The Professional - Volume 7, Issue 6 by IACSA

The Professional Volume 7, Issue 6

Special points of interest:

September 2016

Broad-based Black Economic Empowerment

 IAC AGM 21/10/16.  Tyre levy: Effective date postponed to 1/2/17.  Term of office of the Tax Ombud Judge Bernard Makgabo Ngoepe for a period of three years.  Second batch of the 2016 Draft Taxation Laws Amendment Bill (TLAB) was published for public comment. Deals with employment tax incentive and learnerships.

Inside this issue:

All measured entities must use the Broad-Based Codes of Good Practice as amended as a basis for measurement. The thresholds determining whether an entity qualifies as an Exempt Micro Enterprise (EME) was amended. What is B-BBEE? Broad-based Black Economic Empowerment (B-BBEE) is an initiative launched by the South African Government to address the restrictions that exist within the country for Black people to participate fairly in the economy. According to the B-BBEE Act 46 of 2013 Section 1(b), the definition for “Black people” is a generic term which means Africans, Coloureds and Indians:

 Who became citizens of the Republic of SA by naturalization:-

 Before 27 April 1994; or  On or after 27 April 1994

and who would have been entitled to acquire citizenship by naturalization prior to that date.

The BEE Act allows for the existence of the B-BBEE ‘Codes of Good Practice’ which provide the structures for the BEE Scorecard and certain rules associated with claiming BEE points.

level 8 to level 1) depends on what contributions have been made to support the integration of Black people into the economy. The better level of BEE status you have the more BEE points can be claimed. BEE Point requirements The table below shows the amended BEE Point requirement for each of the 8 BEE Status Levels and how much customers can claim on their BEE Scorecard as a result. The amended codes apply to Exempt Micro Enterprises (EME), Qualifying Small Enterprises (QSE), and Generic Sized Entities (GSE).

B-BBEE Special Voluntary disclosure

1 5

Franchises Small Business Corporations

6 8

 Who are citizens of the Re-

Employment Tax Incentive SARS news

Qualification on the Generic Scorecard

BEE Status

BEE Recognition Level

≥100

135%

New members AGM Learnerships MOI

13 14 15

≥ 95 but < 100

125%

≥ 90 but < 95

110%

≥ 80 but < 90

100%

Helpdesk Website

≥ 75 but < 80

80%

≥ 70 but < 75

60%

≥ 55 but < 70

50%

≥ 40 but < 55

10%

> 40

Non Compliant

public of SA by birth or decent; or

If the company has a recognised BEE status then customers can claim BEE points on their BEE scorecard by buying from those businesses. The different BEE status (from

BEE articles by Prakash Singh

(General Manager IAC)

Page 2

The Professional

BEE—Exempted Micro Enterprises (EME’s) It is unrealistic to expect a start -up or micro business to contribute to BEE as there are likely to be few employees. Most businesses are vulnerable and try to limit their overhead costs in the first few years. For this reason any business that turns over less than R10 million is exempted from being measured against any BEE Scorecard. EMEs are required to produce a sworn affidavit declaring their qualification as an Exempt Micro Enterprise. EME’s automatically qualify as Empowering Suppliers so their customers are all able to claim BEE Points for purchasing from them.

Every accomplishment starts with a decision to try.

The new codes state that the verification under the new amended codes of an EME is only required to obtain a sworn affidavit on an annual basis confirming the following:

 Annual total revenue of R10 million or less, and

 Level of Black ownership

Any misrepresentation in terms of the above constitutes a criminal offence as set out in the B-BBEE Act as amended. Under the new codes any enterprise with an annual turnover of R10 million or less qualifies as an EME.

 An EME is deemed to have a

B-BBEE status of level 4, with contributors having a B-BBEE recognition level of 100%.

 An EME that is 100% Black

owned qualifies for elevation to a level 1 contributor, having a B-BBEE recognition level of 135%.

 An EME that is at least 51%

Black owned qualifies for elevation to a level 2 contributor having a B-BBEE recognition level of 125%.

 However, an EME is allowed

to be measured in terms of a QSE should they wish to maximize their points and move to a higher recognition level, but then they are veri-

fied under the QSE scorecard, and the rules for a QSE will apply. An IAC Accounting Officer may issue a client with a sworn affidavit for an EME. As from 1 May 2015, EMEs are able to submit a sworn affidavit attesting to its EME status. This affidavit must be taken in front of a Commissioner of Oaths. Accounting officers that are registered with the Institute of Accounting and Commerce (IAC) are recognised as Commissioners of Oaths and may therefore issue a sworn affidavit in the case of EME’s. NB: In accordance to the Justices of the Peace and Commissioners of Oaths Act 16 of 1963, a Commissioner of Oaths is not allowed to charge a fee for administering an oath or affirmation, attesting a declaration or certifying a document.

