payroll world january 2014

1/2014Providing the answers to all your payroll questions

Payroll WorldIN THIS ISSUEUPCOMING EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2PRINCIPLES OF THE EMPLOYMENT TAX INCENTIVE ACT– by Rob Cooper, Chairman of Payroll Authors Group of South Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4WHICH EMPLOYERS ARE ELIGIBLE TO BENEFIT FROM THE EMPLOYMENT TAX INCENTIVE?– by Rob Cooper, Chairman of Payroll Authors Group of South Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6WHICH EMPLOYEES QUALIFY TO GENERATE THE EMPLOYMENT TAX INCENTIVE?– by Rob Cooper, Chairman of Payroll Authors Group of South Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8IMPACT OF THE TAXATION LAWS AMENDMENT ACT 31 OF 2013 ON PAYROLL PRACTITIONERS– by Deryn Venski, Training and Development Practitioner at LabourNet Payroll Solutions . . . . . . . . . . . . . . . . . . . . . . . 11EMPLOYMENT EQUITY DEMOGRAPHICS: GOING NATIONAL OR STAYING REGIONAL?– by Stuart Harrison and Pranisha Maharaj , ENSafrica . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14FOREIGN ENTERTAINERS & SPORTSPERSONS– by Michael Stein, Author and Tax Consultant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17UIF COMPANY ACCREDITATION– by Deryn Venski, Training and Development Practitioner at LabourNet Payroll Solutions . . . . . . . . . . . . . . . . . . . . . . . 18GOVERNMENT/SARS NOTICES Employment Tax Incentive Act – What does it mean for companies? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Medical tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 SARS issues new efiling forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Application for tax directive: Gratuities form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Discontinuation of Debit Pull Transactions on eFiling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 New tax clearance certificate (TCC) application process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

DEPARTMENT OF LABOUR RELATED ITEMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28COMMON ERRORS IN THE PAYROLL DEPARTMENT– by Deryn Venski, Training and Development Practitioner at LabourNet Payroll Solutions . . . . . . . . . . . . . . . . . . . . . . 32

SERVICES DIRECTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

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Payroll World February 2014 1

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To issue 1/2014 of Payroll World . This journal provides us with the medium to keep subscribers to our Payroll Administrators Manual and independent subscribers up-to-date with all changes and developments in the payroll field .

The controversial Employment Tax Incentive Bill has been passed and the consequences of this have been addressed by Rob Cooper for both employees and the employer . Also on the legislative front, Deryn Venski explains what the recent Taxation Laws Amendment Act, No. 31 of 2013 means for payroll practitioners . Relevant SARS and Department of Labour –related notices and updates have also been included to ensure you are up to date with all legislative developments .

A highly debated court case regarding employment demographics is discussed by ENS Africa’s Stuart Harrison and Pranisha Maharaj . Author and tax consultant, Michael Stein, speaks about how taxes impact the rich and famous who visit South Africa . Deryn Venski, Training and Development Practitioner at LabourNet Payroll Solutions, provides guidance on compliance with UIF legislation and four potential issues affecting the efficiency of a payroll department .

Thanks to the authors who have been actively involved in putting together this issue .

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Upcoming EventsEvent Dates and Venues

The Practical Amended BEE Codes Workshop

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Background

The unemployment rate amongst our young people has been unacceptably high for many years (about 50% of youngsters under the age of 25 are unemployed), resulting in social instability and a potentially explosive situation if this situation continues . After many years of proposals, discussions and opposition to the concept of a Youth Subsidy, legislation has finally been put into place to address the problem .

After being introduced as draft legislation on 20th September 2013, the Employment Tax Incentive Bill was signed into law by the State President only 3 months later, which must be an all-time record for getting legislation through the parliamentary approval process .

Rob CooperChairman, Payroll Authors Group of

South Africa

Principles of the Employment Tax

Incentive Act


for the month . The total ETI then reduces the normal PAYE liability payable to SARS, and is declared on a newly designed EMP201 form .

If the total ETI amount is not claimed, or can only be partly claimed on the EMP201 at the end of a certain month, then the unclaimed ETI amount can be ‘rolled-over’ to the next month . This ‘roll-over’ can be repeated for a maximum of 6 months which is linked to same cycle used for the submission and reconciliation of tax certificates (February and August) .

SARS will reimburse the employer if there is an ETI amount owing to the employer at the end of the 6-month cycle . At the time of writing this article, the details of the reimbursement process had not yet been made available .

Eligible employers and qualifying employees are defined in the Employment Tax Incentive Act and are discussed in detail in subsequent articles in the issue . p

Purpose of the EmploymentTax Incentive

The tax incentive encourages employers to hire young people by reducing the PAYE that the employer is liable to pay to SARS based on the number of young people employed, thereby reducing the cost of employment to the employer while leaving the employee’s earnings unaffected .

The employer benefits by the reduction to its employment costs, the young person benefits from having a job and an opportunity to improve themselves, and the country will benefit by increasing the rate of employment among young people .

While the employment tax incentive will effectively increase the company’s profitability by reducing its employment expenses, the incentive amount has been exempted from income and the additional profit is not subject to company tax .

Time frame of the ETI project

The Employment Tax Incentive legislation will be in effect for an initial 3-year period, starting from January 2014 and ending December 2016 .

Depending on its success and the unemployment levels, the scheme can be extended beyond the envisaged 3-year period, and without any doubt, amendments will be made to the law during the 3-year period to improve its effectiveness .Overview of the legal framework

The employment tax incentive (ETI) amount cannot be calculated by the payroll in a certain month unless three concepts are in place in that month:

1 . An eligible employer paying .

2 . Remuneration to at least one .

3 . Qualifying employee .

The payroll will calculate an ETI amount in respect of every qualifying employee at the end of each month by using the formulae provided, and will report the ETI total


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3 . where the employer is a natural person, any relative of that employer . ‘Relative’ in relation to any person means the spouse of that person or anybody related to him or to his spouse within the third degree of consanguinity, or any spouse of anybody so related .

Where the legislation refers to an employer, it includes an associated employer . This is of particular importance for the determination of the number of months that an employee has qualified for the incentive, and will be dealt with at a later stage when the method of calculating the ETI is described .

Eligible employers

For the purposes of PAYE withholding, the Fourth Schedule to the Income Tax act defines an employer as being any person that pays remuneration to another person . Remuneration is therefore the link that binds an employer to an employee .

It can happen that a company pays remuneration to its employees (and is therefore an employer), but all of the employees earn below the tax threshold . In this case there is no PAYE withholding, and the employer does not register for PAYE because there is no PAYE to withhold and pay to SARS .

Employers

Before dealing with the concept of an eligible employer, we must first see how the ETI Act defines an employer .

Strangely, but in line with current labour law, an employer is not defined specifically in the ETI Act, but reflexively . An employee is defined, and the person that the employee works for and who pays remuneration for the services rendered, is the employer .

This is academic, as one of the requirements for being an eligible employer clearly defines an employer for the purposes of the ETI Act .

It is important to understand the concept of an ‘associated person’ to the employer, defined in simple terms as being –

1 . where the employer is a company, any other company where both companies are managed or controlled directly or indirectly by substantially the same persons; or

2 . where the employer is not a company, any company which is managed or controlled directly or indirectly by the employer or by any partnership of which the employer is a member; or

by Rob CooperChairman, Payroll Authors Group of South Africa

Before a tax incentive amount can be calculated by a payroll system, the employer must be “eligible” to benefit from the tax incentive .

Which employers are eligible to benefit from the Employment Tax Incentive?


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Opposition to the initial concept of a Youth Subsidy came mainly from Cosatu, who were concerned that unethical employers might get rid of older workers and replace them with younger, subsidised workers .

This is referred to as ‘displacement’ . While this is highly unlikely (why would an employer get rid of a good employee, particularly in the face of very powerful laws designed to prevent and penalise unfair dismissals?), harsh measures designed to allay those fears have been included in the Employment Tax Incentive Act .

