The Mauritian government recently announced several incentives that make Mauritius an attractive option for foreigners to live, work and invest in.

Tarissa Wareley, an Immigration Specialist at Xpatweb, says that besides cutting the minimum investment needed for an occupation permit (OP) as INVESTOR, to half. The government also relaxed other entry requirements that make it easy for someone with a spouse and elderly parents to move to Mauritius. 

“Under the INVESTOR scheme granting an Occupation Permit (OP) - which lets you reside and open a business in Mauritius - has been halved from $100,000 (R1.7 million) to $50,000 (R870,000).

This investment remains under your control, invested in your business, with only 500 USD  (R8500) as the processing fees for the OP. If you have an OP, you can bring your parents and spouse into Mauritius as dependents without having to obtain work permits for them. The permits have also been extended from three to 10 years,” says Wareley. “Other OP options include schemes such as “professionals”, self-employed, and retirees, aimed as further easing of living and working on the rainbow island” she adds.

Wareley  believes her company has seen a rise in the number of enquiries from South Africans who are considering moving to Mauritius. “Those looking to move to Mauritius have been pleased to learn that the process has become more affordable, streamlined, and attractive to residents, entrepreneurs and business owners,” says Wareley.

Favourable tax rates for residents of Mauritius
Lead Tax Advisory of the corporate limb of Temple Group, Vandana Boolell, and Lead Corporate Advisory , Aditi Boolell, say that Mauritius’ tax system is one of the most efficient and linear, with a maximum tax rate of 15%, and with exempted income of up to USD$15 000 (R261 000) per annum. They confirmed that there are tax benefits for South Africans moving to Mauritius.

“The effective tax rates for individuals are well below those applicable to South Africa and other countries. An important difference is that Mauritian residents are only taxed to the extent of the money that they bring into the country. Any global income that isn’t sent to Mauritius won’t be taxed by the Mauritius Revenue Authority,” says Vandana Boolell.

Other key tax benefits include no withholding taxes; no capital gains taxes on property sales, sales of shares, or assets; no taxes on dividends or income; and all income being repatriable, with no caps on FOREX and with no limit on tenure.

Attractive tax policies for entrepreneurs and businesses 
Vandana Boolell says that there are a variety of tax as well as customs and duty benefits for companies operating out of Mauritius, with corporate tax being capped at 15% and the effective tax rates for companies being well below 15%.

“Freeport and export activity is capped at 3%, with export activity also being exempt from the country’s 15% VAT. Mauritius also benefits from the various Free Trade Agreements like COMESA, SADC and CECPA, among others.

Other incentives include tax holidays of up to eight years for companies in certain sectors, as well as headquarters of companies - under certain conditions - that move to Mauritius. Favourable tax policies and the newly announced relaxed immigration requirements means that it now makes more financial sense for South African businesses to set up shop in Mauritius,” concludes Vandana Boolell.

Xpatweb and Temple Group Mauritius are jointly hosting a FREE webinar to help South Africans further understand the changes that came to light during the recent Mauritius Budget Speech.
The webinar takes place via Zoom on Thursday, 9 July 2020. Secure your place soonest by contacting Rebecca Minnie on event@taxconsulting.co.za.

ENDS

MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za

ABOUT Xpatweb:
HOLISTIC EXPATRIATE SOLUTIONS
The Xpatweb group has been in existence for over 14 years and includes over 90 professionals, including immigration specialists, mobility practitioners, tax practitioners, attorneys, and chartered accountants. They offer holistic, client-centric, and fully compliant expatriate and work visa solutions. Clients can expect an exceptional end-to-end service that starts with an initial technical meeting to discuss any past challenges, a recommended optimal solution, and the creation of a roadmap and protocol for service delivery. They also offer an on-premises immigration audit service to confirm expatriate employees hold legally obtained, valid visas, and that their duties align with their visa conditions. In addition, their unique online immigration tracking system helps you to easily manage and track expatriate assignees across the globe, is fully customisable and dashboard-driven, and provides a secure repository for storing assignees’ documents.

For more information on Xpatweb please visit:
Website:  http://www.xpatweb.com/
LinkedIn: https://www.linkedin.com/company/work-permit-south-africa/
Facebook:https://www.facebook.com/xpatweb/

​

Authored by: Jean du Toit, Admitted Attorney & Head of Tax Technical at Tax Consulting SA

The Minister of Finance delivered an Emergency Budget on 24 June 2020, which can be described in diplomatic terms as gloomy, and uneventful.

Most notably, despite speculation by some to the contrary, the Minister did not impose any new taxes, which leaves SARS with no respite as it faces a mighty revenue shortfall of around R300bn.