Black Ownership

BEE Status Level

Procurement Recognition

100% Black

Level 1

135%

>51% Black

Level 2

125%

<51% Black

Level 4

100%

Volume 7, Issue 6

Page 3

BEE—Qualifying Small Enterprises Under the new codes any enterprise with an annual turnover of between R10 million and R50 million or less qualifies as a QSE. The enhanced B-BBEE recognition level for a QSE: A QSE that is 100% black owned qualifies for level 1 BBBEE recognition level. A QSE that is at least 51% black owned qualifies for level 2 B-BBEE recognition level. These QSE’s is only required to obtain a sworn affidavit on an annual basis confirming the following:

 Annual Total Revenue of R50 million or less, and

 Level of Black ownership

Any misrepresentation in terms of the above constitutes a criminal offence as set out in the B-BBEE Act as amended. If a Black ownership of a QSE is below 51%, it is required to be measured in terms of the QSE scorecard to confirm its BBBEE Status Level, and a certificate must be issued by a SANAS approved verification agency. The table below represents the B-BBEE Generic Scorecard, itemizing the 5 elements. Measured entities are to comply with priority elements under the following conditions:

 QSE to comply with at least 2 of the priority elements:

 Ownership is compulsory; and either

Priority Element Ownership Management Control Skills Development Enterprise and Supplier Development Socio-Economic Development

 Enterprise & Supplier Development or Skills Development.

Measured entities who do not meet the thresholds in priority elements, the overall score will be discounted one (1) level down. Verification of QSE’s and GSE’s may only be performed by a verification agency who is accredited by the South African National Accreditation System (SANAS). IRBA has opted out of being a verification agency as of 1 September 2016, and will phase out effective 31 December 2016. Accounting Officers may NOT issue verification certificates for these types of entities.

Weighting 25 15 20 40 5

Code series reference 100 200 300 400 500

Generic Sized Enterprises (GSE) Generic Sized Enterprises are those with a turnover exceeding R50 million. Generic (Large) Sized Entities are required to be measured against all 5 of the BEE Priority elements. Large enterprises are to comply with all priority elements

Life is like riding a bicycle. To keep your balance, you must keep moving. Albert Einstein

Page 4

The Professional

Role of sector codes The following needs to be noted on Sector Codes:

 Economic

and Industry dynamics have been taken into account with sectors allowed to develop sector codes.

 Entities in sectors where there is a sector code are not allowed to be measured on the generic codes.

 Alignment of sector codes

to the Act is critical to prevent fragmentation and

 Property

confusion.

 Generic codes set bare minimum, with sectors codes expected to enhance or accelerate the level of empowerment.

 Valid Sector Codes are:  Tourism  Marketing and Communi-

 Transport  Financial  Information and Communication Technology

 Construction

and Chartered Accountancy sector charters are repealed.

cation

 AgriBEE  Forestry

Verification Agency Options

Start fresh. See the bright opportunity in each new day.

In terms of the DTI's gazetted codes of good practice for BEE businesses, different sizes are measured differently. So, the first step in verification is to understand which category the business falls into. Any business wanting to benefit from their BEE activities will need to prove their BEE status.

Turnover less than R10m

Turnover of R10mR50m

Turnover more than R50m

Exempted Micro Enterprise (EME)

Qualifying Small Enterprise (QSE)

Generic Sized Enterprise (GSE)

Verified BEE Certificates Verification Agencies exist and are able to issue valid BEE Certificates. SANAS has been authorised by DTI to accredit Verification Agencies. A company can use any Verification Agency accredited by SANAS. As Verification Agencies get accredited, SANAS will announce new accreditations. As of 1 July 2008, any Verification Agency that has registered with SANAS and received their preassessment letter may issue a valid BEE Certificate. Verification Agencies are listed on the SANAS website. Pricing and service levels vary as the industry is still establishing itself. The Verification Agencies will take some time to work out their pricing models as the requirements involved in the verification process are still being finalised. In order to be accredited by SANAS as a Verification Agency, the following process applies: 1) Application and Submission of the Quality Manual 2) Document Review 3) Initial Assessment 4) Clearance and non-conformance 5) Approvals Committee 6) Accreditation 7) Six Month visit

8) Annual Assessment 9) Re-assessment (every 3 years) Articles by Prakash Singh

Volume 7, Issue 6

Page 5

Special voluntary disclosure programme A special window period was created for non-compliant taxpayers to voluntarily disclose offshore assets and income under a Special Voluntary Disclosure Programme (SVDP) in order to regularise both their tax and exchange control affairs before SARS starts receiving offshore 3rd party financial data from other tax authorities in 2017.