‘Displacement’ is when an automatically unfair dismissal has taken place and the employer replaces the dismissed employee with another employee in respect of whom the employer can receive the ETI .

If ‘displacement’ has taken place, the employer must firstly pay a penalty of R30 000 in respect of each displaced employee, and secondly face potential disqualification from the tax incentive if so decided by the Minister of Finance . In reaching his decision, the Minister will give consideration to the number of employees that were displaced, and the effect that the disqualification might have on the employees of that employer .

Temporary disqualification as an eligible employer

While this exclusion from the ETI is specified in the ACT in a later section that deals with the claiming of the ETI total every month, it is logical to deal with it here .

If the employer is not tax compliant at the end of a certain month, then the employer must disqualify itself by not claiming the ETI for that month .

There are two reasons why an employer might not be tax compliant:

• the employer has failed to submit any return as defined in section 1 of the Tax Administration Act on the basis required by section 25 of that Act; or

• the employer has an outstanding tax debt as defined in section 1 of the Tax Administration Act, unless an agreement has been reached, or the tax debt has been suspended or it is less than R100 .

This is not permanent disqualification – the ETI amount for that month is not lost and can be claimed at a later stage once the employer returns to being tax compliant .

Having established the employer is eligible to benefit from the tax incentive, the next concept to understand is that of a qualifying employee . p

The principle of the employment tax incentive is that it reduces the PAYE payable to SARS . If there is no PAYE, then there is nothing to claim on the ETI form . The ETI Act therefore defines eligible employers to be only those employers that are registered for PAYE with SARS .

Certain categories of these eligible employers as defined are then excluded from being ‘eligible’ employers:

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

2 . A public entity that is listed in Schedule 2 or 3 to the Public Finance Management Act (note that the Minister of Finance has the power to override this exclusion and include any public entities that he feels would be able to make a contribution to the employment of young people) .

3 . A municipal entity as defined in section 1 of the Local Government: Municipal Systems Act .

This means that other than public entities specified by the Minister of Finance, only private sector employers that are registered for PAYE are eligible and can benefit from the tax incentive . Restricting the incentive to the private sector is logical if one considers that it contributes about 82 per cent of GDP and employs over 70 per cent of those in formal employment outside of agriculture .

The bottom line is simple – all employers in the private sector that are registered for PAYE are eligible for the employment tax incentive – unless disqualified at a later stage .

Permanent disqualification as an eligible employer

During the course of the next three years, an eligible employer can be disqualified permanently from the ETI for any one of the following reasons:

1 . by the Minister of Finance, if the employer ‘displaces’ an employee (see section below);

2 . by not meeting conditions put in place by the Minister of Finance and the Minister of Labour to train employees (no such requirements exist at present); or

3 . not complying with conditions included in the classification of trade in the most recent Standard Industrial Classification Code issued by Statistics South Africa .


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Which employees qualify to generate the

Employment Tax

Incentive?by Rob Cooper

ChairmanPayroll Authors Group of South Africa


PW

There is seldom a written contract of employment in these cases (although we are moving in that direction), but a simple ‘I will pay you Rx per day for doing the following’ is a verbal contract and is sufficient .

3 . Directors of private companies are included by definition in the Fourth Schedule as employees, even if they receive no remuneration . In these cases, ‘deemed’ remuneration must be determined for PAYE calculation purposes . However, to be an ETI employee, remuneration must be physically paid . Therefore, a director who is not paid remuneration is not an ETI employee .

4 . If the ‘trade’ (or service) is seen to be ‘dependent’, the Fourth Schedule can include an independent contractor as a ‘deemed’ employee . However, all independent contractors are excluded from being ETI employees irrespective of the Fourth Schedule ‘deeming’ provisions .

Categories of ETI employees

In summary, Fourth Schedule employees that are excluded from the ETI Act as employees are:

1 . Non-natural persons (Personal Service Providers) .

2 . Directors of private companies who are not paid remuneration .

3 . Learners in terms of a learnership agreement (those that are not employees) .

4 . Independent contractors (even if deemed to be an employee by the Fourth Schedule) .

The following categories of Fourth Schedule employees are employees in terms of the ETI Act:

1 . Permanent employees .

2 . Non-permanent employees (‘casuals’ or ‘temps’) .

3 . Seasonal workers .

4 . Fixed-term contractors .

5 . Learners in terms of a learnership agreement (those that are employees) .

ETI employees

An employee for the purposes of the ETI Act is –

• a natural person;

• who works directly for another person; and

• who is paid remuneration by the other person; but

• excludes an independent contractor.

There are less ETI employees than Fourth Schedule employees for the following reasons:

Comments on the definition of an ETI employee

1 . Only natural persons (individuals) can be an ETI employee . Non-natural persons such as Personal Service Providers that are Fourth Schedule employees are therefore excluded from being ETI employees .

2 . Only individuals that work “directly” for the employer are ETI employees .

The word ‘directly’ can be interpreted to mean that either a written or verbal employment contract must be in place between the employer and the employee, and that the remuneration for the services rendered is paid directly by the employer to the employee .

This excludes learners in terms of a learnership agreement that are not employees, and will definitely exclude all workers supplied to a company by a labour broker . However, the labour broker itself is eligible for ETI on its own employees .

Note that natural person labour brokers (sole traders) are defined as employees of the client company by the Fourth Schedule . The money paid by the client to such a labour broker is Fourth Schedule remuneration . However, a natural person labour broker cannot be an ETI employee because a business contract is in place between the labour broker and the client, not an employment contract .

Finally ‘casuals’ or ‘temporary’ workers are not excluded as ETI employees by the word ‘directly’ .

Before dealing with the concept of a ‘qualifying’ employee, we must first know who the ETI Act defines as employees .

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This condition ensures that the employment tax incentive doesn’t apply to every employee who qualifies in all other respects, but only to new engagements .

This underlines the purpose of the incentive – to assist employers financially to employ youngsters over and above their normal hiring requirements .

Note that if an employee was employed before October 2013 by the employer, then left, only to return to work for the same employer after 1st October 2013, then this employee will qualify for the ETI .

Asylum seekers

At a very late stage, a brand new and (shall we say) an interesting qualifying condition was added to the legislation that opened the door for non-South African citizens who are in possession of an Asylum Seeker Permit to qualify for the ETI .

There is very little information available about the asylum permit itself, its number, expiry date, etc . Sufficient to say that this late addition to the criteria for a qualifying employee is difficult to administer and I hope that it is removed at some stage in the future .

Multiple employment

It is interesting to note that a single employee who works during the same period of time for more than one employer can generate the tax incentive for all of the employers as long as the employers are not ‘associated persons’ to one another .

For example, an employee can have an 8-to-5 day job, and also work for various restaurants in the evenings or over weekends . All of his employers can benefit from the ETI ‘generated’ by the same individual, obviously as long as the qualifying criteria are in place .

Comments on qualifying employees

The ‘qualifying’ criteria are the most important section of the ETI Act to understand – it is also unfortunately the most complex section .

Once there is an eligible employer with at least one qualifying employee, then the payroll will automatically calculate an ETI amount in respect of all the qualifying employees . It is then up to the employer to ‘claim’ the ETI reduction of PAYE on the EMP201 form each month . p

Which ETI employees qualify for the ETI?

Of the five categories of ETI employees detailed above, only those that ‘qualify’ in terms of the criteria specified in the ETI Act will ‘generate’ a tax incentive benefit for the employer .

The following summarises in simple terms the rather complex set of rules that determine when an employee qualifies for the ETI .

Only ETI employees:

• who are not less than 18 and not more than 29 years of age in a certain month, and

• who have a South African ID or an Asylum Seeker permit, and

• who are paid a wage that is not less than the minimum wage for that sector (or R2 000 if there is no minimum wage), and

• who are paid remuneration that is less than R6 000 per month, and

• who were employed on or after 1st October 2013,

will qualify for the incentive .

