Unit 2 - Individuals - EE Tax & Provisional Tax Flashcards
When is EE tax done?
Monthly
Do calc on a monthly basis!!
What is the format used to calculate EE tax?
Step 1: Calc. balance of remuneration
(Monthly remuneration -
deductions)
Step 2: Calc. annual equivalent of balance
of remuneration.
Step 3: Calc. the annual tax thereon - tax rebates & medical rebates
Step 4: Apportion annual tax for part of the
year
Remember tax rebates & medical rebates
Do calc. every month!!
What is the format used to calculate EE tax if EE receives an annual payment?
Such as, B-Day bonus/13th cheque, incentive bonus, leave pay on resignation, merit reward, backdated salary, taxable restraint of trade
Step 1: Calc. tax on the annual equivalent
of the balance of remuneration
- Calc. balance of remuneration
(Monthly remuneration -
deductions).
- Calc. annual equivalent of the
balance of remuneration.
- Calc. the annual tax thereon
Step 2: Calc. tax on the balance of
remuneration + annual
remuneration amounts. (As you do
with Aggregates of RLSB) - tax
rebates - medical rebates.
Step 3: Calc EE tax on bonus (annual
remuneration amount)
Step 2 - Step 1
Remember tax rebates & medical rebates
Par 2(4) - What deductions are allowed from remuneration?
- Contributions by EE to any
pension/provident fund - which ER is
entitled/required to deduct, ltd to
permissible deduction under s11F - Any contribution to RAF by EE @ option of
ER, which proof of pmt has been
furnished, ltd to permissible deduction
under s11F - Any contribution by ER to RAF for the
benefit of EE, ltd to permissible deduction
under s11F - Donations made by ER on behalf of EE to
institutions that issue ER with s18A
receipt/ ltd to 5% of EE remuneration
after deducting all of the above amounts.
Proviso to contributions under s11F deduction:
- the amount of the contribution to be
deducted in calc EE tax must not
< R350 000 for the 12 months, it is
apportioned to months EE is employed -
it cannot exceed R29 167 p.m in the 12
months
Par 9(6) - What deductions are allowed from EE tax?
- s6A medical scheme fees tax credit
- If TP is <= 65 years, s6B(3)(a)(i) medical
scheme fee tax credit - ER must deduct medical scheme fee tax
credit if ER pays medical scheme
contributions for/on behalf of EE - Deduction is @ ER option, if EE pays the
contributions to the medical scheme,
provided that EE gives ER POP of those
fees.
What does remuneration include?
Salary & wages, leave pay, bonuses, gratuities, commissions, fees, overtime pay, emoluments, pensions, superannuation allowance, retiring allowance
- Any subsistence allowance granted to EE
in a month - that is neither spent by the
EE while away from home for at least 1
night nor refunded to ER = deemed to be
remuneration in the following month
Par(a) of the definition of remuneration includes?
- Annuities & living annuities
- Other amounts pd for services rendered
- Restraint of trade receipts
- Amounts pd for variation of office
- RLS
- Any amount received/ accrued in commutation of amounts due under any contract of employment/service
Par(b) of the definition of remuneration includes?
- Fringe benefitsExcl Fringe benefits relating to the use of
a motor vehicle.
Par(bA) of the definition of remuneration includes?
The full amount of:
- Allowances & advances required to be
included in taxable income
Excl. travel allowance, allowance portion
of subsistence allowance, allowance pd
to the holder of any public office, &
allowances that are exempt ito s10.
*!! Any subsistence allowance granted to
EE in a month, that is either not spent
by EE while away from home for at least
1 night/ refunded to ER
= deemed to be remuneration in the
following month
Par(c) of the definition of remuneration includes?
For EE tax purposes only:
- 50% of allowances pd to the holder of
public office
Par(cA) of the definition of remuneration includes?
For EE tax purposes only:
- 80% of any travel allowance
- 20% of travel allowance if ER is satisfied
that at least 80% of the use of the vehicle
will be for business purposes
Excl any travel allowance based on actual distance traveled.
Par(cB) of the definition of remuneration includes?
For EE tax purposes only:
- 80% of the right of use of motor vehicle
fringe benefit - 20% of the right of use of motor vehicle
fringe benefit if ER is satisfied that at least
80% of the use of the motor vehicle will
be for business purposes
Par(cC) of the definition of remuneration includes as remuneration?
100% of any travel allowance that is based on the actual distance traveled by EE, to the extent that the allowance exceeds R4,64 per km.
Par(d) of the definition of remuneration includes?
Any gain determined in s8B if the proceeds are included in EE income ito that section
Par(e) of the definition of remuneration includes?
Any gain determined in s8C on the vesting of shares
Par(f) of the definition of remuneration includes?
Any amount required to be included in the income of a person ito s7(11).
s7(11) = Maintenance to a former spouse of a member of a retirement fund, pd by the fund, that is deemed to be income of member
Par(g) of the definition of remuneration includes?
Any dividends that are taxable ito proviso dd, ii, jj, kk to s10(1)(k) are deemed to be income of the member
What is excluded from the definition of remuneration?
- Fees pd to a person for a service
rendered in the course of any trade
carried on independently (i.e. auditors,
medical practitioners, lawyers,
independent businesses.