One may expect SARS to be bleak about this, but by not coming to SARS’ aid, the Minister has taken a massive weight off Commissioner Kieswetter’s shoulders.

The Emergency Budget gives away the fact that there is perhaps no expectation that SARS will even come close to its collection targets.

The Minister of Finance has indicated that the funds will be sourced by other means, seemingly letting SARS off the hook to a degree.

In other words, it appears that life has handed SARS too many lemons to make lemonade, in these extraordinary times.

From here onwards, one foresees SARS embarking on two possible paths in the coming fiscal year, or a hybrid of the two.

The obvious, but difficult, answer to this equation is to try and stem the tide by prioritising collections– most taxpayers and their tax advisors appear to expect SARS to be extremely aggressive in its collection of taxes in the coming months, which would make sense given the government’s desperate need for more funds.

But SARS may choose to take an alternative approach to the crisis. It may decide to take it on the chin and not participate in Covid-19, taking the fiscal year as a write off. Instead of deploying its resources to try and extract taxes from a limping tax base, it will perhaps use the year of famine as opportunity.

The Commissioner himself has lamented the lack of capacity within SARS, thus this may be a rebuilding phase to lay a new solid foundation for the future.  

In line with SARS’ 2024 Vision, the Commissioner has made it very clear that he wants to reimagine SARS where its work will be informed by data-driven insights, self-learning computers, artificial intelligence and interconnectivity of people and devices.

This might be the ideal opportunity to make this happen. But is this the route to take?

Whilst the second option might be the wiser of the two, it is hard to see how a systems approach will ultimately be the only answer. For every piece of tax law, there exists optimisation strategies; similarly, for each system there will be those all too willing to find ways to find hacks thereto.

The Commissioner should perhaps resist turning its employees into efficient system administrators; rather re-instil the proud SARS auditor skillsets, which some believe have departed from the revenue authority many years ago.

There is nothing like a proper in-depth SARS audit, by a seasoned professional, to unnerve even the most compliant. Confidence in tax positions adopted, almost instantly turned into panic with a couple of carefully aimed SARS audit questions.

Perhaps SARS will roll up their sleeves and get back to the brass tacks of auditing and outsmarting tax dodgers. If SARS uses this opportunity wisely, we may just see a more resilient and assertive revenue authority emerging from the debris of the pandemic.  
​
ENDS
 
MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za

ABOUT Tax Consulting SA:
Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance.

For more information on Tax Consulting please visit:
Website:  http://www.taxconsulting.co.za/
LinkedIn: Tax Consulting South Africa
Facebook:Tax Consulting South Africa

Immigration and International Mobility firm, Xpatweb, recently launched a survey to measure the impact of Covid-19 on the immigration industry.

Tarissa Wareley, an Immigration Specialist at Xpatweb, says some of the issues the Africa Permit Impact Survey aims to measure how many people are grounded either in or outside an African country that they work in due to the pandemic, which market sectors have been impacted the most, and how the government immigration departments of various African countries are affected by increased or reduced VISA and work permit applications. 

“Many people have found themselves stuck either in an African country or outside the relevant African country they need to be in for work, either with or without current employment and with visas and passports that are about to expire.  The most pressing need is to find out how many international workers are affected across Africa. The intention is to provide this information to the government so that they can prepare for a potential influx of applications once travel restrictions lift,” says Wareley.
​
Preparing for a spike in work permit and visa applications
The survey is being distributed to multi-national companies with operations in Africa who specifically employ overseas workers for both short and long term assignments.

“Once the survey is complete, we could potentially show different countries’ immigration departments what type of spike in work permit and visa applications they can expect. Xpatweb hopes to help these departments find a way to streamline these applications and get people into the countries they need to be in for work as efficiently as possible,” says Wareley.

Wareley says some African countries’ immigration services are still open, with many of them still processing work permits but not visas. The processing time of these applications remains very slow due to Covid 19. However, Wareley’s team anticipate receiving an outcome as soon as the Immigration Authorities resume their activities in full.

“Many countries still offer limited immigration services. Work permits, which are needed before a visa application can be done, can be completed in most countries during the lockdown. With this first step complete, workers’ visa applications can be processed as soon as restrictions lift,” says Wareley.

Companies urged to be proactive about employee worker and visa applications
For many foreign workers, work permit and visa applications are often a rushed administrative task that happens at the last minute.

Wareley says companies will have to be more proactive about applications to avoid bottlenecks that will likely exist at many immigration departments after lockdown. She also added that, she highly recommends for all the paperwork to be prepared whilst waiting for the travel restrictions to be lifted. This will allow us to be amongst the first applicants after lockdown.

