Monthly Archives: March 2018

Being happy on International Day of Happiness!

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The Newtons Staff really brought on some smiles on International Day of Happiness on 20 March.

The guys rocked their red bow ties, the ladies bloomed with their yellow flowers and pledges were made to increase happiness.

To see what the story behind International Day of Happiness is about please follow the link to www.dayofhappiness.net

MSI Global Alliance adds two accounting members in India

MSI Global Alliance, one of the world’s leading international associations of independent legal and accounting firms, is delighted to welcome two new accounting members in India, Paperchase Business Services Pvt Ltd. and Anjaneyulu & Co.

Paperchase Business Services Pvt Ltd, based in Ahmedabad, provides key accounting and tax services with a strong focus on book keeping, management accounting, payroll and year-end accounting. The firm also provides outsourcing services to clients from various English-speaking countries.

The three partner firm, with a team of over 50 staff, serves small and medium-sized businesses and individuals from a wide range of industry sectors, which include recruitment, construction, hospitality, charities and healthcare providers.

Maulik Patel, managing partner of Paperchase Business Services Pvt Ltd, comments, ”We are delighted to join MSI, which will help us network with lot of dynamic firms for mutually beneficial relationships.”

Located in Hyderabad, Anjaneyulu & Co. joins MSI with seven partners and a team of 30 staff. The long- established firm, founded in 1980, provides comprehensive audit and assurance services as well as accounting, tax planning and advisory services to national and international clients.

D V Anjaneyulu, managing partner of Anjaneyulu & Co., comments, “We are pleased to join MSI, a global association of dynamic professionals, which will enhance our reach globally. We look forward to a long and fruitful relationship.”

Tim Wilson, chief executive of MSI, comments, “I am very pleased to welcome our two new accounting members in India. We are looking to expand MSI’s membership coverage in India and both firms provide a strong offering for our members and their clients globally.”

The admission of Paperchase Business Services Pvt Ltd and Anjaneyulu & Co. adds to MSI’s presence in India, which comprises seven member firms located in the key business centres of Ahmedabad, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi.

For further information please contact

MSI Global Alliance
Pauline Rottstock, Marketing and Business Development Manager
Tel: +44 20 7583 7000
Email: prottstock@msiglobal.org

About MSI Global Alliance

MSI is one of the world’s leading international associations of independent legal and accounting firms with over 250 carefully selected member firms in more than 100 countries. MSI was formed in 1990 in response to the growing need for cross-border co-operation between professional services firms.

MSI members worldwide work closely together to provide integrated, multidisciplinary services to meet each client’s legal and regulatory obligations and growth ambitions. MSI is ranked among the Top 20 international accounting and legal networks, associations & alliances.

Visit our website: www.msiglobal.org

Medical scheme fees tax credit

Section 6A of the Income Tax Act provides for a medical scheme fees tax credit (“MTC”), or rebate, which reduces the amount of income tax payable by a natural person (hereinafter referred to as the “taxpayer”). The MTC applies to the fees paid by the taxpayer to a registered medical scheme for his or her own benefit or for the benefit of his or her dependents.

The MTC is a fixed monthly amount which increases based on the number of dependents. For the 2017/2018 year of assessment (1 March 2017 to 28 February 2018), the credit is R303 for the taxpayer, a further R303 for the first dependent and R204 for each of the taxpayer’s additional dependents.

A “dependent” in relation to a taxpayer for purposes of section 6A is defined in the Medical Schemes Act. With reference to the member of the medical scheme (here the taxpayer), it includes the spouse or partner of the taxpayer, any dependent children or other members of the taxpayer’s immediate family in respect of whom the taxpayer is liable for family care and support as well as any other person who, under the rules of the relevant medical scheme is recognised as a dependent of the taxpayer.

Contributions paid by the employer of a taxpayer are also deemed to have been paid by that taxpayer to the extent that the amount has been included in the income of that person as a taxable benefit. Contributions by an employer made after an employee has retired carries no fringe benefit value. The converse is also true: where an employer pays an ex-employee’s total contributions to a medical scheme, the benefit will have no value for tax purposes and the ex-employee will not be entitled to claim the MTC for the months after retirement. Should the ex-employee, however, pay any portion of the contributions to the medical scheme during the months after retirement, he or she will be able to claim the MTC for those months. This is due thereto that in order to claim the MTC, it is merely required that fees are paid by the taxpayer. Any contribution paid by the taxpayer should therefore give rise to the MTC.

In summary, any fees paid by the taxpayer him- or herself (whether the full contribution or not), the estate or employer (provided that the amount is taken into account as a taxable benefit) are taken into account for the purposes of MTC as contributions paid by the taxpayer.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Interest received by non-residents on SA bank accounts

Persons that are not tax resident in South Africa (“SA”) are only taxed in SA on income received by or which accrued to such non-resident from an SA source. This will include interest received on an SA bank account.