SARS.

Exclusions

 Amounts in respect of which

Eligibility

 Individuals and companies may apply.

 Settlors, donors and benefi-

The SVDP will be open for applications from 1 October 2016 until 31 March 2017. The SVDP will run concurrent to the permanent Voluntary Disclosure Programme (VDP) of

ciaries of foreign discretionary trusts (including deceased estates) may participate in the SVDP if they elect to have the trust’s offshore assets and income deemed to be held by and accrued to them.

SARS obtained information under the terms of any international exchange of information procedure;

 Disclosures where it is argued by the applicant that all or part of the seed money/ subsequent deposits/funding of foreign assets are not taxable in South Africa or have already been taxed in South Africa.

The normal VDP channel remains open.

SVDP application process For SVDP purposes, SARS & SARB have agreed to a single point of entry for applications, which is the SARS eFiling VDP application process. The current VDP application form (VDP01) will be enhanced to accommodate the SVDP tax related disclosures, while a second form (SVDP01) will be available for exchange control disclosures. Both forms will be available on-line on the SARS eFiling platform. Tax-related disclosures will be routed to SARS staff and exchange control contravention disclosures will be routed to SARB staff. A compliment of SARB staff will be seated at the SARS VDP office. Contact details will be made available in due course. Tax-related disclosures will be approved or rejected on the same basis as the current VDP process. Exchange control contravention disclosures will be approved or rejected on the same basis as currently applied by SARB.

Supporting documents To determine the amount of relief for tax purposes, the VDP01 application form and the following information be submitted :

 Documentation in evidence of the existence of the foreign asset (e.g. bank account details, property registration papers);

 Confirmation of the date on which the

asset was acquired (e.g. letter from the bank in case of a bank account, shareholder certificates, property registration papers);

 Nature of the applicant’s connection to the asset (e.g. owner, director, shareholder, beneficiary);

 A description of the structure and/or intermediaries/advisors that were utilised to establish or acquire the foreign asset;

 Power of attorney (where required);

Table A

Tax period Asset acquisition value and Market value of aggregate of subsequent additional funding all foreign assets Per foreign currency Pre 2011 2011 2012 2013 2014 2015

Per South Afri- Per foreign Per South African Rand currency can Rand

Page 6

The Professional

Money laundering Money laundering is a process used by criminals to hide, conceal or disguise the nature, source, location, disposition or movement of the proceeds of unlawful activities. Criminals generally place and or layer these funds. Placement refers to the way the illegal funds are introduced into legitimate financial systems, e.g. by splitting a large sum of money into smaller amounts deposited separately at a bank. Layering involves the use of a series of transactions, conver-

The secret of being happy is accepting where you are in life and making the most of every day.

sions or movement of funds to hide the true nature/origin of the funds. Any person who carries on a business, is in charge of or manages a business, or is employed by a business who has a suspicion of money laundering or unusual transactions must report it to the Financial Intelligence Centre (FIC). Section 29 of the Financial Intelligence Centre Act requires that the following be reported:  Any amount received or to be received as proceeds of any unlawful activity;

 Transactions (or series of

A franchisor and franchisee generally enter into a franchise arrangement which allows the franchisee to operate a business under specific licensing conditions. A business franchisee will generally receive a strong brand (intellectual property) and complete method to conduct the business itself, such as the marketing plan and operations manuals.

range of payments and receipts which are stipulated in the franchise agreement. Franchisors, for instance, receive payments such as initial fees, renewal fees and royalties from the franchisee. In exchange, the franchisor has to provide the necessary intellectual property and business processes to enable the franchisee to operate the franchise.

since it is regarded as money spent in creating or acquiring an income-producing asset.. Costs incurred in –

Alternatively, the franchisee may enter into a product distribution franchise arrangement which does not involve the franchisor providing the franchisee with its method of conducting business.

The franchisee on the other hand incurs initial expenditure in setting up the franchise outlet, as well as expenditure relating to the day-to-day running of the franchise which can either be in the form of once-off or recurring payments.

 the registration of a trade-

Different tax consequences may attach to amounts received by a franchisor and a franchisee. A receipt of an amount by a franchisee or franchisor generally constitute “gross income” unless the amount is capital in nature.

 the renewal of the registra-

transactions) which has no apparent business or lawful purpose;  Transactions which may be of interest to SARS in a possible investigation of tax evasion.

The information must be sent to the FIC within 15 working days. Failure to do so constitutes an offence.