Irrespective of the above, the employee does not qualify for the incentive if he is a ‘connected person’ to the employer, or if he is a domestic worker .

Special Economic Zones

To encourage economic activity within Special Economic Zones (SEZ), an employee who works ‘mainly’ in one these zones will qualify for the ETI even if he falls outside of the 18 to 29 age group . The incentive for an employer who has a place of business in a SEZ is therefore not limited to young people but is available in respect of employees of all ages who qualify in terms of the other requirements .

The Special Economic Zones have not yet been defined in law, so the SEZ provisions in the ETI Act are effectively dormant and can be ignored at this stage .

Date of engagement

Only individuals employed on or after 1st October 2013 can qualify .


PW

Retirement Funds (effective 1 March 2015)

Under the new rules, all pension, provident and retirement annuity funds will be treated the same from a tax perspective both from the tax deductibility of the contributions and the actual pay-out are concerned . Any amounts paid on behalf of the employee by the employer will now be seen as a fringe benefit subject to certain annual exclusions and limits . The total amount paid by both the employer and the employee will then be able to be deducted from taxable remuneration under the following limits:

• A total of 27.5% of the greater of ‘remuneration’ or ‘taxable income’ (excluding annuities and retirement lump sums); and

• limited to a maximum contribution of R350 000 per annum .

Any amount over the limit may be ‘rolled over’ to successive years where the limits have not been reached in those years .

In addition, regulations around provident funds have been included to annuitize them to bring them in line with the other retirement funds . The annuitizing of the provident fund means that the investment will be amended so that

the pay-out will happen in periodic payments, usually monthly, over a lifetime or a specific period of time . Provident funds are currently not annuitized and pay-out is done with a lump sum . Members of provident funds over the age of 55 years on 1 March 2015 are exempt from having their provident funds annuitized and any balance in the provident fund for any other member as at 1 March 2015 is exempt from being annuitized .

During 2013, payroll practitioners were exposed to the customary Taxation Laws Amendment Bill (TLAB) wherein proposed changes, inclusions and deletions to all types of taxes were dealt with . This Bill was promulgated into law on 12 December 2013 and in this article we deal with the seven most significant changes that will affect day-to-day payroll management .

Deryn VenskiTraining and Development Practitioner

at LabourNet Payroll Solutions

Impact of the Taxation Laws Amendment Act 31 of 2013 on

payroll practitioners


PW


In the case of employer-owned policies, the premium was tax-free and employee-owned was tax deductible . This meant that the pay-out would be taxed in the hands of the employee .

The new ruling is, regardless of who owns the policy, any amount paid by the employer is taxed as a fringe benefit in the hands of the employee but the premium becomes a tax deduction for the employer . Any policies in respect of life cover and temporary/permanent disability is not tax deductible .

Income protection policies will now be included in the non-tax deductible rule with the life policies, and the pay-outs will be tax-free .

Due to these changes, it is now important that if there is a life policy included in a company pension or provident fund, this amount is reported separately so that the correct taxation can be carried out on this amount . The reason for this is that any premiums paid by the employer on behalf of the employee must now be treated as a fringe benefit .

Low-cost Housing (effective 1 March 2014)

Should an employee who is considered a low-income employee obtain a house for less than its market value from the employer, the employee will not be taxed under the following limitations:

• The employee’s proxy remuneration may not exceed R250 000 (i .e . the previous year’s remuneration as explained above) . This remuneration will include all fringe benefits, bonuses, overtime, etc .

• The cost of the immovable property to the employer may not exceed R450 000 .

Should the above limitations be exceeded, the difference between the cost of the immovable property and the price paid by the employee will be the value of the fringe benefit .

Medical Aid Alignment (effective 1 March 2014)

From 1 March 2013, the medical tax credits (MTC) were in force for all employees under the age of 65 . From 1 March 2014, all taxpayers will fall under the same rules regarding the medical tax credits . The new value of these credits, especially for those over the age of 65 years will be announced in the upcoming budget speech .

Bursaries (effective 1 March 2014)

In order to understand the new bursary rules, it is necessary to understand the term ‘proxy remuneration’ . Both the bursary and low-cost housing rules depend on this new term . In easy language, the proxy remuneration refers to the full remuneration of the year preceding the current tax year except where:

• if the employee did not work the complete previous year, the amount that the employee earned in remuneration for the time worked annualised to the ratio of 365 days (one year); or

• if the employee did not work at all in the previous year, then the first month’s remuneration annualised to the ratio of 365 days (one year) .

A better way to understand this is to have a look at a few examples . An employee worked the full previous tax year and the total remuneration was R180 000 for the year . The ‘proxy remuneration’ is therefore R180 000 . (The full previous year’s remuneration .)

An employee started to work with the company on 1 November 2012 . The employee earned a total remuneration of R50 000 until the end of February 2013 . The ‘proxy remuneration’ will then be:

R50 000 ÷ 4 × 12 = R150 000 .

An employee did not work for the company in the last year . The employee starts with the company on the 1st March 2013 and earned a remuneration of R10 500 . The ‘proxy remuneration’ will then be:

R10 500 × 12 = R126 000 .

The new bursary rules are applicable if a qualifying employee’s proxy remuneration does not exceed R200 000 and the employee is awarded a bursary for one of his/her relatives, the bursary will be tax-free under the following limitations:

• R10 000 for any education up to and including NQF level 4 (matric or grade 12 equivalent) under the SAQA Act; and

• R30 000 for any further education above NQF level 4 .

Insurance Policies (effective 1 March 2014)

Until recently it has been required to establish whether the insurance policy for life, disability or income protection was owned by the employee or the employer .

13Payroll World February 2014

Dual Income (income from two or more sources)

Many people are trying to make a living by moonlighting in a second employment scenario . This means that the person is often taxed by both companies that he/she works for . This scenario always leads to the person having to pay in taxes at assessment time . This is due to SARS adding the two incomes together which will place the taxpayer in a higher tax bracket than what was used by both the employers at the time when the tax was calculated and deducted .

SARS has published a table where an employee can determine an amount of additional tax that they can request one of the employers to deduct to compensate for the shortfall during the year . These tables can be obtained from the SARS website .

Rented Cars

The use of motor vehicle rules were changed to include the calculation of the fringe benefit value for where the company car is a ‘rented’ or ‘leased’ vehicle . This change was effective from 1 March 2013, but further changes have now been made to the reporting of these rented cars . These changes are required for the reporting on tax certificates for the 2013/2014 (current) tax year .

A rented or leased vehicle is a vehicle which is part of a bona fide lease agreement with a company that is determined to be at ‘arm’s length’ from the company . This means that it cannot be an agreement with a connected person or a private individual who is not in the business of renting out motor vehicles . The vehicle must also be available to be rented out to any member of the public .

Where the vehicle is under the rented vehicle definition, the value of the fringe benefit is the actual value of the operating lease and the cost of fuel in respect of that vehicle .

The new rules for the rented vehicles fringe benefit is that the amount must be reported on the tax certificates against code 3816 – Use of motor vehicle acquired by employers via ‘Operating Lease’ . For foreign service income, it must be reflected against code 3866 . Employer-owned vehicles will be reported against the usual code 3802 – Use of a motor vehicle .

It is important for payroll practitioners to become familiar with these new changes and to obtain assistance in having these changes made to their systems and policies . p

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Employment equity demographics: Going

national or staying regional?

Pranisha MaharajSenior Associate, Employment

Department, ENSafrica

Stuart HarrisonDiretor, Employment Department,

ENSafrica

The Employment Equity Amendment Bill was recently passed and this means that companies have to rethink their employment equity plans to be in line with the new regulation . In a recent Labour Court judgement, the Department of Correctional Services was ordered to take immediate steps to ensure that, instead of taking into account only the national demographics of designated groups when setting employment equity targets, it take into account both national and regional demographics .

