Taxation

1. Taxation Chapter 3 (Lecture 4)

2. Taxation • Personal taxation • Company taxation • Capital gains tax • Other taxes • Double taxation • South African taxation

3. SOUTH AFRICAN TAXATION What kinds of tax do we pay Stamp duty Transfer duty Uncertified securities tax Unemployment insurance fund Value Added Tax (VAT) Other taxes • Air passenger tax • Capital gains tax (CGT) • Diamond export levy • Donations tax • Estate duty • Excise duty • Income tax • Pay as you earn (PAYE) • Provisional tax • Retirement funds tax (RFT) • Skills development levy (SDL)

4. SOUTH AFRICAN TAXATION VALUE ADDED TAX (VAT) Value-Added Tax (VAT) is an indirect tax based on consumption of goods and services in the economy. Revenue is raised for the government by requiring certain traders or vendors to register and to charge VAT on taxable supplies of goods or services.

5. SOUTH AFRICAN TAXATION:VALUE ADDED TAX (VAT) • VAT was introduced on 30 September 1991 at 10% and increased to 14% on 7 April 1993. • The VAT system comprises of three types of supplies: • Standard-rated supplies: Supplies of goods and services subject to the 14% VAT rate in force at the time of supply • Exempt supplies: Supplies of certain services not subject to VAT. For example educational services provided in pre-primary, primary, secondary and tertiary schools of a public character. Also premiums on life policies and contributions to pension, provident, retirement annuity and medical aid funds etc.

6. SOUTH AFRICAN TAXATION:VALUE ADDED TAX (VAT) • The VAT system comprises of three types of supplies (continue..): • Zero-rated supplies: Supplies of certain goods or services subject to VAT at 0%. For example brown bread, maize meal, rice, fresh vegetables, fresh fruit, eggs and milk. Also goods and services exported from the Republic of South Africa.

7. SOUTH AFRICAN TAXATION:VALUE ADDED TAX (VAT) 1. The characteristics of VAT: • The tax applies generally to transactions related to goods and services • It is proportional to the price charged for goods and services • It is charged at each stage of production and distribution process • The taxable person (vendor) may deduct the tax paid during the preceding stages, that is the burden of the tax is on the final consumer

8. SOUTH AFRICAN TAXATION:VALUE ADDED TAX (VAT) 2. VAT is only charged on taxable supplies made by a vendor. Taxable supplies include supplies for which VAT is charged at either the standard rate or zero rate, but does not include: • Salaries and wages; • Hobbies or any private recreational pursuits (not conducted in the form of a business); • Occasional private sale of personal or domestic items; • Exempt supplies

9. SOUTH AFRICAN TAXATION:VALUE ADDED TAX (VAT) 4. Who needs to register for VAT? • Persons who make taxable supplies in excess of R1 million in any 12-month consecutive period (from 1 March 2009) • A person may also register voluntarily provided that the minimum threshold of R50 000 (from 1 March 2010) has been exceeded in the past 12-month period • Persons liable or voluntarily registered for VAT are called “vendors”

10. SOUTH AFRICAN TAXATION:DIVIDENDS TAX In 2007 the Minister of Finance announced that Secondary Tax on Companies (STC) would be replaced by Dividends Tax (DT) with the effective date 1 April 2012. The main objectives behind the change to DT: • To align South Africa with the international norm where the recipient of the dividend, not the company paying it, is liable for the tax relating to the dividend • To make South Africa a more attractive international investment destination by eliminating a perception of a higher corporate tax rate (STC is an additional corporate tax) coupled with lower accounting profits (STC has/had to be accounted for in the income statement)

11. SOUTH AFRICAN TAXATION:DIVIDENDS TAX In simple terms, Dividends Tax (DT) is a tax imposed on shareholders at a rate of 15% on receipt of dividends, whereas Secondary Tax on Companies (STC) was a tax imposed on companies (at a rate of 10%) on the declaration of dividends. The DT is categorised as a withholding tax, as the tax is withheld and paid to SARS by the company paying the dividend or by a regulated intermediary (i.e. a withholding agent interposed between the company paying the dividend and the beneficial owner), and not by the person liable for the tax, i.e. the beneficial owner of the dividend.

12. SOUTH AFRICAN TAXATION:CORPORATE TAX Any company or any close corporation (CC) which becomes liable for any normal tax or becomes liable to submit any return of income in terms of section 66 of the Income Tax Act No. 58 of 1962, (the Act) is required to register as a taxpayer in terms of section 67 of the Act. Any such person must register as a taxpayer at SARS within 60 days after so becoming a taxpayer by completing an IT77(C) form.

13. Corporate Income Tax (CIT) is applicable to the following business: • Listed public companies • Unlisted public companies • Private Companies • Close Corporations • Co-operatives • Collective Investment Schemes • Body Corporates • Share Block Companies • Dormant Companies • Public Benefit Companies • Small business corporations (Gross income for the year of assessment does not exceed R20 million (2013: R14 million) • Micro businesses from 1 March 2009 with turnover not exceeding R1 million per year

14. SOUTH AFRICAN TAXATION:CORPORATE INCOME TAX (CIT) • Companies tax rate for 2014/2015 remained at 28% • PLEASE USE THE RATES AS GIVEN IN MY PRESENTATIONS ON EACH SUBJECT - FOR FINANCIAL PERIOD ENDING 28/02/2015