Franchises

The franchisor that establishes or develops a concept generally uses franchisees to duplicate and distribute the concept on a large scale. The success of a franchise chain lies in the effective implementation of basic, but clearly defined, business principles that have been established by the franchisor. Tax The income of franchisors and franchisees consists of a wide

IP Creation The following costs incurred by a franchisor would, in most instances, be capital in nature

 obtaining a patent;  devising or developing an invention;

 creating or producing a design, copyright or any property of a similar nature; mark, trade name or design;

 the restoration or extension of any patent;

 the extension of the registration period for a design; and tion of a trade mark or trade name,

There are however specific tax deductions for qualifying costs in section 11(gB) and 11(gC) of the Income Tax Act.

Volume 7, Issue 6

Page 7

Tax deductions for intellectual property Section 11(gB)

Section 11(gC)

 property of a similar nature.

Section 11(gB) provides for the deduction of expenditure actually incurred in obtaining the granting or restoration or the extension of the term of any patent, the registration or extension of registration of any design, or the registration or renewal of registration of a trade mark if the patent, design or trade mark is used by the taxpayer in the production of the taxpayer’s income.

This section provides for an allowance of 5% a year of the expenditure actually incurred during years of assessment commencing on or after 1 January 2004 to acquire (otherwise than by developing or creating) any –

Section 11(gD)

 invention or patent as defined in the Patents Act;

 design as defined in the Designs Act;

 copyright as defined in the Copyright Act; or

The franchisor may also consider this section if his trade relates to gambling, telecommunication or the exploration, production or distribution of petrol if a license is required from Government (national, provincial or local) in order to carry on that trade. The deduction is limited to the actual expenditure divided by the lesser of the period of the license or 30 years.

Franchisee—Licence fee The lump sum amount expended by a franchisee in obtaining a licence for the right of use of the franchisor’s intellectual property and business processes can be made as a separate payment or could be included as a portion of the initial fee. This upfront licence fee is generally paid in addition to the royalty payments that a franchisee is required to make to a franchisor for the continued use of the relevant intellectual property and business process-

es granted by the franchisor under the licence agreement.

cence was acquired by the franchisee.

While a lump sum upfront licence fee paid by a franchisee to a franchisor is considered to be capital in nature, it is accepted there may be exceptional circumstances in which the relevant licence fee could be of a revenue nature. The ultimate determination will depend on the specific facts relating to the licensing arrangement, including the purpose for which the li-

Please note that, even though the licence fee may be capital in nature, the taxpayer may still qualify for a deduction under section 11(f), if the licence fee is a “premium or consideration in the nature of a premium” which clearly relates to the right to use intellectual property referred to under section 11 (f)(iii) .

Franchisor

Franchisee

An initial fee received by a franchisor will generally constitute “gross income” for the franchisor. The costs incurred by a franchisor in drawing up the franchise agreement are part of the costs of operating the franchisor’s income-earning structure (intellectual property, business processes, and the like), and is therefore regarded as being of a revenue nature and thus deductible under the general deduction formula.

The franchisee’s aim in entering into a franchise agreement with a franchisor and expending a lump sum in the form of a composite initial fee is therefore to establish an income-producing concern or structure. This fee is consequently of a capital nature and not deductible under the general deduction formula. The franchisee may however consider section 11(f) as well in determining whether a specific deduction is allowed.

Initial fees An initial fee (also referred to as an up-front fee) is usually paid by a franchisee to a franchisor to enable the franchisee to use the franchisor’s intellectual property as well as its business methods and operating systems. This fee is generally paid before commencement of trade by the franchisee. The tax treatment of these fees are discussed in the following two columns.

If you want something you never had—you have to do something you’ve never done.

Page 8

The Professional

Small business corporations SARS recently issued an updated Interpretation Note on Small Business Corporations. This Note provides guidance on the interpretation and application of section 12E which provides accelerated depreciation allowances for a taxpayer that qualifies as an SBC.

eign company which has successfully applied under section 13(5) to 13(11) of the Companies Act to transfer its registration from the foreign jurisdiction in which it is registered to South Africa is deemed to have been incorporated in South Africa.

This Note does not address other sections in the Act which contain provisions that refer to or are applicable to a “small business corporation” as defined in section 12E .

Such a company will exist as a company under the Companies Act as if it had originally been so incorporated and registered. A foreign company that has transferred its registration to South Africa is called a “domesticated company” and may qualify as an SBC if it satisfies the requirements of a private company as discussed above and the other requirements of section 12E(4)(a).

Section 12E

Look for something positive in each day, even if some days you have to look a little harder.