“Many African infrastructure projects, such as those in the oil and gas sector, for example, have been put on hold due to Covid-19.   Making sure that companies have the right people to get projects back up and running as soon as possible is a top priority for both the public and private sectors.

A proactive approach will ensure companies who employ internationally and their staff avoid waiting and headaches down the line. Apply for work permits and visas well in advance so that people are allowed to enter the country as quickly as possible,” concludes Wareley.

ENDS
 
MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za

ABOUT Xpatweb:
HOLISTIC EXPATRIATE SOLUTIONS
The Xpatweb group has been in existence for over 15 years and includes over 100 professionals, including immigration specialists, mobility practitioners, tax practitioners, attorneys, and chartered accountants. They offer holistic, client-centric, and fully compliant expatriate and work visa solutions. Clients can expect an exceptional end-to-end service that starts with an initial technical meeting to discuss any past challenges, a recommended optimal solution, and the creation of a roadmap and protocol for service delivery. They also offer an on-premises immigration audit service to confirm expatriate employees hold legally obtained, valid visas, and that their duties align with their visa conditions. In addition, their unique online immigration tracking system helps you to easily manage and track expatriate assignees across the globe, is fully customisable and dashboard-driven, and provides a secure repository for storing assignees’ documents.

For more information on Xpatweb please visit:
Website:  http://www.xpatweb.com/
LinkedIn: https://www.linkedin.com/company/work-permit-south-africa/
Facebook:https://www.facebook.com/xpatweb/
​

Starting a new job in an employee’s career is usually an exciting event with the additional prospect of increasing their earning potential in most cases. 

With the evolution of payroll systems over the years, it is natural to accept that there should not be any discrepancies between what an employee has been offered and what he receives when they obtain their first payslip.

Differences in net take home pay
Unfortunately, it is not that uncommon for new employees to be faced with a different salary package at the end of their first month than the one they were initially promised as part of the recruitment process.

Tanya Tosen, Master Mobility, Tax and Remuneration Specialist at Remuneration Consultants (Tax Consulting SA), says the general practice during the recruitment process is to present the prospective employee with a “dummy payslip” as an indicator to what the employee can expect in their net  take-home pay.

Ultimately employees are mainly concerned about what will be deposited into their bank accounts after all their deductions which include statutory taxes have been made. It therefore can cause a major break in trust if what has been presented in the dummy pay-slip and the offer letter is not fully aligned in the employee’s first payslip they receive.

In-House Package Structuring Tool not aligned
Tosen says the discrepancies may be attributed to the use of an in-house package structuring tool that has not been configured properly, or the tax treatment of certain benefits which have been calculated incorrectly.

This problem is further exacerbated in an environment where there are flexible benefits structured into the employee’s package whereby an employee wants to see what the impact is on his take-home pay if he selects different benefit options.

“This in effect means that the payroll department will have to run multiple dummy pay-slips to show this impact to the employee’s net take-home pay based on the employee selections made. This can be time-consuming and an additional administrative burden on payroll department,” says Tosen.

In addition, companies should ensure that the pay-slip design is simplistic and easy to understand. The payslip should tie back to the offer letter prospective employees receive to minimise additional queries and create further mistrust. 

Fixed Package Structure
It is also important to note that employees who receive fixed packages i.e. – a fixed basic salary and benefits which remain constant throughout the tax year – should not be faced with fluctuating Pay-as-You-Earn amounts and a different net pay from one month to the next. It is only when the employees earn variable amounts in addition to their fixed packages should there be a fluctuation in net pay and PAYE.

“If this is not the case, it will be necessary to do an analysis of the payroll to find the specific reasons for these discrepancies,” says Tosen.

Bespoke Package Structuring Tool
Remuneration Consultants has developed a bespoke Package Structuring Tool for companies as a solution to the above problems. The tool is customized to the company’s remuneration structure and is configured to mirror exactly what the payroll should reflect when a dummy payslip is issued.

”We update this customized tool for our clients in accordance with any legislative or regulatory changes annually.  This tool also provides an additional layer of comfort in ensuring optimal compliance from a tax perspective is maintained.”
​
The structuring tool also serves as a double check to the payroll system; it is able to provide a dummy payslip to new employees based on selection criteria available in the company’s remuneration structure and it will also reflect the net impact of increases or decreases to a salary package. 

“In addition, it really is an excellent way of alleviating any additional administrative pressures companies may be facing amidst many other concerns raised by the Covid-19 pandemic at the moment where many employees are faced with changes to their current package structure.” 