On the judgment as it stands employers are entitled (and indeed obliged) to take both national and regional demographics into consideration when setting equity targets . But what are ‘regional’ demographics? The parameters of exactly what will constitute ‘regional’ demographics were not really explored in the judgment, although the court appears to have accepted that regional can at least mean provincial .


PW

accommodation for people from designated groups in order to ensure that they enjoy equal opportunities and are equitably represented in the workforce of a designated employer’ . It was contended that this not only required that opportunities offered to persons from designated and non-designated groups be the same (so that the employment opportunities offered to those candidates from the designated groups do not exceed the employment opportunities offered to those from the non-designated group) but also that this consideration operated equally, if not more so, where appointment decisions required a choice to be made between different persons who all fall within a designated group (such as ‘Black people’, which is defined to comprise African, Coloured and Indian people) . The applicants contended that a ‘blanket solution’ in such a situation would be inappropriate, and rather an assessment of the individual was necessary where a choice had to be made between competing members from a designated group .

In its defence, the DCS contended that as a designated employer it was required to prepare and implement an employment equity plan aimed at achieving reasonable progress towards employment equity and that it was entitled to use national and not regional demographics for its EEP because it is defined as a national department under the Public Service Act, 103 of 1994 . The DCS was of the view that its EEP provided for the implementation of affirmative action measures to ensure that there is equitable representation of suitably qualified persons (from designated groups) in all occupational categories and levels of DCS and accordingly that its EEP was not race and gender profiling that was in conflict with any provisions of the Constitution or the EEA .

How did the court find?

In evaluating the submissions of the parties, the Labour Court found that while the right to equality, as enshrined in the Constitution, proclaims that everyone is equal before the law and has the right to equal protection and benefit of the law, it goes further to authorise and recognise restitutionary measures to protect or advance persons or categories of persons disadvantaged by unfair discrimination in order to advance the achievement of equality . It was on this basis that the Labour Court rejected the submission of the applicants that the

5 December 2013: In the recent Labour Court judgment in Solidarity and Others v Department of Correctional Services and Others,1 the Department of Correctional Services (‘DCS’) was ordered to take immediate steps to ensure

that, instead of taking into account only the national demographics of designated groups when setting employment equity targets at all occupational levels of its workforce, it take into account both national and regional demographics .

The widely publicised judgment was delivered pursuant to a referral by six Coloured applicants2 who claimed that they had been unfairly discriminated against on account of race, gender and/or sex by virtue of not being selected for the posts for which they had applied (because the DCS wanted to appoint candidates from other race groups (such as Africans) to the posts in question, not Coloured candidates) . At the core of the dispute was whether the provisions of the DCS’s Employment Equity Plan (‘EEP’) was consistent with the Employment Equity Act (‘EEA’) and, in particular, whether ‘regional’ demographics had to be taken into account by the DCS in developing and applying an employment equity plan . In addition, the Labour Court was called upon to determine whether the manner in which the EEP had been implemented by the DCS amounted to unfair discrimination .

The EEP was a national plan in force at the DCS for the period April 2010 to December 2014 . The EEP required that recruitment and selection processes undertaken by the DCS be driven by employment equity considerations in order to ensure that the shortlisting of candidates and all appointments were informed by the EEP, which made reference to certain national numerical targets . With regard to regional divisions of the DCS and its business units, the EEP called upon each region to develop an Employment Equity Implementation Plan which was aligned to its national plan . The EEP also went further to include tables outlining the employment equity targets at various levels of the DCS workforce . For example, the tables prescribed that at ‘[a]t level 3 only Whites and Indians should be appointed’ and ‘[a]t level 5 only African females, Whites and Indians can be appointed .’

In support of their claim, the Coloured applicants made reference to the provisions of section 15 of the EEA which provides that employers should make ‘reasonable


PW

With regard to the appropriate relief in the circumstances, the Court ordered the DCS to take immediate steps to ensure that both national and regional demographics are taken into account in respect of members of designated groups when setting equity targets at all occupational levels of its workforce . The Court considered this to be the most appropriate relief in the circumstances, i .e . relief that would ‘benefit all employees of DCS in the Western Cape who are black employees of the DCS and members of the coloured community in the future’ .

What are the implications of the judgment?

On the judgment as it stands, therefore, employers are entitled (and indeed obliged) to take both national and regional demographics into consideration when setting equity targets . But what are ‘regional’ demographics? The parameters of exactly what will constitute ‘regional’ demographics were not really explored in the judgment, although the court appears to have accepted that regional can at least mean provincial .

While questions therefore remain as to whether ‘regional’ equates to only provincial or whether it can mean something even more localised than that for a particular employer, what is implied in the judgment is that there can be some recognition in the employment equity target setting for an employer’s workplaces in the Western Cape, for example, of a relatively greater proportion of Coloured people than the portion of the population that Coloured people represent nationally . (Unlike the national demographics, where Coloured people make up only approximately 11% of the economically active population and Africans constitute 74%, in the Western Cape approximately 56% of the economically active population are Coloured people and only 28% are African .) The same will go for other provinces where the provincial demographics are out of kilter with national demographics (e .g . KZN, where there is a greater Indian representation in the population or the Northern Cape where there is a greater Coloured representation) . For employers in these regions who draw their workforces from the local population, this should make complying with employment equity targets a more realistic endeavour .

This judgment is unlikely to be the final word on the matter . It is likely that the judgment (or the same issue in different litigation) will be taken to the appeal courts . p

restitutionary measures under the EEA promoted equal opportunity for designated groups to compete with members of the non-designated group, i .e . that the employment opportunities offered to those candidates from the designated groups should not exceed the employment opportunities offered to those from the non-designated group .

As to the question of whether the applicants had been unfairly discriminated against by virtue of the selection and appointment process of DCS (guided by inter alia its EEP) which did not take regional demographics into account for the purposes of its equity objectives:

• The Court referred to section 42 of the EEA, which provides expressly that an employer should consider the extent to which suitably qualified people from and amongst the different designated groups are equitably represented within each occupational level in that employer's workforce in relation to the demographic profile of the national and regional economically active population .

• However, whilst the text of the EEA itself thus made direct reference to regional demographics, it was recognised by the Court that the Codes of Good Practice promulgated in terms of the EEA were contradictory in this regard . In the face of conflicting provisions in the Codes, however, the Court found that those which supported the provisions of the EEA and the Constitution should be preferred .

• The Court therefore held that the clear meaning of section 42 of the EEA revealed that both regional and national demographics must be taken into account when determining numerical targets .

• The Court recognised that, while it was essential that national demographics factor into all employment equity plans to ensure the safeguarding of the African majority who were most severely impacted by Apartheid policies, regional demographics should also considered to ensure that all those persons who comprise ‘Black’ persons in terms of the EEA benefit from the restitutionary measures created by the EEA, in line with the right to equality as entrenched in the Constitution .

The Court accordingly found that the applicants, who were Black employees in terms of the EEA, had suffered unfair discrimination given that the selection and recruitment process derived from EEP took no cognisance of the regional demographics of the Western Cape, and that this amounted to unfair discrimination .

16 Payroll World November 2013

FOOTNOTES: 1 [2013] ZALCCT 38 (18 October 2013) .

2 There was also one white male applicant but his case does not impact on the essence of the judgment in the matter .

PW


One of the growing number of withholding taxes provided by the Income Tax Act is the tax imposed on foreign entertainers and sportspersons, which began on

1 August 2006 . It is interesting to see how this tax works, particularly when so many entertainers are visiting this country .

The term ‘entertainer or sportsperson’ is defined as including a person who, for reward, performs an activity as a theatre, motion picture, radio or television artiste or a musician, takes part in any type of sport, or takes part in any other activity that is usually regarded as of an entertainment character .

A ‘specified activity’ is also defined . It is a personal activity exercised in South Africa by a person as an entertainer or sportsperson, whether alone or with another person or persons .

The tax is imposed on amounts derived by a person who is not a resident for any specified activity exercised by him or her or another person who is not a resident .