Section 12E sets out the requirements which must be met in order to qualify as an SBC. It provides accelerated depreciation allowances on certain capital assets brought into use by an SBC. Qualifying criteria In order to qualify as an SBC, an entity must meet the requirements stipulated in the definition of “small business corporation” in section 12E(4) (a); that is:



Legal entity requirement



Holder of shares requirement



Gross income limitation requirement



Business activity requirement. Legal entity

In order to qualify as an SBC, the taxpayer must be a juristic person in the form of a “close corporation”, “co-operative” or “private company” as defined in section 1 of the Companies Act. A company which is incorporated and registered under foreign legislation will not qualify as an SBC. However, a for-

Holder of shares The shareholders or members must all be natural persons throughout the whole year of assessment. A qualifying entity whose shares or members interest are held in a trust may qualify as an SBC provided that the beneficiaries hold a vested right in those shares or members interest throughout the year of assessment and are all natural persons. Contravention of this requirement, even if for one day during the year of assessment, will disqualify a qualifying entity from being an SBC for the year of assessment in which the requirement was not met, irrespective of whether all of the other requirements are met. The shareholders/members may furthermore not hold shares or an interest in any other “company” except in those specifically permitted.. The permitted entities include listed companies and any portfolio in a collective investment scheme.

Gross income limitation The taxpayer’s gross income may not exceed R20 million for the particular year of assessment. There is however an exception for this rule which is contained in the proviso to section 12E(4)(a)(i); that is if a qualifying entity carries on a trade, in which a section 12E asset is used, for a period which is less than 12 months, the limitation of R20 million must be reduced proportionately. The ratio applied to the R20 million limitation is the number of months the qualifying entity traded divided by 12. In determining the number of months during which a qualifying entity traded, a part of a month is treated as a full month. The proviso does not increase the denominator of 12 if the year of assessment is longer than 12 months. Business activity Section 12E(4)(a)(iii) imposes a limitation on the amount of income which may be generated from certain income streams, namely investment income and income generated from personal services. An entity cannot qualify as an SBC if more than 20% of the total of all receipts and accruals (excluding capital receipts) and capital gains, consists of investment income and income from the rendering of a personal service

Volume 7, Issue 6

Page 9

Personal service “Personal service” generally refers to a service rendered for which the income derived is mainly a reward for the personal efforts or skills of an individual. The list of services included in the definition of “personal service” is limited in the following two respects: list is personally performed by any person holding an interest in that qualifying entity; and

assessment employ three or more full-time employees (excluding an employee who holds a share in that company or who is a member of the close corporation or co-operative, or who is a connected person in relation to a holder of a share in that company or a member of the close corporation or cooperative), who are on a fulltime basis engaged in the business of that company of rendering that service.

 that qualifying entity does

If one of these requirements

 the service falling within the

not throughout the year of

for a personal service is not met, the qualifying entity will not be rendering a personal service for purposes of section 12E. The persons considered in the employee count need not necessarily be involved in an activity that directly generates the income from the potential personal service. Under common law, an employee does not include an independent contractor since this type of contract does not generally result in an employeremployee relationship.

A lot of people

Personal service providers A “personal service provider” does not qualify as an SBC. A “personal service provider” is defined in the Fourth Schedule as a company if the services rendered on behalf of such company to a client are rendered personally by a connected person in relation to the company and –

 the connected person would

be regarded as an employee of the client if that person had rendered the service directly to the client; or

 the services must be performed mainly at the premises of the client and the connected person or the company is subject to the control or supervision of the client as to the manner in which the services are rendered; or

 more than 80% of the income of the company during the year of assessment is or is likely to be received directly or indirectly from any one client or associated institution in relation to that client,

except if the company employs three or more full-time employees throughout the year of assessment.

have gone further than they thought they could because someone else thought they could.

Small business corporation assets Section 12E provides for two sets of accelerated depreciation rates potentially applying to the assets of an SBC, that is

 assets used directly in a pro-

cess of manufacture or a process of a similar nature may qualify for a 100% writeoff in the year of assessment in which the asset is brought into use.

 assets that do not fall into

the above category may qualify for write-off over a period of three years at a rate of 50, 30 and 20% in the

respective years. Directly in process An SBC may deduct the provided it is –

 brought into use for the first time by that SBC on or after 1 April 2001;

 brought into use for the

purposes of the taxpayer’s trade (other than a trade of mining or farming); and

 owned by the SBC or the

SBC acquired the plant or machinery as purchaser un-

der paragraph (a) of the definition of "instalment credit agreement" in section 1(1) of the VAT Act. The total amount of the allowance available under section 12E(1) may be limited to less than 100% of the cost of the plant and machinery concerned if funding was received from a small business funding entity or in the form of a government grant.

