every month

• Y=T/N where;• Y=monthly amount to be determined• T=balance of remuneration iro previous year• N=number of completed months in previous yearNote: if more than 75% of T consists of fixed monthly income then actual remuneration must be used.

Students

• Taxed in the same manner as any other employee

• Refer to following slide of standard vs non standard employment.

Standard/non standard employment

• Non standard -25% tax deducted on balance of remuneration

• Standard – refer to tax tablesScenario Deduction

Required to work min of 22 hours per week and is in standard employment

Deduction tables

Not in standard employment and works less than 5 hrs per day and earns <R261 for that day

25% deduction

Not in standard employment and works at least 5 hrs per day and earns >R261 for that day

25% deduction

Not in standard employment and works min 5 hours per day and earns less than R261 for day

No tax deducted

Age Related Rebates/Concessions

• >=65 on last day of tax year• Qualifies for an additional tax rebate(R6390)• All medical aid contributions are tax

deductible• >=74 on last day of tax year• Qualifies for an additional rebate.(R2130)

Leave Pay

• Accrued leave pay that is encashed must be treated in the same manner as a bonus

Advance Salary

• Will be subject to employees tax when it is paid by the employer to the employee

Overtime Payments

• Must be treated as normal income for tax purposed (not as a periodic payment)

Annual Payments

• Examples• Annual bonus• Incentive bonus• Leave pay on resignation• Encashment of leave• Merit awards• Backdated payments

Taxable fringe benefits

• Acquisition of an asset at less than actual value• Right of use of motor vehicle• Right of use of asset• Meals, refreshment vouchers• Free/cheap accommodation• Low interest/interest free loans• Medical fund contributions paid on behalf of an

employee

Non-taxable fringe benefits

• Uniform allowance• Transfer costs

Employment income exemptions

• Income derived outside RSA for a period or periods exceeding 183 full days in aggregate during any 12 month period and

• For a continuous period exceeding 60 full days during that period.

Right of use of a motor vehicle• Value of the vehicle is the purchase price inclusive of VAT and

exclusive of finance charges• If the vehicle is >12 months old when first allocated to the

employee the above value can be reduced by 15% for each completed cycle

• Fringe benefit is 3.5% of the determined value of the vehicle if ER bears cost of maintenance and fuel.

• Employer bears cost of maintenance only 3.5% -.22%=3.28%• Employee bears cost of fuel and maintenance

3.5%-.22%-.18% = 3.1%• Where maintenance is included in the purchase price use

3.25%

Travel allowance

• 80% of the allowance is taxable• If usage is guaranteed to be greater than 80%

for business then only 20% is taxable• A log book is required to claim business km at

the end of a year.• If no log book is submitted then 100% of

allowance is taxable

Reimbursive travel

• R3.16 per km or the determined rateScenario Deduct

PAYE?SARS Code

Fixed allowance paid Yes 3701

Reimbursed at <= prescribed rate AND <8000km AND no travel allowance paid

No 3701

Reimbursed at <= prescribed rate AND <8000km ANDReceives a travel allowance

NoYes

37023701

Reimbursed at <= prescribed rate AND >8000km AND no travel allowance paid

No 3702

Reimbursed at <= prescribed rate AND >8000km AND Receives a travel allowance

NoYes

37023701

Reimbursed at a rate exceeding the prescribed rate No 3702

Low interest or interest free loans

• Exemptions– Casual loans if the aggregate of these loans does not

exceed the sum of R3000 at any time.– Casual loans are granted on an irregular basis– Employee study loans– No benefit if the interest charged is greater than the

official interest rate.– If interest charge is less than official interest rate then

fringe benefit = (official interest rate – interest rate charged x balance)

Subsistence allowance

Need to spend a night away from normal residence to qualifyLocal• Where employer pays for meals and accommodation

R93 per day• Where the employer only pays for accommodation

R303 per dayForeign Refer to the table of values per country

Medical aid tax credits <65 years old

• Changes from a cap of R720+R720+R440+ to Tax credits of R230+R230+R154+• Only applicable to employees <65 years oldExample:Medical aid contribution R15002 Dependents (Tax Credit 460)Calculate the tax before taking credit into accountReduce the tax payable by the tax credit.

Medical aid tax >65 years old

• Medical aid contribution treated as a fringe benefit as well as a deduction for tax purposes

• Tax neutral

CRS tax calculator – determine limits

• Regular income (3)• NRFI regular(26)• Bonus (4+5)• Arrear pension (32) Limit?• Donations (96) Limit?• RA regular (11) Limit?• RA arrear contribution • Pension (8) Limit?• Medical aid (9)

CRS tax calculator – limits

• Arrear pension (32) Limit =R1800• Donations (96) Limit=5% of balance of rem• RA regular (11) Limit=greater of:• R3500 – pension fund contrib.• 15% of NRFI• R1750• RA arrear contribution Limit= R1800 • Pension (8) Limit=7.5% of RFI• Medical aid (9) See tax credits

CRS tax calculator exercise

Legislation references

• Guide for employers iro employees tax• Guide for employers allowances• Guide for employers fringe benefits• Guide for subsistence travel foreign

allowance• Guide for rate per km schedule external

Approved vs non approved funds

• Insurance policies