ENDS

MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za

About Remuneration Consultants:
Remuneration Consultants South Africa provides market leading remuneration and employee benefit consulting services.Our competitive advantage is adding a layer of tax optimization to the solutions we deliver. This enables us to optimally structure your Total Rewards System from the ground up to be fully compliant, where tax is planned proactively and not a mere afterthought. Our team consists of full-time tax attorneys, tax professionals, reward specialists, global remuneration professionals (GRP), chartered accountants, professional accountants and psychometrists.
 
For more information on Remuneration Consultants please visit:
Website: www.remunerationconsultants.co.za
LinkedIn: Remuneration Consultants
Facebook: Remuneration Consultants
​

 Author:  Marisa Jacobs, Director and Head of Immigration and Mobility at Xpatweb

A recent survey by Xpatweb shows that 44% of employers are faced with work visas for their expatriate workers that are about to expire or will expire during the Covid-19 lockdown.

The survey gives a sense of how the lockdown is impacting expat workers and new assignees who were due to enter SA. More than 150 JSE-listed and large multinational companies operating across Africa participated in the survey.

According to the survey, 37% of the participants have new assignees that were due to enter the country during the first quarter of 2020.

They are waiting for the lockdown regulations to be lifted in order to enter SA.

These expats will then need to obtain work visas from 34 different SA embassies around the world. Top of the list of countries from where the assignees will be coming from is Germany, Zimbabwe, China, India and Spain.

Embassies that will also be kept busy include Bangladesh, Kazakhstan, Serbia, New Zealand and the US.

Interestingly, 84% of the participating companies indicated that they are not affected by revoked visas.  When the Department of Home Affairs issued its first directive – just before the lockdown and the travel ban – it stated that certain visas issued to people from high risk countries would be revoked.

The Department has further clarified that only visas issued to people from China and Iran, and who had not yet activated their visas at the time of the travel ban, would be revoked. Xpatweb has confirmed this position with the Department.

Expats who had an existing visa and went back to their home countries would be able to re-enter SA with their existing visa when travel ban is lifted. They were concerned that their visas would be revoked and that they would have to re-apply.

That is however not the case. These assignees will be able to enter SA again at a later date using their existing visas.

Companies seem to be dealing differently with the start dates of assignments where assignees had not yet entered SA at the time of the travel ban being imposed.

In the case of an intra-company transfer, assignees are in many cases simply remaining in their current role with the foreign entity with a delayed assignment start date to be confirmed until the travel restrictions are lifted.

There is certainly going to be a mismatch between the work visa issue dates and the actual assignment start dates.
In the case of new assignees who have already resigned from a previous position, companies may request that these expats start working from abroad until the borders open again.

According to the survey 9% of expats either resigned their position or declined a position due to the coronavirus outbreak. Employers have indicated that their preferred recruitment destination to have these positions filled is internationally (30%) compared to locally (20%).  

Another 20% said they will look both locally and internationally
It is important to remember that the work visa does not become active on the day it is issued. It only becomes active once the expat travels through a border and it is loaded onto the Department’s track-and-trace system.

We trust that the Department will be quite lenient and understanding because current circumstances are beyond anybody’s control.

Please click here for a copy of the full survey results.
​
ENDS

MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za

ABOUT Xpatweb:
HOLISTIC EXPATRIATE SOLUTIONS
The Xpatweb group has been in existence for over 14 years and includes over 90 professionals, including immigration specialists, mobility practitioners, tax practitioners, attorneys, and chartered accountants. They offer holistic, client-centric, and fully compliant expatriate and work visa solutions. Clients can expect an exceptional end-to-end service that starts with an initial technical meeting to discuss any past challenges, a recommended optimal solution, and the creation of a roadmap and protocol for service delivery. They also offer an on-premises immigration audit service to confirm expatriate employees hold legally obtained, valid visas, and that their duties align with their visa conditions. In addition, their unique online immigration tracking system helps you to easily manage and track expatriate assignees across the globe, is fully customisable and dashboard-driven, and provides a secure repository for storing assignees’ documents.
​
For more information on Xpatweb please visit:
Website:  http://www.xpatweb.com/
LinkedIn: https://www.linkedin.com/company/work-permit-south-africa/
Facebook:https://www.facebook.com/xpatweb/
​

Authored by: Marisa Jacobs, Director at Xpatweb

On 23 May 2020, the Department of Home Affairs (“DHA”) has confirmed that international travel will be permitted for South Africans to travel out of South Africa, should they fall within one of the (limited) categories as outlined by the DHA.