Page 10

The Professional

SBC—Other assets SBCs that acquire any machinery, plant etc. for which a deduction is allowed under section 11(e) may elect to determine the deductible amount under section 11(e) or deduct the amount over 3 years in a ratio of 50/30/20. This deduction is not apportioned for a part of the year. In order to claim an allowance under section 12E(1A), the qualifying entity must be an SBC in both the year of assessment in which the asset is acquired and the year of assess-

ment when it is first brought into use. The election between the two alternative methods for calculating the amount of the deduction is made when the asset is first brought into use. An SBC may elect to calculate the amount of the deduction allowable under section 12E (1A) according to the provisions of section 11(e) under section 12E(1A)(a) if, for example, it provides a more favourable allowance than the threeyear spread under section 12E

(1A)(b). For example, a “small” item which does not form part of a set and which is acquired at a cost of less than R7 000 may be written off in full under section 11(e) in the year of assessment in which it is acquired and brought into use. The election to calculate the amount of the deduction under section 12E(1A)(a) [that is, the amount determined under the provisions of section 11(e)] or section 12E(1A)(b) is made on an asset-by-asset basis.

SBC—Moving cost

Be the mentor you wish you had.

An SBC may incur costs in moving an asset, for example, when relocating its business operations to a new site. Section 12E(3) provides that any expenditure [other than expenditure falling within section 11(a)] which has been incurred during a year of assessment in moving an asset for which a deduction was allowed or allowable under sections 12E(1) or 12E(1A) must be deducted –



tled to a deduction for that asset under section 12E(1A) in that year and one or more succeeding years of assessment, in equal instalments over that and the remaining number of years in which a deduction is allowable; or



Moving costs incurred in a year of assessment before a qualifying asset has been brought into use may not be written off under section 12E(3). Such expenditure has not been incurred in a year of assessment during which a deduction is or was allowable under section 12E(1) or section 12E(1A).

in any other case, in that year of assessment.

if the taxpayer was enti-

Employment tax incentive—Eligible employers An employer may only receive the Employment Tax Incentive (ETI) if the requirements of section 3 are met. An employer may only qualify for ETI if the employer is registered for purposes of withholding and paying over to SARS employees’ tax under paragraph 15 of the Fourth Schedule [section 3(a)], clearly indicates that to qualify the relevant employer must be an “employer” as defined for employees’ tax purposes.

However, certain employers are specifically excluded and will not be eligible to receive any ETI notwithstanding that they are registered employers for employees’ tax purposes [sections 3(b) or 3(c)]. The exclusions are as follows:

Public Finance Management Act 1 of 1999, other than those public entities that the Minister may designate by notice in the Government Gazette on such conditions as the Minister may prescribe by regulation.

The government of the Republic in the national, provincial or local sphere.

 A “municipal entity” defined

 A public entity that is listed

in Schedule 2 or 3 of the

in section 1 of the Local Government Municipal Systems Act 32 of 2000.

Volume 7, Issue 6

Page 11

Employment tax incentive – Qualifying employees An employee is a “qualifying employee” if the employee meets the following requirements: Age The employee must be aged from 18 to 29 at the end of the month in which the ETI is claimed. An employee will therefore be a “qualifying employee” in the month that the employee turns 18 and will cease to be a “qualifying employee” in the month in which the employee turns 30.

No age limit applies however if the relevant employee is employed by an employer in a fixed place of business within a “special economic zone” or if the employee is employed in an industry designated by the Minister. Status The employee must –

 be in possession of either:  an identity card or a green identity book,

 a refugee identity document;

 not be a connected person in relation to the employer

 not be a domestic worker;  be employed by the employ-

er or an associated person on or after 1 October 2013; and

 receive monthly remuneration of less than R6 000.

 an asylum seeker permit,

Employment tax incentive – Qualifying period The ETI will operate for a period of three years commencing on 1 January 2014, but an eligible employer can only claim the ETI for a maximum of 24 individual months per qualifying employee. The 24 months need not be consecutive. An eligible employer will therefore only be able to claim the ETI per qualifying employee from 1 January 2014 up to (and including) 31 December 2016 as (based on current legisla-

tion) the ETI will cease to exist on 1 January 2017. The ETI is only claimable on monthly remuneration paid on or after 1 January 2014 for employees who commenced employment with the employer on or after 1 October 2013.

more youth employment. The draft amendment also proposes a monetary cap of R20 million on the value of ETI claims per employer, per annum.

lifting others. Robert Ingersoll

Treasury has however proposed that the employment tax incentive be extended for another two years until 28 February 2019 in order to promote

Employment tax incentive—Disqualification Non-compliance with wage regulating measures and minimum wages An employer that is subject to a wage regulating measure is not allowed to claim the ETI for an employee if the wage paid to that employee for that month is less than the wage prescribed by the relevant wage regulating measures.