Non-residents may, however, be exempt from SA income tax on interest earned in terms of section 10(1)(h) of the Income Tax Act. The section 10(1)(h) exemption does not apply though to the extent that the non-resident is a natural person who was physically present in SA for a period exceeding 183 days in the 12-month period preceding the date on which the interest was received by or accrued. In these circumstances, the non-resident must register for income tax and declare such SA source interest to the South African Revenue Service. The exemption will also not apply where the debt from which the interest arises is effectively connected to a permanent establishment of that person in SA or where the interest received is in the form of an annuity.

The general interest exemptions in section 10(1)(i) may, however, still apply to non-residents that are natural persons.

Other than for an income tax effect, non-residents earning SA source interest can also be subject to the withholding tax on interest (“WTI”) at a rate of 15%, unless certain exemptions apply.

This withholding rate can be reduced by an applicable double taxation agreement between SA and the foreign country where the person (who is a non-resident for SA tax purposes) is tax resident. Two exemptions from WTI may apply to non-residents receiving interest on an SA bank account. Firstly, there is a general exemption from interest received from SA banks.Secondly, no WTI is payable where the non-resident exceeds the 183-day threshold as set out above.

In summary, non-residents are not subject to WTI on interest received on an SA bank account. Also, no liability for income tax will arise on condition that none of the exclusions in section 10 mentioned above applies. To the extent that any of these exclusions apply though, the non-resident will have to register for income tax in SA and submit an income tax return. An applicable double taxation agreement should also be considered as it may contain specific provisions relating to the taxation of interest and providing relief to the extent that none is afforded by the domestic legislation discussed in this article, although this will not affect the obligation to submit an income tax return to the South African Revenue Service.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Budget 2018

Following the annual national budget speech delivered by Finance Minister Malusi Gigaba on 21 February, we highlight some of the most significant matters arising below:

  • The much-debated VAT rate has been increased from 14% to 15%, which was widely expected although hugely unpopular given the political sensitivity coupled with the effect that this will have on the poor;
  • The corporate income tax and transfer duty rates have been left unchanged;
  • The CGT inclusion rate (40% for individuals, 80% for companies or trusts) was left unchanged too (although we do expect these to go up to 50% / 100% in the near future);
  • “Bracket creeps” or “stealth taxes” had a significant impact on the current budget and refer to marginal tax brackets not being adjusted upwards for the effect of inflation annually. This year, no adjustments will be made to the top 4 tax brackets for individuals. Assuming that inflation is 6%, it will therefore be 6% “easier” for taxpayers to fall into a higher tax bracket compared to last year.
  • A new estate duty / donations tax bracket is to be introduced for donations or estates in excess of R30 million, and which will attract tax at 25%. Amounts below this threshold will still be taxed at the prevailing rate of 20%.
  • The above and other most significant changes can be summarised as follows:

 

WAS

NOW

Top marginal PIT rate

45%

45%

VAT rate

14%

15%

Tax rate for trusts

45%

45%

Estate duty for estates > R30m

20%

25%

CGT annual exclusion

R40,000

R40,000

Primary rebate for individuals

R13,635

R14,067

The Minister also alluded to the following matters which would be subject to legislative intervention or refinement during the course of the legislative year ahead:

  • Interaction of anti-avoidance rules relating to share buybacks and dividend stripping and the general reorganisation rules are to be reviewed, since current rules may affect legitimate transactions (especially in the preference share funding context);
  • Appropriateness of the current high tax exemption as part of the “controlled foreign company” (CFC) regime will be considered. However, legislation targeting foreign companies held by foreign trusts (which have SA resident beneficiaries) and classifying these as CFCs will be reintroduced;
  • To further encourage venture capital company investments, the appropriateness of the current passive investment income threshold is to be revisited, as well as the timing of the “group company” disqualification requirement;
  • The “official rate of interest” (used to calculate tax consequences of interest-free or low-interest loans), currently at prime less 2.5%, is to be increased; and
  • Further refinements will be made to the new “debt relief” legislation introduced in 2017 to remove anomalies.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

VAT Increase and Accounting Systems

As you are aware, the National Treasury announced an increase in Value Added Tax (VAT) from 14% to 15% effective 1 April 2018.

We urge you to ensure that your accounting systems are set up to process transactions at the new VAT rate of 15% from 1 April 2018. This is to avoid any penalties or interest due to an under declaration or an over claim on your VAT201return.

Also note that vendors under Category B (March/April), Category E (annual return) and most farmers registered under Category D VAT reporting periods, will have transactions subject to the VAT rate of 14% and 15% which must be correctly reflected on the VAT201 return.

Feel free to contact us should you have any questions or require assistance.