Thus foreign entertainers and sportspersons as well as other non-residents paid for their services are liable for the tax . It is a final tax, and is levied at a rate of 15% on all targeted amounts .

The tax is not payable by a person who is not a resident, if he or she is an employee of a resident

employer and is physically present in South Africa for a period or periods exceeding 183 full days in aggregate during any twelve-month period commencing or ending during the year of assessment in which the specified activity is exercised .

A taxpayer must pay the tax on a taxable amount within thirty days or an approved further period after an amount is received by or accrues to him or her . A resident liable to pay a taxable amount to a qualifying taxpayer must deduct or withhold the tax chargeable on that amount and pay it to sars before the end of the month following that during which it was deducted or withheld . This payment is made on behalf of the taxpayer concerned on account of his or her liability for the tax, and the amount in question is deemed to have been received by him or her .

Since non-residents are involved, a tax treaty might apply . For example, the one between South Africa and the usa provides that income derived by a resident of the usa as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as a sportsman, from personal activities exercised in South Africa may be taxed in South Africa, except when the gross receipts derived from these activities, including reimbursed expenses, does not exceed $7 500 or its equivalent in rand for the relevant year of assessment . p

Foreign Entertainers & Sportspersons

Michael SteinAuthor and Tax Consultant


PW

UIF company accreditation

By Deryn VenskiTraining and Development Practitioner at LabourNet Payroll Solutions

Most companies are of the opinion that they fully understand UIF legislation . Yet, there are sections of the Unemployment Insurance Act, No . 61 of 2000, the Unemployment Insurance

Contributions Act, No . 4 of 2002 and the Unemployment Insurance Amendment Act, No . 32 of 2003 that people get wrong . Due to the misinterpretation of these Acts and the amendment to the Unemployment Insurance Contributions Act to include SARS for the collecting of UIF and SDL contributions, many companies remain non-complaint with how these Acts should work .

The most common error made by companies is to believe that their responsibility for UIF ends once they have paid the contributions over to SARS . Section 56 of the Unemployment Insurance Act states that all registered employers must furnish details to the UIF Commissioner by the seventh day of each month . These details include the business details (meaning the address and contact details of the business, including the details of any branches the business has), the details of all employees employed, the change in employment status of each employee and any additional information the commissioner may request from time to time . Section 10(2) of the Unemployment Insurance Contributions Act re-iterates what is legislated in the Unemployment Insurance Act, making specific reference to the recording and reporting of new engagements and terminations .

In the past, there were two accepted ways of doing the monthly returns to the UIF Commissioner . The first is

by doing a manual UI19 form for all the employees . The second was to get an electronic file from the payroll system and email this file to declarations@uif .gov .za with the word ‘Declaration’ in the subject line . The second form had special rules to abide by which included the extension of the attached file . The first declaration file would have an extension of .001 and this would increment for each and every declaration made after the first declaration (i .e . .002, .003, etc .) . If two declaration files were sent with the same extension, then the second file sent would overwrite the first file sent .

In addition, with the electronic email declarations, many companies’ emails would automatically place an attachment of the company logo onto outgoing emails . This would create an additional attachment to the email sent, which would result in the actual file not being read by the UIF system .

After investigation into company compliance to these Acts, it was mentioned in August 2012 that only 15% of companies were fully compliant . This was due to:

• companies not doing the monthly declaration because the company management believed that their UIF responsibility ended when they paid the contributions to SARS;

• companies sending in their electronic files with the same extension each time; and

• companies who inadvertently sent the declaration file email with more than one attachment .

PW

To streamline and simplify the process of doing the declarations by companies and for the employees to be able to apply for compensation from the UIF easier, the Department of Labour, Unemployment Insurance division launched the first version of uFiling some years ago and then subsequently released the Virtual Office to its Labour Centres around the country . These electronic services are designed to make the UIF process quick, effortless and most importantly, paperless . It eliminates the need for applicants of UIF benefits to stand in long queues when applying and also when collect their benefits .

Albert Tshidavhu, Head of Department for Labour, recently said: ‘We want you (employers) to focus on your core business, which is to make a profit, and that is why we introduced the system to save you costs and the cumbersome administration process so that you can just click a button to comply with UIF processes .’

In order for a company to register for uFiling they need to use the link http://www .ufiling .co .za/ and select the ‘Activate my uFiling Account’ . As part of this process, the company will be asked to complete a form to request UIF accreditation . Only accredited companies can use uFiling . Employees can also use the same link and option to register as an employee . If the employee’s current company, or their previous company, if unemployed, is not accredited, they will not be able to use the uFiling system .

The reason behind the accreditation process is to assist companies to become compliant . Although there will be a cut-off date where all companies will be required to be accredited, this has not been announced . Employees who either work, or worked, for companies that are not accredited, will now place pressure on companies to become accredited .

The accreditation process is relatively simple . It is required that all the company’s declaration files for the past four years are up to date . If this is lacking, then the company will not receive accreditation until this has been resolved . If a company applies for accreditation, and they are not compliant, the UIF division of the Department of Labour will send a notification to the company stating what is outstanding, and give the company a deadline to rectify this .

The manual UI19 will soon fall away and there are already Department of Labour branches that are not accepting these, unless it can be proved that the company does not have access to a computer system . It is not known if the email declarations site will be discontinued, but this is a possibility .

This move has been done to ensure that all South African companies become compliant with the legislation . Although we do not have a timeline of when the accreditation process must be completed, it is advisable to get this done before there is a rush when the final cut off is announced . p

The most common error made by companies is to believe that their responsibility for UIF ends once they have paid the contributionsover toSARS.


PW

Employment Tax Incentive Act – What does it mean

for companies?

The new Employment Tax Incentive Act No . 26 of 2013 was signed into law by President Jacob Zuma last December, in an attempt to create more job opportunities for the youth in South Africa . This Act is effective since 1 January 2014 and will directly affect payroll and HR due to the tax breaks .

For those who are not familiar with the Act and its relevance to companies, SARS has published a few pointers to help understand how this Act will affect you, the payroll professional and employees . For full details, visit the SARS website .

What is the employment tax incentive?

It is an incentive primarily to encourage employers to hire young and less experienced work seekers . This is done by reducing the cost to employers through cost-sharing with government .

Who will qualify?

• The employer is eligible to receive the employment tax incentive if the employer:

– is registered for employees’ tax (PAYE);

– is not in the national, provincial or local sphere of government;

– is not a public entity listed in Schedule 2 or 3 of the Public Finance Management Act (other than those public entities designated by the Minister of Finance by Notice in the Gazette);

– is not a municipal entity;

– is not disqualified by the Minister of Finance due to displacement of an employee or by not meeting such conditions as may be prescribed by the Minister by regulation .

Government / SARS Notices


PW

• An individual is a qualifying employee if he or she:

– has a valid South African ID or an asylum seeker permit;

– is 18 to 29 years old [please note that the age limit is not applicable if the employee renders services inside a special economic zone (SEZ) to an employer that is operating inside the SEZ, or if the employee is employed by an employer that operates in an industry designated by the Minister of Finance];

– is not a domestic worker;

– is not a “connected person” to the employer;

– was employed by the employer or an associated person to the employer on or after 1 October 2013; and

– is not an employee in respect of whom an employer is disqualified to receive the ETI (i .e . the employee is paid below the minimum wage applicable to that employer or paid a wage below R2 000 per month if a minimum wage not applicable) .

Tip: There is no limit to the number of qualifying employees that an employer can hire .

How does it work?

The employer will calculate and claim the incentive on a monthly basis, and must follow these steps:

• Identify all qualifying employees in respect of that month;

• Determine the applicable employment period for each qualifying employee;

• Determine each employee’s “monthly remuneration”; and

• Calculate the amount of the incentive per qualifying employee as per the table below:

In determining the first or the second 12-month period, only the months in which the employee was a qualifying employee are taken into account . For example, the employee may be a qualifying employee in the first three months but not a qualifying employee in the fourth and the fifth months . If the employee is a qualifying employee in the sixth month, the sixth month is month number four as far as the 12-month period is concerned .

