1. The First return which covered the estimated income for the tax year, based on the expected taxable income for the period 1 March to 31 August. The deadline to submit your next IRP6 return and make payment is the 31 August 2024. This return is the First IRP6 for the 2025 tax year.
2. The Second return which covers the estimated taxable income for the full year, for the period 1 March to 28 February. The deadline to submit this return and make payment is 28 February.
3. The Third return is optional, for those who were did not have their final figures or were unable to accurately calculate their February income. This additional top-up payment will avoid being penalized for underestimating your income when you submit you’re annual ITR12 income tax return. This deadline to submit this return and make payment is 30 September.

Provisional tax ensures that businesses and individuals, such as Freelance Artists, Independent Contractors, Sole Proprietors, Landlords or Investors, declare and pay tax on income that hasn’t already been taxed by their employers, pensions, or other sources.

As confusing as it may seem, provisional tax is not a separate tax from income tax. The purpose of Provisional Tax is to benefit those taxpayers with hefty taxation payments due, to allow them to spread these over two or three instalments, instead of a once off payment at the end of the tax year. Upon the assessment of your compulsory annual Income Tax Return (ITR14 for companies or ITR12 for individuals), your provisional tax payments will be off-set against your normal tax liability. If you underpaid, you will need to make an additional payment, including a penalty for underestimating your income, and if you overpaid, a refund, including any interest that was earned on the overpayment, will be due to you.

WHO IS ELIGIBLE?
All businesses or trusts, regardless of size or trading activity must submit a provisional return, even if you are running at a loss. For individuals who earn multiple salaries or income from other sources, then the threshold varies depending on age and tax year. For the 2024 and 2025 tax year (March to February), you don’t need to register for Provisional tax, if your total annual taxable income falls below the following thresholds:

• R 95 750 if you are under 65, or
• R 148 217 if you are older than 65 and younger than 75; or
• R 165 689 if you 75 and older

Additionally, you only need to register for provisional tax if those other sources of income, exceed R30,000 for the year. Neglecting to file your Provisional return before SARS deadlines can have serious consequences and can lead to Penalty fines of R250 to R16 000 for both trading and inactive companies. Your business also runs the risk of becoming non-tax compliant, which means you will not be able to apply for new tenders, contracts or loans.
Provisional tax is a critical aspect of financial responsibility for businesses and individuals. Understanding your obligations, registration requirements, and payment deadlines is essential to avoid penalties and ensure compliance with tax regulations.

Dirmeik Consulting provides comprehensive tax services and can help you to correctly navigate your Provisional Tax obligations to keep you tax compliant. To find out how we can assist you to maximize your financial well-being or to set up a consultation with us, contact us here.

The post Understanding Provisional Tax appeared first on Dirmeik Consulting.

Further bad news for companies, is that SARS will be implementing a global minimum corporate tax that will bring more business operations into the tax net, subjecting multinational companies to a tax rate of at least 15%, regardless of where its profits are located.

Some good news was that the expected VAT increase to 16% was not introduced and will remain at 15%.  There was also no increase to the general fuel levy, while the accident fund levy and the customs and excise levy will remain unchanged.  In 2026, producers of electric vehicles in South Africa will be able to claim 150% of qualifying investment spending, as an incentive to aid the transition to new energy vehicles.

Changes to the environmental taxes are as follows:-

• Carbon tax increased from R159 to R190 per tonne of carbon dioxide equivalent, as of 1 January 2024.
• Carbon fuel levy will increase to 11 cents per litre for petrol and 14 cents per litre for diesel effective from 3 April 2024.
• Plastic bag levy will increase from 28 cents a bag to 32 cents from 1 April 2024.
• Incandescent light bulb levy will rise from R15 to R20 per light bulb from 1 April 2024.

The brackets of the property transfer duty table also remain unchanged, providing no additional incentive to buyers, with properties below R1.1 million remaining exempt from the tax.

The budget also includes a hike in excise duties on alcohol of 6.7% to 7.2%, while duties on tobacco products will increase by 4.7% to 8.2%.  Godongwana also said they would be tabling an increase of the excise duty on electronic nicotine and non-nicotine delivery systems, known as vapes, to R3.04 per milliliter.