Displacement This refers to instances where the employer unfairly dismiss an employee under section 187 (1)(f) of the Labour Relations Act and replaces the dismissed employee with an employee qualifying under the ETI. In such instance, the employer is liable to pay a penalty of R30 000 to SARS and will be disqualified from receiving the ETI.

We rise by

Non-compliance with tax obligations An employer will not be eligible to claim the ETI in a month if the employer has any outstanding tax return or outstanding tax debt. For ETI purposes, “outstanding tax debt” excludes amounts due under an instalment payment agreement, amounts compromised or suspended under the Tax Administration Act and an amount below R100.

Page 12

The Professional

Employment tax incentive—Amount The eligible employer is required to perform a monthly calculation to determine the amount of the ETI that it may claim per qualifying employee. The calculation takes into account the monthly remuneration paid to the qualifying employee, the period for which the qualifying employee is employed and the amount or percentage that may be claimed. The employer must add any amounts rolled over from previous months to the amount of the ETI for the current month. See the table below: Monthly remuneration

ETI per month during the first 12 months in which the

R0—R 2000

50% of monthly remuneration

25% of monthly remuneration

R2 001—R4 000

R1 000

R500

R4 001—R6 000

Formula: R1 000—[(0.5 x (monthly remuneration—R4 000)]

Formula: R500—[(0.25 x (monthly remuneration—R4 000)]

Before you are a leader, success is all about growing yourself. When you become a leader, success is all about growing others.

Employment tax incentive—Roll-over amounts The ETI Act provides for three instances when the ETI may be rolled over and claimed in a succeeding or future period. Firstly, if the ETI amount exceeds the employees’ tax due for a particular month, the excess must be added to the ETI available in the succeeding month and will be available for deduction in the next month.

Secondly, if the employer does not reduce the employees’ tax due by the employer in the relevant month by the ETI, despite the ETI being available to that employer, the ETI not claimed must similarly be added to the ETI available for deduction in the first month that the employer reduces employees’ tax by any available ETI.

Thirdly, if the employer was not allowed to reduce the employees' tax payable by the employer because of the employer’s tax returns being outstanding or the employer having a tax debt due to SARS, the relevant ETI must be carried forward and may be claimed in the first month that the employer becomes compliant.

Jack Welch

National Credit Act—Threshold change Previously the National Credit Act (NCA) only required credit providers with at least 100 credit agreements or a total principal debt of R 500 000 to register as credit providers. From 1 May 2016, both requirements were removed and the new threshold, according to Government Gazette 39981, is Rnil. This means that any person who grants credit within the ambit of the NCA is required to register as a credit provider before granting the credit , irrespective of the value of the principal debt. This could include employee loans. Consequently, any person providing more than one loan bearing interest at commercial rates must register. The credit provider must provide the National Credit Regulator with CIPC documents, auditor details, detail of the total value of all credit agreements entered into during the most recent financial year and signed resolutions and criminal name clearance certificates for all directors. Furthermore, a R550 initial registration fee, R250 branch fee as well as an annual renewal fee are payable. The National Consumer Tribunal may levy administrative fines if a person fails to register as a credit provider.

Volume 7, Issue 6

Page 13

Welcome new members Independent Accounting Professional ( Reviewer) / Certified Tax Practitioner Practice Number Surname Name AO655197 Tayob Muhammed Mujtaba AO654301

Jeewa

Zaheer Suleman

Financial Accountant in Practice (Accounting Officer) / Certified Tax Practioner Practice Number AO653287

Surname Pienaar

Name Willem Botha

AO303844

Hassen

Inayet Hussain

Financial Accountant in Practice (Accounting Officer) Practice Number AO655412

Surname Penxa

Name Zizipho

AO655405

Jingose

Thandile

AO655406

Matandirotya

Prudence Ruregerero

AO655407

Chatindo

Philoxenia Mutsa

It is a beautiful

Approved Traning Centre ATC Number 007

Surname

Name DRG Accountants

Surname

IAC655402

Mlambo

Name Gladman Obrey Vukile Nkosenye

Technical Accountant / Associate Tax Practitioner Practice Number IAC655403

Surname Chakanyuka

Name Peter

Technical Accountants Membership No IAC655414

Surname Larsen

Name Michael Robert

IAC655410

Nyoni

Ruth Debra

IAC655411

Ngubelanga

Agrippa Thabani

Students Membership No IAC655419 IAC655418

Surname Ntaka Gxekwa

career and a passion come

Certified Tax Practitioner Practice Number

thing when a

Name Sinethemba Shuan Mzuvukile

together.