​The main categories which are being considered for those who are required to travel are: work, study, to take up permanent residency, medical conditions and/or family reunions.

These categories provide concessions towards many situations South Africans find themselves in, and where international travel is an important consideration, there is a special onus on the reconciliation of family members globally.  

Getting Parent(s) Out of South Africa
We have seen an increase concern about the state of readiness of South Africa over the following four to six months as the virus works its way through society. Government’s publicized “peak” is between August or September 2020, with some experts weighing in this may be more end July 2020. The questions remain on how South Africa as a society will deal herewith, adhering to the rules of good hygiene, social distancing and protecting the vulnerable categories.

Many families are undergoing severe distress due to separation and isolation following the travel bans that have been implemented globally. The family reunion category announced by the South African Department of Home Affairs provides the perfect window of opportunity for concerned SAFFA expats abroad to be reunited with their parent(s) and/or grandparent(s) currently stuck in South Africa.

Whether these loved ones are frail, isolated, at risk to the Corona Virus in South Africa and/or if it has always been the plan to relocate them abroad, now may be opportune time to make use of the concessions to get them safely abroad, and with relaxed requirements.

Will Parents be safer in South Africa or abroad?
This is the important decision which each family needs to make, and no situation is exactly the same. On the one hand, keeping one’s parents or older generation in a familiar environment is extremely important for some.

Push factors include there being no quality of life where they are effectively in lockdown from the virus, they stay in a society not known for its remarkable degree of adherence to rules and questions on how effective the health system will deal with the pandemic. Some clients have also indicated that they would rather move their parents closer to them and a country which has already passed the “peak” and they foresee a better chance overseas than in South Africa.

Opinions are very much divided hereon, but the Department of Home Affairs should be applauded for recognizing that families with means should be allowed to reunite and there is a benefit to all where parents are safely with the children.

Application Requirements
A typical application would require a copy of valid South African passport page, a letter from the country they will be travelling to confirming admissibility, permission for transiting countries, proof of means of travel and the intended date of departure.

The international travel is however subject to South African Department of Home Affairs’s approval and which is required before one may proceed with any travel arrangements. Currently, the complexity of this process is unclear, and albeit one would expect the normal strict Home Affairs protocols to be followed, there will be the normal leniency on properly motivated cases.

Assistance for two or more loved ones
The new dispensation additionally makes provision that a ‘group application’ may be submitted to the DHA should there be more than one relative required to travel out of South Africa. This will thus be a single application and the supporting information/documentation must then be sent for each member of the group.

Where you need more information hereon, have a more complex or sensitive situation which needs assistance, more information is shared on https://www.xpatweb.com/covid-19-international-travel-for-south-africans/ and please contact travel@xpatweb.com.
 
ENDS
 
MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za

ABOUT Xpatweb:
HOLISTIC EXPATRIATE SOLUTIONS
The Xpatweb group has been in existence for over 14 years and includes over 90 professionals, including immigration specialists, mobility practitioners, tax practitioners, attorneys, and chartered accountants. They offer holistic, client-centric, and fully compliant expatriate and work visa solutions. Clients can expect an exceptional end-to-end service that starts with an initial technical meeting to discuss any past challenges, a recommended optimal solution, and the creation of a roadmap and protocol for service delivery. They also offer an on-premises immigration audit service to confirm expatriate employees hold legally obtained, valid visas, and that their duties align with their visa conditions. In addition, their unique online immigration tracking system helps you to easily manage and track expatriate assignees across the globe, is fully customisable and dashboard-driven, and provides a secure repository for storing assignees’ documents.

For more information on Xpatweb please visit:
Website:  http://www.xpatweb.com/
LinkedIn: https://www.linkedin.com/company/work-permit-south-africa/
Facebook:https://www.facebook.com/xpatweb/

​

​Authors:  Darren Britz, Admitted Attorney, and Laurence Mbokwane, Tax Consultant, at Tax Consulting SA

Many South Africans who had to start working from home due to the national coronavirus lockdown imposed on businesses will not yet be able to claim “home office expenses”.

People who are in a traditional employer-employee relationship earning a salaried income have the expectation and general understanding that the employer is responsible for business expenses.

Therefor there is no automatic deduction employees can rely on to claim expenses.

The most important test for claiming expenses is that the person must have spent at least 50% of their time in a tax year working from home.

This means that people will have to continue working from home until at least the end of September for them to be able to claim (six months since lockdown).

The employee will be required to prove to the South African Revenue Service (SARS) that they have created a dedicated area in their home where they conduct their trade.

This is not simply a table in the corner of a room. It must resemble an office when SARS comes knocking.