These changes to the budget are expected to grow South Africa’s economy over the next three years at an average of 1.6%. The government has said they would be prioritizing energy and logistics reforms, along with measures to arrest the decline in state capacity.

Rebates remain unchanged, as follows:-

• Primary – R17 235
• Secondary (Persons 65 years and older) – R9 444
• Tertiary (Persons 75 years and older) – R3 145

Age Tax threshold

• Below age 65 – R95 750
• Age 65 to below 75 – R148 217
• Age 75 and above – R165 689

Click here to see our in-depth Tax Guide for the 2024/2025 tax year that begins on 1st March 2024.

The post 2024 Budget Speech Highlights appeared first on Dirmeik Consulting.

To know how this tax incentive will work in your 2024 income tax return, is to understand that it is actually a credit or rebate, that will be a deduction against your calculated tax liability.  The required elements of this is as follows:

• It is available in respect of a cost incurred only by a natural person (if the home is owned by a trust or company and the owner incurs the expenditure, the rebate is not available, but it will be available if the occupier incurs the cost).
• The cost must be incurred on the acquisition of new and unused solar photovoltaic panels that have a generation capacity of at least 275W each.
• The panels must be brought into use for the first time on or after 1 March 2023 and before 1 March 2024.
• The rebate is an amount equal to 25% of the cost of the panels, with a maximum rebate of R15 000.
• The panels must be installed and mounted on or affixed to a residence mainly used for domestic purposes by the individual incurring the cost.
• The installation must be connected to the distribution board of the residence and be issued with an electrical certificate of compliance.

What is needed to ensure your solar panel rebate is approved by SARS?

1. A VAT invoice reflecting the cost of the solar panels, separately from other items
2. The proof of payment of the above invoice
3. A Certificate of Compliance showing that the panels were brought into use for the first time during the period of 1 March 2023 to 29 February 2024

What happens if I sell my home?

You will not need to pay back the incentive. As the rebate only applies to fixed solar panels, the next person who moves into or uses the property will be able to produce their own power.

How do I claim if I live in a sectional title property?

Residents who live in sectional title properties and are allowed to install their own panels can claim in the same way as other homeowners. However, there are currently no provisions for reclaiming levies that are attributed to the cost of solar panels.

Can I claim the incentive if I rent my solar panels?

There is currently no provision for individuals who rent or lease solar panels to claim back any monies spent on covering this cost.

Solar Panel Incentives for Businesses

The initial Section 12B capital allowance provides for accelerated depreciation of 100% of the initial costs in the year the business started using the solar system.

From 1 March 2023, this incentive will increase to an accelerated depreciation allowance of 125%.

Therefore, a company that invests R150,000 in a solar system can deduct the following:

• VAT of 15% is reclaimable on the total installation charge (subject to a valid VAT invoice being issued by the supplier).
• Income tax saving of 27% for companies.
• If the R150,000 is VAT exclusive, the income tax savings will be R40,500.

If the claiming of this tax incentive seems confusing, why not let the experts at Dirmeik Consulting handle the intricacies to ensure that your claim is approved to the maximum benefit.  Contact us today for a consultation to see how we can best meet your tax and accounting needs.

The post Shining the Light on SARS Solar Panel Tax Incentive appeared first on Dirmeik Consulting.

With official emigration having been phased out in 2021, SARS new tax clearance application processes for foreign investment and emigration allowances now treats all South African individuals the same, regardless of where they live.

This consolidated change is that the new ‘Approval of International Transfer (AIT)’ replaces both the previous ‘Emigration’ and ‘Foreign Investment Allowance (FIA)’ application types, which can conveniently still be applied for via e-Filing.  As part of the AIT, the following information will be required by SARS:

• Statements of assets and liabilities must be split between foreign and local
• Tax status (resident or non-resident)
• Are you a beneficiary of a trust (foreign or local)
• Do you have a shareholding (directly or indirectly) in any legal entity of 20% or more (foreign or local)
• Have you made a loan/s to a trust (local or foreign)

For more details on the supporting documents that will be needed, see SARS link here.