Tip: For the next biannual reconciliation submission process in 2014, the EMP501 and IRP5 will also be updated with the necessary fields .

How long will it be available?

The incentive is currently scheduled to end on 31 December 2016 but its effectiveness will be reviewed to determine whether to continue with the incentive . p

Monthly Remuneration Employment Tax Incentive per month during the first 12 months of employment of the qualifying employee

Employment Tax Incentive per month during the next 12 months of employment of the qualifying employee

R 0 – R2 000 50% of Monthly Remuneration 25% of Monthly Remuneration

R 2 001 – R4 000 R1 000 R500

R 4 001 – R6 000 Formula: R1 000 – (0 .5 × (Monthly Remuneration – R4 000))

Formula: R500 – (0 .25 × (Monthly Remuneration – R4 000))


PW

Medical tax creditsAs from March 2014, people over 65 will now be subject to the same Medical Tax Credit system as those under 65 . Employers are reminded to check that their payroll systems are adjusted accordingly . For a full explanation detailing these changes, visit the SARS website .

What are the changes?

Effective 1 March 2012 the following changes were introduced:

• A medical scheme contribution tax credit is available to taxpayers who are below the age of 65 and contributes to a medical scheme in respect of themselves and their dependants, set at fixed amounts per month:

2012/13 (1 March 2012 – 28 February 2013) tax year of assessment: – R230 per month for the taxpayer and R230 for the first dependant; plus – R154 per month for each additional dependant .

2013/14 (1 March 2013 – 28 February 2014) tax year of assessment: – R242 per month for the taxpayer and R242 for the first dependant; plus – R162 per month for each additional dependant .

Please note the following: – The medical scheme fees tax credit may vary from time to time and changes will be announced by the Minister

of Finance during his Budget Speech each year . – The medical scheme fees tax credit is not refundable, and cannot exceed the amount of the tax liability .

• The non-taxable fringe benefit in respect of medical scheme contributions paid by the employer on behalf of a taxpayer who is 65 years and older and who has not retired from that employer was repealed . This means that the contribution amount paid by an employer on behalf of a taxpayer who is 65 years and older and has not retired from the employer, is a taxable fringe benefit . This is aligned to the treatment of all other taxpayers . However, a person 65 years and older is still entitled to the full medical scheme contribution paid as a deduction . The net effect on such a person’s tax due is therefore nil .

• Where a taxpayer has retired from an employer, and the employer continues to pay contributions on behalf of the retired taxpayer, the fringe benefit is non-taxable .

From 1 March 2013, the following fixed monthly medical scheme fess tax credits became applicable:

Taxpayer + dependantsMedical tax credit

(1 March 2013 until 28 February 2014)

per month per annum

Taxpayer (1) R242 .00 R2 904 .00

Taxpayer + 1 dependant R484 .00 R5 808 .00

Taxpayer + 2 dependants R646 .00 R7,752 .00



Note: The tables are for illustration purposes only, and the amounts may vary depending on the number of months in the year of assessment during which a taxpayer and dependents are members of a medical scheme fund . p


PW

The IRP3(a) – Application for Tax Directive: Gratuities form has been updated with the required legislative changes . These changes include:

• Two new directives reasons regarding “Employer owned policy proceeds” was added: – Taxable .

– Exempt s . 10(1)(gG) .

• The severance benefit reason has been enhanced to align to the Income Tax Act No. 58 of 1962 severance benefit definition, which means:

– The leave and pro-rata bonus must not be included as severance benefits as these amounts are only paid at the time of the termination of employment .

Top Tip: These amounts are regular employment income, and must be included in gross income, and not as severance benefit (termination) payments . p

SARS issues new efiling forms


Telephone numberTelefoonnommer

C O D E N U M B E RK O D E N O M M E R-

Contact PersonKontak Persoon

For official use - Application numberVir kantoor gebruik - Aansoeknommer

Income Tax reference numberInkomstebelastingverwysingsnommer

Taxpayer current detailsBelastingpligtige se huidige besonderhede

Employer detailsWerkgewer se besonderhede

This application must be completed in capital lettersHierdie aansoek moet in hoofletters voltooi word

SurnameVan

Initial(s)Voorletter(s)

First name(s)Voorname

Date of birthGeboortedatum

Residential addressWoonadres

Employee numberWerknemernommer

Business addressBesigheidsadres

Postal codePoskode

Postal codePoskode

NameNaam

Email address of employerEpos adres van werkgewer

PAYE ref. numberLBS verwys. no.

Postal addressPosadres

Postal addressPosadres

Identity numberIdentiteitsnommer

SITESIBW

UnemployedWerkloos

OtherAnder

If the taxpayer is not registered for income tax, select one of the following reasons:Indien die belastingpligtige nie vir inkomstebelasting geregistreer is nie, dui een van die volgende rede(s) aan:

If ‘other’ provide reasons:Indien ‘ander’ verskaf redes:

Annual salaryJaarlikse salaris

R

Other identification numberAnder Identifikasienommer

Year of assessment ended onJaar van aanslag geëindig op

Postal codePoskode

Postal codePoskode

,

Application for tax directive: Gratuities

Aansoek om belasting aanwysing: Gratifikasie

INCOME TAXINKOMSTEBELASTING

IRP3(a)

C C Y YE E J J M M D D


7

1 - 2


R

Other (Specify)Ander sifiseer(Spe )

Gross amount payableBruto bedrag betaalbaar

,

,

,

,

,

,

,

,

,

R

R

R

R

R

R

R

R

R

Employer owned policy proceeds payable

Opbrengs uit polis besit deur werkgewer betaalbaar

Signature of /Handtekening vanemployer werkgewer Date/Datum

Additional details of applicationAddisionele besonderhede van aansoek

DeclarationVerklaring

Date of accrualDatum van toevalling

Reason for directive (Mark with an X)Rede vir aanwysing (Merk met ‘n X)

Severance benefit - DeathSkeidigsvoordeel - Dood

Share option without obligationAandele opsie sonder voorwaarde

I hereby certify that the information furnished above is true and correct.Hiermee verklaar ek dat die bogenoemde besonderhede die korrekte en ware gegewens weergee.

Severance Benefit payableSkeidingvoordeel betaalbaar

Severance benefit - Retirement

Empl owned policy proceeds axableoyer - T

Empl owned policy proceedsoyer - Exempt s 10(1)(gG)Skeidigsvoordeel - Aftrede

Opbrengs uit polis besit deur werkgewer - Belasbaar

Opbrengs uit polis besit deur werkgewer - Vrygestel s 10(1)(gG)

If ‘other’ provide reasonIndien ‘ander’ verskaf rede

Severance benefit - Retirement due to ill healthSkeidigsvoordeel - Aftrede weens swak gesondheid

Share option without obligation

Section 10(1)(gB)(iii) Compensation

Aandele opsie sonder voorwaarde

Artikel 10(1)(gB)(iii) Vergoeding

Severance benefit - RetrenchmentSkeidigsvoordeel - Personeel vemindering

OtherAnder

R ,



2 - 2

Note :s - .Directives are not transferable and a new application must be made following a change in the gross amount.- Leave payments should not be included in the severance benefit payable.

Nota :s - Belastingaanwysings is nie oordraagbaar nie en ‘n nuwe aansoek moet geskied indien enige van die inligting verander.- Verlofgelde moenie ingesluit word by die skeidingsvoodeel wat betaalbaar is nie.

Betaling saamgestel soos volg:Payment made up as follows:

,R


PW

As of the end of October 2013, Debit Pull transactions are discontinued for ABSA, FNB, Investec, Nedbank and Standard Bank . For all other banks you will still be allowed to use the Debit Pull option until phased out . Taxpayers are advised to set-up a Credit Push payment option or use one of our alternative methods of payment .