Only then will they be able to claim expenses such as a portion of the rental or interest on bond payments, electricity costs, and other office expenses such as stationary, airtime and data costs.

Different options
There are currently two situations.

The one is where the employee takes it upon himself to incur the costs necessary to continue working from home and the employer does not reimburse his costs.

These employees are seeking some relief through deductions from their taxable income.
The other is that the employer pays an amount upfront for certain expenses.

This has the risk of attracting fringe benefits tax. It becomes a fine line whether the costs were incurred to fund business expenses or if it was used for the employee’s personal benefit.

The ideal position would be through reimbursements. It does not sound fair to the employee, but the better approach would be for them to incur the costs and then to claim it as a reimbursement from the employer.

It will be easier to submit proof (invoices and receipts) that the expense was for business purposes than having received a cash amount paid and having to prove how it was used.

If the employee and employer negotiate an arrangement for the employee to continue working from home indefinitely, it is important to obtain a letter from the employer setting out the new arrangement.

It will also be important to keep detailed records (supporting documentation) of all the expenses that will be claimed.

Abandon the claim
People who have been working from home temporarily and just “made-do” in the short term (using the dining room table as their workspace) should abandon claims for tax deductions. We would not recommend they pursue this route seriously.

However, people who earn more than 50% of their income through commission or qualify as independent contractors remain entitled to claim their businesses expenses as they have been doing before the imposition of the lockdown.

Should you still consider claiming from SARS ensure that you comply to all requirements and have your documentation and office space ready should SARS request the necessary proof.

ENDS

MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za

About Remuneration Consultants:
Remuneration Consultants South Africa provides market leading remuneration and employee benefit consulting services.
Our competitive advantage is adding a layer of tax optimization to the solutions we deliver. This enables us to optimally structure your Total Rewards System from the ground up to be fully compliant, where tax is planned proactively and not a mere afterthought.
Our team consists of full-time tax attorneys, tax professionals, reward specialists, global remuneration professionals (GRP), chartered accountants, professional accountants and psychometrists.
 
For more information on Remuneration Consultants please visit:
Website: www.remunerationconsultants.co.za
LinkedIn: Remuneration Consultants
Facebook: Remuneration Consultants

Authors: Darren Britz, Attorney, Taritha Oosthuizen, Remuneration Specialist at Remuneration Specialists

Many companies are considering or are in the process of retrenching workers due to the economic woes of the country that is being exacerbated by the imposed lockdown to curb the spread of the Covid-19 disease.

A critical part of retrenchment discussions should focus on the tax consequences on the final payments.

Getting it wrong can have severe financial implications for employees.

The Income Tax Act allows for a far more favourable tax treatment on retirement, death or severance benefits. The first R500,000 severance benefit is tax free and the amount above R500,000 up to R700,000 is taxed at 18%. Tax of 18% is charged on income up to R250,900. Only R25,000 is tax free if an employee makes early withdrawals from retirement funds.

The Labour Law allows for a minimum payment of one week per completed year of service. In many instance companies are prepared to sweeten the deal if enough people take voluntary packages, thus preventing a formal involuntary process.

It is advisable to have the final agreement in writing. It does not have to be a formal legal document. The language during the discussions becomes very important.

When you talk about the retrenchment amount, you have to ask about the tax costs. Employees should ask for a very basic calculation to see what the impact of the tax liability will be.

Previous severance payments
Employees are strongly advised to remind the current employer of any previous severance payments or retirement lump sums that was paid to them. This means that the full R500,000 tax exempt amount is no longer available.

Many employees tend to forget that the R500,000 tax free amount is over their lifetime and not for every retrenchment event.

Your employer’s tax calculation will be wrong if he is not made aware of the amounts received previously. If the employer knows that your tax bill may be more because the exempt amount has been depleted or eaten into, he may offer a bigger package to put you in a better position.

Tax directives
Once the discussion is complete and the employer and employee have reached an agreement, the employer must apply for a tax directive from the South African Revenue Service (SARS) to set out the tax obligation in terms of the severance payment.

The employer will deduct the tax as indicated in the directive and pay it to SARS before the retrenchment package is paid to the employee. In many instances employees are left aghast because they received less than what they anticipated – mostly because they did not fully understand the tax consequences.

It has also happened that employers pay a severance amount but neglect to apply for a tax directive. The employee only becomes aware of the tax liability when he files his tax return months after receiving the amount and SARS taxes it as normal income.

Tax debt
Equally devastating is the realisation that the employee had outstanding tax debt which will also be deducted from the agreed amount. Debt may arise when employees neglect to file returns when they are obliged to do so.