Previously, the FIA (R10 million limit) required the completion of a SARS FIA001 Form that would generate a TCS (Tax Compliance Status) PIN for foreign investment. Emigrants followed a similar process, but was issued a TCS PIN for emigration. This has now been consolidated into an enhanced single clearance process, namely the AIT, which aims to dramatically improve turnaround times for taxpayers, provided they are already compliant.

However, these changes only apply to the tax clearance process, with no changes being made on the Exchange Control side. The allowances applicable to South African resident individuals, as well as those who have ceased to be residents for tax purposes (emigrants) remain unchanged, and can be summarised as follows:

• The current R1 million Single Discretionary Allowance limit is still available yearly to all South African resident individuals, 18 years and older, who wish to transfer money abroad, and does not require a Tax Compliance PIN. However, this is only available to emigrants in the calendar year when they leave South Africa. Any further capital transfers for residents or emigrants above R1 million require tax clearance in terms of the AIT process.  For applications in excess of R10 million, SARB approval will be required.

In conclusion, this new process applies to new applications for foreign investment and emigration, and does not have any impact on tax clearances that have already been issued. Taxpayers are well advised that whilst SARS have made the process easier to apply, there is a strengthened and technology compliance enabled backend, which is best navigated through an experienced Tax Consultant, like ourselves. We, at Dirmeik Consulting can easily assist clients with this new tax clearance process, whether you are transferring or taking money abroad.  We are also able to successfully have you coded as a non-resident tax-payer with SARS, should you choose to emigrate.  Contact us today to find out how we can assist you.

The post SARS Changes to Foreign Investment & Emigration Explained appeared first on Dirmeik Consulting.

With the energy crisis being the focus this year, the news was welcomed of a tax incentive for the installation of rooftop solar panels, which will help ease the impact of load shedding on households, businesses and the economy.  From 1 March 2023, individuals will be able to claim a rebate of 25% of the cost of the panels, up to a maximum of R15 000. This incentive will be available for one year but has strict terms and conditions to comply with. To find out more on this, see the SARS guide.

Businesses will now be able to deduct 125% of the cost of wind, solar, hydropower and biomass projects in the first year, for renewable energy brought into use during a period of two years from 1 March 2023.

Some much-needed tax relief bailouts to struggling enterprises this year included :

• Eskom of R254 billion
• SAA of R1 billion
• SA Post Office of R2.4 billion

Some of the 2023 Budget Speech tax changes that will affect your pocket are:

Personal Tax Rates

Individuals will only pay income tax if they earn more than R95 750 per annum.

Personal income tax brackets will only be increased according to the predicted inflation rate of 4.5%.

• If you’re a taxpayer under 65 years: your tax-free threshold increased to R95 750 from R91 250.
• If you’re a taxpayer between 65 and 75 years of age: your first R148 217 is tax-free. Increased from R141 250.
• If you’re a taxpayer over 75: your tax-free threshold increased to R165 690 from R157 900.

Medical Tax-Credit

Medical tax credits will increase from R347 to R364 per month for the first two members, and from R234 to R246 per month for additional members.

Small Business Tax

From 1 April 2023, Corporate Tax will be reduced to 27% for companies with years of assessments ending after 31 March 2023.

Retirement Tax

The retirement tax tables for lump sums withdrawn before retirement, and for lump sums withdrawn at retirement, will be adjusted upwards by 10%. This means that the tax-free amount that can be withdrawn at retirement increases to R550,000. A two-pot retirement system was announced, which will include the amount that could be immediately available when the system is implemented from 1 March 2024.

Sin taxes

Although a sugar tax increase has been delayed until 1 April 2025, taxes or excise duties on alcohol and cigarettes were increased by an average of 4.9%, in line with inflation

• 340ml can of beer will increase by 10c
• 750ml of spirits will increase R3.90
• A pack of cigarettes will increase by 98c

Other welcoming changes include:

• Social grants have increased slightly below inflation with the Covid-19 Social Relief grant being extended until 31 March 2024.
• The brackets of the transfer duty table will also be increased by 10%, allowing properties below R1.1 million to avoid any transfer duty payments.
• The research and development tax incentive will be extended for 10 years and will be refined to make it simpler and more effective.
• The urban development zone tax incentive will also be extended by two years

What hasn’t changed?