Why is SARS discontinuing the use of a Debit Pull transaction on eFiling?

With debit pull a taxpayer or their approved representative may authorise SARS to collect the money owed directly from their bank on their behalf, which means that SARS is initiating the collection directly from their bank . SARS does so by instructing the bank to collect the amount from the taxpayer’s bank account . There are several problems associated with this:

• There are risks associated with this product in that payment is not guaranteed and can be reversed at the request of the client and can also be rejected due to insufficient funds

• SARS is unable to validate that the person authorising SARS to initiate the debit pull is mandated to do so which can result in payments being withdrawn from incorrect accounts . SARS could be placed at risk as a result of such unauthorised actions .

Very importantly it is in the interest of the client to not allow unauthorised withdrawals from their accounts .

It should be noted that the debit pull option is still available for certain payments until the end of October 2013, on condition that the approved representative agrees to the declaration which appears on the screen . p

Discontinuation of Debit Pull Transactions on eFiling


PW

SARS have introduced an enhanced Tax Clearance Certificate application process on eFiling and in branches . This is the first step in the phased implementation of a modernised tax compliance process to be introduced in the first quarter of 2014 .

What happens?

You simply apply online using our improved online system and collect the certificate at the branch .

What do I need to do when applying for a Tax Clearance Certificate (TCC) on eFiling?

When asking for a TCC you need to use the holding company’s (legal entity’s) income tax reference number . ideally you should also use the entity’s value-added tax (VAT) and employees tax (PAYE) reference numbers .

What if it’s for a branch or division of the main company (entity)?

If you use a:

• branch VAT reference number;

• branch registration number for Payroll taxes:

– Pay-As-You-Earn (PAYE);

– Skills Development Levy (SDL);

– Unemployment Insurance Fund PAYE .

Then SARS will add all sub-entities belonging to the holding company and provide a consolidated compliance answer .

The tax compliance of sub-entities, divisions or branches of a corporate will have an impact on the holding company’s tax compliance status, meaning if any one of holding company’s sub-entities is non-compliant, the holding company will also be regarded as non-compliant and a Tax Clearance Certificate will not be issued .

Top Tip: The VAT registration number that appears on the Tax Clearance Certificate will be the number of the requesting sub-entity . p

New tax clearance certificate (TCC) application process


PW

Department of Labour related

Items


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Important notices issued by Department of Labour to employers

• All Registered Coida Employers – Letters of Good Standing

Letters of good standing are issued only to employers who meet the following criteria:

1 . Employer must be registered with the Fund as per section 80 of the COID Act .

2 . Employer must have submitted all returns of earnings as per section 82 0f the COID Act .

3 . Employer must be fully assessed as per section 83 of the COID Act .

4 . Employer must have paid/settled all outstanding debt as per section 86 of the COID Act .

5 . The turn-around time to issue letters of good standing is 5 (five) days .

Department of Labour’s UIF to fund a R300-million training programme with Seta to empower youth and unemployed

On 3 December 2013 Labour Minister, Mildred Oliphant, announced a joint-funded training programme to the tune of R300-million that will benefit 8000 youth and the unemployed . The minister said it was imperative that workers’ skills be improved, saying that the more workers were trained the more they are likely to be employed or be self-employed thus reducing their dependency on social grants and UIF payments .

The minister also announced the availability of an online U-filing system which will assist UIF claimants to apply for UIF benefits on line . Beneficiaries who have access to the Internet will no longer be required to visit labour offices to apply for benefits .

Updated lists – January 2014

The Department of Labour has made a list of registered trade unions, federations and employer organisations available on their website .

Table 1 – Minimum wages for domestic workers who work more than 27 ordinary hours per week

Area A (metro areas) Area B (rural/small town)

Hourly Rate (R) 9 .63 Hourly Rate (R) 8 .30

Weekly Rate (R) 433 .35 Weekly Rate (R) 373 .50

Monthly Rate (R) 1877 .70 Monthly Rate (R) 1618 .37

CPI plus 1% increase CPI plus 2% increase

Table 1 – Minimum wages for domestic workers who work more 27 ordinary hours or less per week

Area A Area B

Hourly Rate (R) 11 .27 Hourly Rate (R) 9 .80

Weekly Rate (R) 304 .29 Weekly Rate (R) 264 .60

Monthly Rate (R) 1318 .48 Monthly Rate (R) 1146 .51

CPI plus 1% increase CPI plus 2% increase

Minimum wage increase for domestic workers

In case you missed it, the minimum wages in the Domestic Workers Sector have increased with effect from 1st December 2013 – 30th November 2014 . The wage increases for the two different areas are as follows:


PW

3 . Tender documents must be produced to the Compensation Fund in order to qualify for an issue of a tender letter .

4 . The tender letter will be addressed to the Company issuing the tender .

5 . The tender letter will be issued for a specific tender .

6 . The responsibility to register the successful bidder with the Compensation Fund is now transferred to the company issuing the tender .

Criminal proceedings will be instituted against businesses that unlawfull intend to defraud and misrepresent facts about their employment status.

• All Registered Coida Employers – Instalment Settlements

Please be informed that with effect from 1 January 2013:

1 . 20% of the balance owed will be required upfront in order to enter into an instalment arrangement .

2 . The instalment arrangement will be approved for a maximum period of 12 months .

3 . Interest on non-payment or late payment of assessments is levied at the prevailing prime rate on all instalment arrangements .

4 . Should the instalment fall overdue, the full balance becomes payable immediately .

5 . Employers will be served with court orders for all instalments not honoured .

Legislative developments (as at 17 January 2014)

• Basic Conditions of Employment Act 20 of 2013 was passed and published in Gazette 37139, on 9 December 2013 .

• Labour Relations Amendment Bill – The Bill has been sent to the National Assembly for concurrence .

• Employment Equity Amendment Bill – The Bill was passed by the NCOP on 21 November and has been sent to the National Assembly for assent . p

Employers that have not yet been assessed by the Compensation Fund will first be assessed, up to the current assessment year, and are expected to pay all assessments in order to meet the criteria set out above . This process will also assist the Fund in finalising all assessment backlogs .

Letters of good standing will also be issued on a month-to-month basis to employers that have entered into an instalment arrangement . (Refer to conditions on instalment settlements) .

For effective and efficient service, employers are encouraged to make use of the online facility and register on the ROE website (www .labour .gov .za) .

• All Emerging Employers – Tender Letters

Please be informed that with effect from 1 January 2013, The Compensation Commissioner reviewed the requirements for issuing tender letters to aspiring employers not registered with the Compensation Fund .

Tender letters are issued under the following condition:

1 . Tender letters will be issued to businesses that have no employees .

2 . Employers that have been operating businesses without having registered with the Compensation Fund are not eligible to apply for tender letters .

Payroll Administrator’s Manual and Payroll World Journal

ISBN: 060PAYRADMSYSFormat: Print, looseleaf and print soft cover

Payroll Administrator’s ManualAn easy to read practical overview of payroll administration, including guidelines and commentary on the latest legislation. Advice on:• The duties of the Employer• Steps for Employees to take in order to exercise their rights• How PAYE is calculated using different common methods of annualising• Items to be reported on a new tax certifi cate• Rules for the valuation and taxation of fringe benefi ts• Retirement funding income – the portion of taxable income used to calculate pension fund contributions• Salary structuring and salary sacrifi ces

Also includes a quarterly subscription to Payroll World Journal. Please note that you can subscribe to this journal without subscribing to the Payroll Administrator’s Manual.

LexisNexis Concise Guide to Employee Taxation 2013 8th Edition

ISBN: 9780409115598Format: Print, soft coverAuthor: D Clegg

Of interest to anyone in the broader fi eld of remuneration packaging, including fringe benefi ts, this guide is ideal for those responsible for structuring remuneration packages. It discusses the tax consequences of particular package choices, how to avoid pitfalls and how to take advantage of those opportunities provided for in the tax legislation.