Once the directive has been issued and the payment made to the retrenched employee their only remedy is to lodge an objection when there is a dispute.

Only the employer can request the cancellation of a directive when there are errors.  One such error - that can cost a taxpayer dearly - is when the “wrong box” on the directive is ticked.

The directive provides for severance payments, but employers have inadvertently ticked “other”, which means the amount will be taxed at normal income tax rates and not the beneficial rate for severance benefits.

Talk first, pay later
Ideally the employer should have another discussion with the employee once the tax directive has been issued and before the final payment is made.

That would be far more beneficial because the employer will be able to cancel a disputed directive and reapply with the correct information. It is a simple and easy process, but should be done before the payment is made to the retrenched employee.

Employees are not obliged to accept a voluntary retrenchment offer if the payment terms are not acceptable.

However, it would be prudent to only reject an offer if the employee is fairly certain he will survive a formal retrenchment process, or if the offer is equal or lower than what he would get with an involuntary retrenchment process where he may only receive the statutory minimum.

While retrenchment is an extremely sensitive matter, a high level of discernment, accuracy and professionalism will go a long way in ensuring that the best tax outcome is achieved.
​
ENDS

MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za
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About Remuneration Consultants:
Remuneration Consultants South Africa provides market leading remuneration and employee benefit consulting services.
Our competitive advantage is adding a layer of tax optimization to the solutions we deliver. This enables us to optimally structure your Total Rewards System from the ground up to be fully compliant, where tax is planned proactively and not a mere afterthought. Our team consists of full-time tax attorneys, tax professionals, reward specialists, global remuneration professionals (GRP), chartered accountants, professional accountants and psychometrists.
 
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With the first provisional tax payment being due on 31 August 2020, there is some confusion regarding whether expatriates are deemed to be provisional taxpayers by the South African Revenue Service (SARS) or not.

Reabetswe Moloi, Expatriate Tax Attorney at Tax Consulting SA, says that an expatriate may be regarded as a provisional taxpayer if their employer isn’t registered for PAYE in South Africa.

South Africans working abroad are likely working for employers who aren’t registered for employees’ tax with SARS. In this case, they will be classified as provisional taxpayers and are obliged to submit a provisional tax return.

As of 1 March 2020, provided they meet the requirements, only the first R1,25 million earned by a South African tax resident working abroad will be exempt from tax.

Therefore, South African expatriates who remain tax residents and who either earn above the R1,25 million exemption or who do not qualify to claim the exemption should anticipate to have to pay their first provisional expat tax in August 2020” says Moloi.

Which expatriates are paying provisional tax, and why?
In South Africa, provisional taxpayers are people who earn income other than a salary.

Consequently, most salary earners do not pay provisional tax, but if a person earns extra income such as rental income from a property or other income from a trade, they will be a provisional taxpayer, even if they also receive a salary.

This general rule, however, doesn’t apply to expatriates who only earn foreign employment income.

“In terms of the Fourth Schedule of the Income Tax Act, a provisional taxpayer is defined as any natural person who derives income, other than remuneration or a natural person who derives remuneration from an employer who is not registered for employees’ tax.

Therefore, despite only earning a foreign employment income, where the employer of an expatriate is not registered for employees’ tax, the expatriate will be regarded as a provisional taxpayer and will be liable to submit a provisional tax return and make payment accordingly to SARS” says Moloi.

The benefit of provisional tax is the ability to plan and save
Provisional tax is not a separate tax that is different to income tax. It is merely a system that requires taxpayers to provide for their final taxliability in advance. 

“Where a locally registered employer would have withheld tax, the taxpayer would find - upon assessment - that their tax liability is settled.

Where a foreign employer does not withhold tax to be paid over to SARS, provisional tax ensures that the taxpayer’s tax affairs are up to date on a biannual basis and their tax liability is paid over to SARS in two separate payments in a year.

Provisional tax encourages tax planning and gives expatriates the ability to anticipate what their tax liability will be,” says Moloi.

Tax Consulting South Africa offers an Expatriate Calculation Service that helps provisional taxpayers ensure they are exercising due diligence on their tax affairs.

“The Calculation Service takes everything from fringe benefits and exchange rates to bonuses and tax credits into account to help expatriates plan and save for any tax liabilities they may have,” concludes Moloi. 