• Fuel levy
• Capital Gains Tax
• Donations Tax
• Estate Duty Tax
• Dividends Tax
• UIF
• Skills Development Levy
• Interest Exemption
• International Travel Tax

These points are just a brief summary of the budget speech proposals, but they are not yet legislated and may be subject to further changes.

Consider the experts

Dirmeik Consulting has an extensive understanding of the latest tax laws, rules and regulations and can advise you effectively on all your tax matters. Our experts will endeavour to create the best solution for you and your business, so don’t delay in getting in touch with us.

The post 2023 Budget Speech Highlights appeared first on Dirmeik Consulting.

The following tips will hopefully ensure the handover goes smoothly and efficiently: –

1. Correct Timing

The best changeover date is once your latest annual financial statements have been submitted and there are no pending audits or outstanding notice of objections or appeals.

2. Compliance

Ensure that your accountant has done the work for all invoices raised and that you have no monies outstanding to them. Be sure to know where you stand with SARS and if you are aware of any tax compliance issues, do disclose this at the handover meeting.

3. Giving Notice

As a business courtesy, you should first inform your current accountant of your plan to change, giving them the details of your new accountant.  You shouldn’t need to have to give any reasons, unless you feel it is necessary.

4. Your Tax Files and Information

If your current Accountant has any tax files or company documents of yours, these need to be couriered over, which you may be charged for. We are happy to oversee this for you, unless you prefer to collect and deliver these yourself.

5. SARS e-Filing

With SARS’s new e-Fling move transfer requests, ensure that the OTP is used timeously to authorise the move to your new accountants. If not given automatically, be sure to request a Tax Compliance Status as confirmation that there are no returns or any debt outstanding.

Now that you know how effortless it is to change accountants, you might find it useful to consider why you might want to end your existing relationship… and whether we might be the right move for your business…

• Do you feel confident that they have your best business interests at heart?
• Have they taken the time to fully understand your business and your goals?
• Are your accounting fees market related?
• Does their communication with you include jargon you don’t understand?
• Are they client-focused and SARS knowledgeable?

Choosing the right accountant or Tax Practitioner for your ‘baby’ is as important as choosing the right medical specialist. They need to be able to see any adverse symptoms, diagnose them correctly and offer the correct solutions to see you to full health.  Our team at Dirmeik Consulting will be honoured to partner with you to help your business grow, to remain afloat during the storms of life and to help make sure that your ‘baby’ prospers to adulthood. You can contact us on info@dirmeik.co.za or WhatsApp number 064 898 4388.

In the wise words of Tony Robbins –

“Stop being afraid of what could go wrong and start being excited about what could go right”

The post 5 Steps To A Smooth Changeover Between Accountants appeared first on Dirmeik Consulting.

While that may sound like music to our ears, what is really in store for South Africans? How will this new budget “strike a critical balance between saving lives and livelihoods while supporting inclusive growth,” as Godongwana says it will?

Let’s look at the 2022 Budget Speech Highlights:

What has changed?

Personal Tax Rates

You’ll be happy to see that personal income tax brackets will only be increased according to the predicted inflation rate of 4.5%.

• If you’re a taxpayer under 65 years: your tax-free threshold’s increased to R91 250 from R87 300.
• If you’re a taxpayer between 65 and 75 years of age: your firstR141 250 is tax-free (previously R135 150)
• If you’re a taxpayer over 75: your tax-free threshold’s increased to R157 900 from R151 10).

Medical Tax Credit

Treasury announced a very slight change for medical tax credits. The main member and first dependent are allowed a tax credit of R347 (a R15 increase) and R234 (a R10 increase) for all other dependents.

Although small, this increase is very welcome and not expected as the medical tax credit is not continually revised.

Small Business Tax

If your small business qualifies as a Small Business Corporation, Treasury announced some good news. Your SMC will benefit from an inflationary adjustment to their tax brackets to bring their tax in line with the tax threshold for individuals.

Turnover tax rates, however, have remained unchanged.

Sin Taxes

Excise duties on alcohol and tobacco will increase by between 4,5% and 6,5%. If you want to know how that’s going to affect your shopping basket:

• beer an extra 11c per can
• wine an extra 17c per bottle
• sparkling wine an extra 76c per bottle
• spirits an extra R4.83 per bottle
• cigarettes an extra R1.03 per packet and
• rolled cigar an extra R6.77 per 23 grams

New on the cards will be a tax on vaping products of at least R2.90 per ml from 1 January 2023.