Taxation of Employees

ISBN: 060TAXATEMSYSFormat: Print, looseleafAuthor: A Vutter

Structure tax-effective remuneration packagesAssisting the employer with every aspect of the taxation of employees:• The tax consequences of

particular package choices• Pitfalls and opportunities found in

the tax legislation• Fringe benefi ts, share incentive

schemes, retirement funding choices and medical cover

• Deferred compensation and other special payments

• Cross-border tax issues for incoming and outgoing expat employees

LexisNexis Payroll SolutionsUnderstand how the law affects you

RS009/14

Visit www.lexisnexis.co.za/fi nancialsolutions to view our complete range of titles

To order your payroll solution simply call 0860 765 432 or email [email protected]

Just Released

RS009-14_payroll_solutions_ad_297x210.indd 1 2014/01/20 12:44 PM

Additional information with regard to letters of good standing

The Compensation Fund is deeply concerned with the escalating number of fraudulent letters of good standing which are presented for tender purposes and in most cases are not issued in accordance with the Compensation Fund Policy .

In view of the above, The Compensation Com-missioner assures employers and service providers of his commitment to curb fraud by automating the processes of issuing a letter of good standing . The current template is undergoing changes and will be modified with built‐in security features that will enable employers and service providers to validate the authenticity of the letter of good standing . A new template and the effective date of implementation of the automated process will be communicated in the near future .

Payroll Administrator’s Manual and Payroll World Journal

ISBN: 060PAYRADMSYSFormat: Print, looseleaf and print soft cover

Payroll Administrator’s ManualAn easy to read practical overview of payroll administration, including guidelines and commentary on the latest legislation. Advice on:• The duties of the Employer• Steps for Employees to take in order to exercise their rights• How PAYE is calculated using different common methods of annualising• Items to be reported on a new tax certifi cate• Rules for the valuation and taxation of fringe benefi ts• Retirement funding income – the portion of taxable income used to calculate pension fund contributions• Salary structuring and salary sacrifi ces

Also includes a quarterly subscription to Payroll World Journal. Please note that you can subscribe to this journal without subscribing to the Payroll Administrator’s Manual.

LexisNexis Concise Guide to Employee Taxation 2013 8th Edition

ISBN: 9780409115598Format: Print, soft coverAuthor: D Clegg

Of interest to anyone in the broader fi eld of remuneration packaging, including fringe benefi ts, this guide is ideal for those responsible for structuring remuneration packages. It discusses the tax consequences of particular package choices, how to avoid pitfalls and how to take advantage of those opportunities provided for in the tax legislation.

Taxation of Employees

ISBN: 060TAXATEMSYSFormat: Print, looseleafAuthor: A Vutter

Structure tax-effective remuneration packagesAssisting the employer with every aspect of the taxation of employees:• The tax consequences of

particular package choices• Pitfalls and opportunities found in

the tax legislation• Fringe benefi ts, share incentive

schemes, retirement funding choices and medical cover

• Deferred compensation and other special payments

• Cross-border tax issues for incoming and outgoing expat employees

LexisNexis Payroll SolutionsUnderstand how the law affects you

RS009/14

Visit www.lexisnexis.co.za/fi nancialsolutions to view our complete range of titles

To order your payroll solution simply call 0860 765 432 or email [email protected]

Just Released

RS009-14_payroll_solutions_ad_297x210.indd 1 2014/01/20 12:44 PM


PW

One of the most common causes of errors that occur in a payroll department is often that of apathy . This is not just found amongst the management team but often its common right across the board and it results in the lack of proper procedures being implemented and followed, the general neglect of key activities and tasks, and all too often, the lack of segregation of duties that could have a financial impact .

Payroll is still often considered as the department that can be placed in the back office and ignored until pay day . Management often feel that this is an easy function which virtually anyone with a bit of administration experience can do . Thankfully, this perception started to change a few years ago . The change was primarily due to payroll practitioners learning to become more assertive and becoming more vocal in the company, and often at executive level these

by Deryn VenskiTraining and Development Practitioner at LabourNet Payroll Solutions

Every payroll practitioner strives to run the most effective and most efficient department in their company, and as a result, want to believe that their department is fully compliant in all areas at all times . In reality however this is often not the case because there are so many factors that are often outside the control of the payroll department, that if not managed and monitored properly, will make it near impossible to achieve the “perfect” payroll department . Similarly there are often the simplest of errors that are made or the oversight of what may appear to be insignificant procedures and tasks, which could unwittingly cause the payroll department to, very quickly, become non-compliant and put the company as risk .


PW

Part of these procedures is to ensure that there is a proper segregation of duties in the payroll department . Even in the one-man payroll department, there can still be a partial segregation of duties . In this case, someone else can do the payment approval process, or authorise the release of a batch of payments . Far too often it is found that payroll fraud is caused because there is no segregation of duties or checks to prevent this from happening . According to a Deloitte statistic from 2011, 39% of all financial fraud in South Africa happens in or around payroll processes .

Finally, neglect is another one of those areas which could cause huge financial losses . Neglect mainly occurs when a payroll administrator starts to become complacent as a result of their perception that the payroll system and the payroll department is running optimally and cannot be improved – there is always something that can be improved . In addition, errors can be caused through simple ignorance of the latest legislative requirements or where the payroll administrator believes that the actual payroll system itself is doing all the relevant checks and validation, and therefore should not need any form of manual intervention or monitoring . System parameters and rules can easily be inserted incorrectly, or changed without proper testing, and as such, mechanisms must be established that at least do spot checks on what the system is doing .

It is important that a payroll practitioner ensures that the procedures and system are regularly checked . It is not appropriate to use a procedure that was perfect a year ago, but no longer complies with either legislation or company policies that may have changed . In addition, the system being used must be checked for compliance and correctness . Even if a professional consultant set up a new code in the system, it must be checked for accuracy . The consultant will do all they can to ensure it is correct, but they can make mistakes, or may have a varying understanding of what was explained to them . If the consultant made a mistake, it will still be the company and the payroll practitioner that will have to take accountability for the mistake .

It is not acceptable for a payroll practitioner to assume that what comes out of the payroll system is 100% correct all the time . Even though the system may be set up correctly, the information fed into the system may not be . It is therefore always important to reconcile the payroll and to ensure that all input is correct .

Should these four potential issues be reviewed and attended to by both the company management and the payroll practitioner on a regular basis, it will be a lot easier to maintain a fully compliant and efficient payroll department . p

days . Payroll practitioners are now being encouraged to become more involved in the strategic affairs of their organisations . Increasingly, they are now being requested to be part of the senior meetings and often tasked with scheduling planning sessions to discuss payroll/HR issues and deadlines with other executives . Payroll practitioners are being told to make time to do ‘walkabouts’ so that the members of staff can get to know the payroll department . This new found exposure within the company and to other areas of management now allows executives and staff to have a far better understanding of day-to-day payroll management . Managers now recognise that it takes a special individual to manage and operate a payroll function and also just how important it is to provide the appropriate level of ongoing training to all members of the payroll team .

Most payroll departments have very good procedures, policies and checklists written . Many follow these procedures religiously but often do not have the support of the rest of the company, and as such, cracks begin to show . How many times has it been said that payroll is the last to know what’s going on in the business? The standing joke in payroll seems to be that any change that affects the payroll will only be known to the payroll team after a payment was not made and when a very irate manager or employee is involved . It may sound amusing to some, but the unfortunate truth is, payroll is still often the last to know, hence the payroll practitioner needs to be proactive in combatting this problem . When setting the deadlines and procedures, payroll practitioners should ensure that the various department heads impacted by these are involved from inception . They should be given responsibility and accountability for the areas that impact them and everything that is agreed should be consolidated into a single procedure . This will assist greatly in getting buy-in from everyone in the company and will go a long way in preventing ‘forceful’ managers ‘overruling’ a payroll deadline or procedure .


PW

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