ENDS

MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za
ABOUT Tax Consulting SA:
Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance.
For more information on Tax Consulting please visit:
Website:  http://www.taxconsulting.co.za/
LinkedIn: Tax Consulting South Africa
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Authored by: Jean du Toit, Head of Tax Technical at Tax Consulting SA

On 5 May 2020, the Commissioner for SARS made a profound media statement, which gave a detailed account of projected revenue collection in light of the COVID-19 crisis, but also gave valuable insight of what we can expect from SARS in coming months. The most important aspects of the address can be unpacked as follows:

Pensive statement – the first thing many would notice is how comprehensive this statement is, and it is clear the Commissioner poured a lot of thought into it. Arguably it was not incumbent for him to go to such lengths, but it reveals the gravity of the message he wanted to convey and also the context to what taxpayers may experience from SARS in the coming months.

SARS officials returning to work – following a period where SARS operated with staffing levels of between 15 and 30%, its employees will now start returning to work – to meet taxpayer demands and, most importantly, to deliver on its mandate to collect revenue.

Grim economic outlook – with a struggling economy pre-COVID-19, the credit rating downgrade and the prevailing crisis it is anticipated that our economy will contract by between 5.4% and 16%. Frankly this is a staggering statistic, but a crisis of this magnitude has a devastating snowball effect where we end up with less participants in the economy on the one hand and more being reliant on government support on the other.

Decreased revenue collection – April yielded a significant decline in revenue collection from the previous year, totalling a drop of R9 billion (-8.8%). The slide was experienced across all tax types – PAYE (-5.2%); domestic VAT (-4.3%); overall import tax (-19.7%); specific excise duties (-54%); and CIT (-55.4). SARS does not expect our fortunes to change any time soon and estimates that revenue collection could be R285 billion below the amount projected in the budget in February.

Job losses and failing businesses – SARS looked at the tax directives finalised during April which reveals that over 20 000 employees were retrenched during April. According to figures sourced from STATS SA, prospects for businesses look equally dire – liquidations increased by 12.3%, 46.4% of businesses have temporarily closed their doors and 54% of businesses predict they could not survive beyond the three-month mark of the pandemic.

An improved SARS – it seems we are dealing with a vastly improved SARS. The institution has shown its agility in operating effectively during these times, whilst observing the spirit of the lockdown. SARS also used this time smartly to improve the integrity and effectiveness of their systems. It is clear the Commissioner appreciates the challenge that lies ahead and he and those around him have developed a clear 3-step plan to enforce compliance and optimise revenue collection in the coming months.

Third party information – the Commissioner made it clear SARS will rely more heavily on information sourced from banks, employers, financial services companies who administer retirement funds and insurance schemes to assess taxpayers. It will also use information available from the population register, the companies register and the Deeds Office to triangulate taxpayer information. This is an encouraging initiative, as these sources were vastly underutilised in the past. Items such as rental income not disclosed will be easily detected if SARS compares its records with that of the Deeds Office.

Aggressive enforcement – the statement does not expressly warn taxpayers of this, but with the current permutations, SARS’ hands are tied; it has no choice but to extract every penny from the tax base. With the exigence to collect taxes and enhanced capacity, we are expecting more audits and a tougher SARS in the coming months. Those who historically had the nerve to try their luck with SARS should think carefully before they choose to run the gauntlet again this year.

Individual wealth no. 1 on the list – all tax types are underperforming as a result of the pandemic, but some will be under more pressure than others. Businesses are collapsing, with more to follow, and those who manage to stay afloat may report losses for the foreseeable future, which means corporate income tax will fall sharply. The contraction in the economy and the restriction of many activities mean less transactions which impacts heavily an VAT. The same rationale applies to imports and exports where customs revenue will see a significant drop, not to mention the loss in excise duties from the prohibition on sales of alcohol and tabaco. This leaves us with personal income tax where we will see a decline but perhaps not as piercing. The over-taxed minority will potentially face an even heavier burden this season, as SARS will have to extract all it can from those with the means to contribute. SARS will no longer shut its eyes to trust structures, rental properties and offshore assets.

Commissioner’s report card – Edward Kieswetter closed off by reflecting on his first year as Commissioner. Lest we forget, when he assumed his position, SARS faced a serious breakdown of governance and integrity, with structures and employee relationships left festering. From our perspective, the Commissioner is dedicated to serving a higher purpose and he has a clear vision on what he wishes to achieve, which is to restore SARS as a respected institution that serves compliant taxpayers as it should, whilst being equally tough on transgressors. Thus far, we have seen positive initiatives being rolled out in achieving this vision and while the wheels may turn slowly, SARS appears to be on the right track.

ENDS

MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za

ABOUT Tax Consulting SA:
Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance.

For more information on Tax Consulting please visit:
Website:  http://www.taxconsulting.co.za/
LinkedIn: Tax Consulting South Africa
Facebook:Tax Consulting South Africa