What hasn’t changed?

Fuel levy

All motorists can breathe a sigh of relief. For the first time in over 30 years, the general fuel levy and Road Accident Fund levy will remain the same.

Capital Gains Tax

There were no changes to Capital Gains Tax this year.

Individuals: still must include 40% of the gain in their income, and the overall maximum effective tax rates for individuals remain unchanged from last year at 18%.

Companies and trusts: still must include 80% of the gain into their income, and the overall maximum effective tax rates for companies and trusts stay the same at 22.4% and 36%, respectively.

Dividends

The Withholding Tax on Dividends remains unchanged at 20%.

Donation Tax remains the same: 20% is levied on amounts over R100 000 per year and 25% on donation values exceeding R30m.

The Estate Duty threshold stays the same: above R3.5m, and up to R30m, estates will be taxed at 20%, and then at a rate of 25% above R30m.

Interest and investment exemptions

The threshold for interest exemption remains at R23 800 for those under 65 years of age and R34 500 for those over 65.

There was also no change on the contribution limit for tax-free savings accounts, the annual limit is R36 000, and the total lifetime limit is still capped at R500 000.

Corporate Tax

Corporate Tax is to remain the same at 28% this year for companies with years of assessment ending between 1 April 2022 and 30 March 2023.

However, as announced in 2021, there will be a reduction in the corporate tax rate to 27% for companies with years of assessments ending any date after 31 March 2023.

Lumpsum payouts

There are no shifts to the lumpsum tax rates.

Retirement deduction

The retirement laws which allow for the deductibility of provident, pension, and retirement annuity contributions also remain the same. The regime provides a capped 27.5% of the greater remuneration or taxable income to the maximum of R350 000 per year.

Although these points discussed here are just a summary of the more significant budget speech highlights and proposals, they are not yet legislated and may be subject to further changes. If there are any areas you need to understand further or if you would like to find out how these new plans may affect your business, contact the professionals for help.

Consider the experts

Dirmeik Consulting has an extensive understanding of tax and VAT laws and can give the correct and up to date advice on all your tax matters. We make sure to keep up to date with any new rules or regulations made by SARS.

Dirmeik’s tax experts can advise on all South African tax matters and endeavor to create the best solution for you and your business. Get in touch with us on our website.

The post A Closer look at the 2022 Budget Speech Highlights appeared first on Dirmeik Consulting.

PAYE is the amount of income tax that is deducted from your salary before you receive it. This system ensures that you don’t have to pay SARS between 18% and 45% of your earnings in a yearly lump sum. That’s good news.

Your employer will pay your portion every month directly to SARS according to each employees’ tax rates. These rates are calculated based on your basic salary, bonuses, benefits like a pension fund, medical aid, and other allowances.

Now, let’s get down to the Q&As on ‘what is PAYE’?

How do you get started?

Your employer, who is registered or required to register with SARS for PAYE, will pay the amount you owe to SARS by deducting the amount from your salary each month and paying it directly to SARS. Besides supplying your Employer with your personal details and income tax number, there is nothing else you will need to do. If you don’t have an income tax number, your employer can register you for one via their e-Filing. It’s essential that all your details submitted are accurate and current (especially your banking details) for any possible refund and to make sure your IRP5 is correct.

Who is it for?

The amounts deducted or withheld must be paid by the employer to SARS by completing the Monthly Employer Declaration called an EMP201. This declaration is a payment return in which the employer declares the total payment together with the allocations for PAYE, SDL, UIF and/or Employment Tax Incentive, if applicable. These amounts then need to be submitted twice a year to SARS via an Employer Reconciliation Declaration (EMP501) which is the return that generates your IRP5.

How and when should it be paid?

PAYE must be paid to SARS by the 7th of the following month for the salary that is being declared. If the 7th of the month falls on a public holiday or weekend, the payment must be made on the last business day prior to it.

