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New tax laws – 10 key changes taxpayers need to take note of

The President has given effect to the 2020 tax proposals by signing three tax Acts into law that will introduce several big new changes for South African taxpayers:

    • The Rates and Monetary Amounts and Amendment of Revenue Laws Act No. 22 of 2020:
    • The Taxation Laws Amendment Act No. 23 of 2020; and
    • The Tax Administration Laws Amendment Act No. 24 of 2020.

Jean du Toit, Head of Tax Technical at Tax Consulting SA highlights 10 key changes taxpayers need to know:

1. Withdrawal of retirement funds upon emigration

From 1 March 2021, taxpayers will no longer be able to access their retirement benefits upon completion of the emigration process through the South African Reserve Bank, commonly referred to as “financial emigration”.

2. Anti-avoidance rules bolstered for trusts

The anti-avoidance rules aimed at curbing tax-free transfers of wealth to trusts have been strengthened to prevent persisting loopholes.

3. Reimbursing employees for business travel expenses

Employees are not subject to tax on an amount paid by their employer as an advance or reimbursement in respect of meals and incidental costs where the employee is obliged to spend a night away from home for business purposes, provided it does not exceed the amount published in the Government Gazette.

4. Relief for expats confirmed

Due to the travel restrictions under the Covid-19 pandemic, the days requirement for the foreign employment exemption has been reduced from 183 days in aggregate to 117 days.

5. Employer provided bursaries

The Income Tax Act makes provision for the exemption of bona fide bursaries or scholarships granted by employers to employees or their relatives.

6. Tax treatment of doubtful debts

The doubtful debt allowance provision has been amended to bring parity between taxpayers that apply IFRS 9 and those who do not.

7. Roll-over amounts claimable under the ETI

The Employment Tax Incentive Act has been amended to encourage tax compliance.

8. Estimated assessments

The terms under which SARS may issue an assessment based on an estimate has been expanded.

9. SARS can withhold your refund if you are under criminal investigation

In terms of the Tax Administration Act, SARS is entitled to withhold refunds owed to taxpayers in certain circumstances.

10. Criminal sanctions for minor tax offences

Previously, a taxpayer would only be guilty of a criminal offence for non-compliance under the Tax Administration Act if they “wilfully” failed to comply with their tax obligations. With the new amendments, non-compliance will constitute a criminal offence where it is as a result of the taxpayer’s negligence. In other words, intent is no longer required; where you are non-compliant as a result of ignorance of your obligations, you may be found guilty of a criminal offence. These offences are subject to a fine or imprisonment of up to two years.

Click here to read the detail of the key changes.

In September 2020, South African Revenue Service Commissioner Edward Kieswetter allayed fears that taxpayers will be imprisoned for minor mistakes on their tax returns. According to Kieswetter criminal prosecution is the last resort when it comes to tax non-compliance as SARS has a few other steps in place before resorting to court action. I suppose the proof will be in the pudding. Best advice: rather be safe than sorry.

Related article: Common errors with tax returns – SARS taking a tough stance on submissions.

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