Page 14

The Professional

IAC: ANNUAL GENERAL MEETING

Notice, in terms of Article 10 of the IAC’s Constitution, was given on 5 September 2016 of the 89th Annual General Meeting to be held on 21 October 2016 at the Protea Hotel Sea Point, Cape Town. Proxy forms must be submitted on or before 15:00 on 20 October 2016.

Agenda 1.

Welcome

Apologies

Notice of meeting

Confirmation of Minutes of the 88th AGM

President’s report 2015/2016

CEO report 2015/2016

Audited Annual Financial Statements for the year ended 31 December 2015

Adoption of new Memorandum of Incorporation

Appointment of auditors

10. Induction of new directors to the IAC Board

21 October 2016

Volume 7, Issue 6

Page 15

Learnerships—Proposed amendments National Treasury proposed an extension of the Learnership Incentive until 31 March 2022. The values of the claims will however be adjusted in order to target the incentive to crucial training. All registered learnerships will still qualify for the incentive, but higher priority will be given to learners without basic to intermediate qualifications by providing a higher value of claims. The prior qualifications of the learner entering into the learnership agreement will therefore determine the value of the claim. This proposed amendment is deemed to come into effect from 1 October 2016.

Proposed Learnership Tax Incentive claim values Qualification

Proposed

Current

Person without disability

NQF 1-6 NQF 7-10

R40 000 R20 000

R30 000 R30 000

Person with disability

NQF 1-6 NQF 7-10

R60 000 R50 000

R50 000 R50 000

Learn from yesterday, live for today, hope for tomorrow.

Memorandum of Incorporation

The important

The institute is in the process of changing its Memorandum and Articles of Association to the new Memorandum of Incorporation (MOI). The New MOI will be tabled at the Institute’s Annual General Meeting on the 21 October 2016 for adoption.

thing is not to

Please submit any proposed amendments to the MOI in writing and submit to the IAC office on or before 30 September 2016. Please e-mail proposed amendments to either info@iacsa.co.za or ceo@iacsa.co.za

Regional committees We wish to congratulate the following 2016/7 regional committees: Western Province Shafiek Tassiem (Chairman) Shawn Cupido (Vice Chairman) Leatitia van der Walt (Secretary) Jean Maritz (Treasurer) Melanie Telleman (Assistant Treasurer) Bjorn Manuel Rushaan Toefy Elmari Schwenke James Mentor Eastern Province Tabile Mzwakali (Chairman) Philoxenia Chatindo (Secretary) Julius Mputa (Treasurer) Njongo Gqoli (Marketing Manager) Portia Mhaga

Gauteng Mickey Biermann (Chairman) Ron Gibbs (1st Vice Chairman: Johannesburg) Charity Boshomane (2nd Vice Chairman: Pretoria) Colinn Alberts (Regional SARS liaison) Free State Joey Lubbe (Chairperson) Yolandé Nel (Secretary) Jean-Pierre du Plessis (CPD) Antoinette van Heerden Tsosane Mahodi

stop questioning. Albert Einstein

A dynamic world-class professional accounting institute

INSTITUTE OF ACCOUNTING AND COMMERCE

The Institute of Accounting and Commerce (IAC) is a professional accounting institute. Established in 1927, it is registered in South Africa as a non profit company (NPC). It is fully self-funded and conducts its business from its Head Office in Cape Town. MISSION STATEMENT It is the aim of the Institute of Accounting and Commerce to promote actively the effective utilisation and development of qualified manpower through the achievement of the highest standards of professional competence and ethical conduct amongst its members.

Primary Business Address 252 Rosmead Avenue Wynberg 7780

QUERIES General: Abeeda Busch info@iacsa.co.za Membership Soraya Busch members@iacsa.co.za Bronwyn Benjamin compliance@iacsa.co.za Finance Duncan Stark finance@iacsa.co.za Valencia Williams finance2@iac.co.za GM & Technical Prakash Singh gm@iacsa.co.za CEO & Technical Ehsaan Nagia: ceo@iacsa.co.za Office Hours: Monday - Thursday 08:30 - 16:30 Friday 08:30 - 16:00

www.iacsa.co.za

IAC technical Helpline Phone: (021) 761 6211 Fax: (021) 761 5089 E-mail: Prakash Singh gm@iacsa.co.za Ehsaan Nagia ceo@iacsa.co.za