- Provided that the course of trade
carried on independently is not
mainly on the premises/subject to
the control of the person paying. &
- The person will be deemed to be
carrying on a trade independently if
throughout the YoA he employs 3/<
EE on a full-time basis, other than any
EE who are connected persons in
relation to such a person. - Disability pensions ito certain Acts
- Amounts pd to EE to reimburse him for
expenditure incurred in the course of his
employment. - Annuities under an order of
divorce/similar separation
What is the withholding tax which is deducted from EE remuneration on a regular (Monthly basis)?
EE tax
Within how many days must the ER pay the EE tax over to SARS?
Within 7 days after month-end.
When must the ER pay EE tax to SARS if the 7th day falls on a weekend or holiday?
EE tax is to be pd by the last business day before the 7th day.
If late payments are made - these are subject to penalties and interest.
What happens in situations where an ER fails to deduct/withhold the full amount of EE tax:
- ER becomes personally liable for pmt of
EE tax if ER either does not withhold EE
tax/ does withhold EE tax but does not
pay it over to SARS - Where CSARS is satisfied that failure to
withhold tax was not due to an intent to
postpone payment of tax/evade ER
obligations, provided that if there is a
reasonable prospect of ultimately
recovering EE tax/paying it over to SARS,
CSARS may absolve ER from his liability.
Is a non-resident ER liable to withhold EE tax?
Any ER that is non-resident which conducts business through PE in SA, is also liable to withhold EE tax iro EE who are liable for tax in SA
Par 2(2B) 1/3/2022 - Must the retirement fund/insurer apply the fixed tax rate that the CSARS directs must be used when a retirement fund/licensed insurer pays an annuity to a person?
Yes - this must be done where the person who receives the annuity, receives an amount of remuneration from more than 1 < ER
How many hours must a person work to be considered a Std EE?
=> 22 hours a week
< 22 hours but no other employment
What is considered to be part-time/non-standard employment?
- Workers employed daily, & pd daily
- Casual commissions pd
- Casual pmts to casual workers for
irregular services rendered/Occasional
services - Fees pd to part-time lecturer
- Honoraria pd to office bearers of
organizations, clubs, etc.
This list is not exhausted.
- EE tax @ flat rate of 25%
Define ER.
A person who pays/is liable to pay remuneration to someone else
Incl:
- Trustee in an insolvent estate
- Executor/administrator of benefit fund,
retirement fund/any other fund
- Anyone acting in a fiduciary capacity, a
like a trustee of a trust
- Person responsible for paying
remuneration under provisions of any
law/out of public funds
Excl:
- Agents that pay remuneration on behalf
of another ER
Define EE.
A person(not a company) who receives remuneration/ to who remuneration accrues
Incl:
- Natural person who is a labor broker
- A person who works for/on behalf of a
labor broker
- PSP
- Anybody who/which Min. of Finance
declares to be EE.
Define a provisional TP.
- Any person (other than a company) who
derives income- from ER not registered for EE tax
- which is not remuneration/any
allowances
- Any company/CC
- Any person notified by CSARS that he is a
provisional TP.
What is excluded from the definition of a provisional TP?
- Any tax-exempt PBO
- Any tax-exempt recreational club
- Any body corporate, share block company
- Any small business funding entity
- Any non-resident owner/charterer of any ship/aircraft
- A natural person who does not derive any
income from carrying on of any business
if:- taxable income for relevant YoA < tax
thresholds - Taxable income for YoA derived from
interest, dividends, foreign dividends,
and rental from letting fixed property
and remuneration from ER not
registered for EE tax < R30 000
- taxable income for relevant YoA < tax
- Deceased estate
Any entity as defined in s30B
What are the 2 compulsory payments made per tax year?
1st payment:
- covers first 6 months of YoA
- 31 Aug 2023 for individuals tax year of
28 Feb 2024
2nd payment:
- Covers last 6 months of YoA
- Pd before the end of YoA - 28/29 Feb
2024 for individuals tax year of 28/29
Feb 2024
When is the voluntary 3rd provisional payment made?
If YoA ends on 28/29 Feb 2024 = 7 months thereafter = 30 Sept 2024
Payment made to avoid penalties & interest
What is the 1st provisional payment based on?
- Estimate of taxable income
- Estimate may not be < basic amount
without CSARS permission - If the estimate is more than the basic
amount, the basic amount may be used. - Estimate excl.
- RLSB
- RLSWB
- SB
What is the basic amount for individuals?
Taxable income based on the latest preceding YoA
LESS:
- Any taxable capital gains included
therein
- RLSB
- RLSWB
- SB
- Any amount contemplated in par (d) of
GI def.
What is the basic amount for companies?
Taxable income based on the latest preceding YoA
LESS:
- Any taxable capital gains included
therein
What is deemed to be the latest preceding YoA?
- Preceding YoA iro of which estimate is
made, & - Iro which notice of assessment issued by
CSARS is not received in less than 14 days
before the date, the estimate is submitted
to CSARS
Provided that if the estimate must be made:
- More than 18 months after the end of the latest preceding YoA, the basic amount must be increased by 8% per annum of that amount
What is the format for the 1st provisional payment calculation?
Step 1: Calc tax payable on estimate/basic amount
Step 2: Deduct rebates (primary, secondary & tertiary)
Step 3: Divide tax payable by 2
Step 4: Deduct any EE tax (EE tax for first 6 months)
Step 5: Pay the difference to SARS
What is the format for the 2nd provisional tax payment calc?
Step 1: Calc tax payable on estimate/ basic amount
Step 2: Deduct rebates (primary, secondary, tertiary)
Step 3: Deduct any EE tax ( EE tax for full YoA)
Step 4: Deduct the first provisional tax payment
Step 5: Pay the difference to SARS