The following payment methods are available:

• eFiling – for the payment to be authorized Bia the employer’s bank account
• Electronic payments (EFT), using the correct reference number to allocate the payment to the correct period
• Payments at a bank: All payments can be made at any ABSA, Capitec, FNB, Nedbank, or Standard Bank branch.

How much will you pay?

The minimum percentage you will pay in tax is 18% of your taxable income. This is for individuals earning up to R216 200 per year. The subsequent tax bracket up to R337 800 requires a payment of R38 916 plus 26% for taxable income above R216 200, and it keeps going up from there. To view the 2022 tax table, click here.

How is PAYE calculated if you’re self-employed?

If you are self-employed and earn taxable income above the annual threshold of R79 000 for the current tax year, you must register as a provisional taxpayer. This involves twice-yearly provisional payments, and it is highly recommended that you have the cash available to pay these two lump-sum payments in August and February each year. Provisional taxpayers receive income other than a salary or remuneration from an employer—individuals who run their own businesses, such as freelancers, sole proprietors, and independent contractors. Commission earners and freelance artists can apply for a Tax Directive for a lower tax percentage rate.

Consider the experts

Dirmeik Consulting has an extensive understanding of tax and PAYE laws and can give the correct and up to date advice on all your tax matters. We make sure to keep up to date with any new rules or regulations made by SARS.

Dirmeik’s tax experts can help you to lower your tax liability and will endeavor to create the best solution for you and your business. Get in touch with us on our website.

The post What is PAYE? appeared first on Dirmeik Consulting.

This kind of employment involves workers working part or all of their time from an at-home office. Of course, the most obvious upside to this is eliminating the daily commute, thereby increasing a healthy work-life balance – there is more opportunity to get to the gym, make an early dinner, and help your kids with their homework.

But what kind of effect will this have on your tax deductions, and does it impact Capital Gains tax? Let’s take a look below:-

Tax deductions

Home office expenses do qualify as a tax deduction if specific criteria are met. Reducing our taxable income is always a bonus, but it’s essential to know the tax rules around home office expenses and what you are allowed to deduct. These rules don’t apply to sole proprietors or established freelancers who have always worked from home.

But for those just moving into the remote or flexible working fields due to the pandemic, here’s what you need to know and what is required for home office deductions and expenditure:

• A letter from your employer is needed, showing that they have allowed or instructed you to work from home.
• The individual must spend more than half of their total working hours working in the home office.
• The individual must have a separate area that is used exclusively for business. It can’t be used as an office during the day and double up as a dining room in the evening.
• The space must be equipped for your specific business or trade, including printers and other work tools.

What expenses can be deducted?

Suppose the individual is a commission earner (earning more than 50% of total remuneration from commission). In that case, they can deduct: rent, interest on the bond, repairs to the premises, rates and taxes, cleaning, wear and tear, and all other expenses relating to their house and related business expenses like internet, telephone, stationery, repairs to computers, etc.

In contrast, salaried employees can deduct rent, interest on the bond, repairs to the premises, rates and taxes, cleaning, wear and tear, and all other expenses relating to their house only.

How would you calculate the home office deduction?

One would need to work out the total square meterage of the home office in relation to the total square meterage of the house and then convert this to a percentage. This is then applied to the home office expenditure to calculate the portion deductible as business-related.

Although there are benefits here for home office tax deductions, few people know that it can have a negative impact on your capital gains tax when you sell your property one day.

How do home office deductions impact Capital Gains Tax?

Individuals are entitled to a primary residence exclusion of up to R2 million to offset the capital gain arising on sale. However, if part of your primary residence is used for business and a deduction is claimed for trade expenditure, this part of your primary residence is then not covered by the exclusion. This means the individual may be exposed to Capital Gains Tax because the overall capital gain will need to be apportioned between a primary residence and business use.

Let’s take a look at an example from the South African Institute of Taxation to illustrate the point:

Isabel purchased a home in February 2007 for R1.2 million. In February 2015, she carried out renovations for R300 000 to add on an office from where she worked until she sold her home in February 2019. The office space made up approximately 10% of her total house space (i.e., it was 10 m2, while her entire home was 100 m2) and she therefore claimed 10% of her house running costs as a tax deduction against her business income.

She lived in this home until February 2019 when she sold it for R3.5 million. Her taxable income for 2019 was R500 000.

THE CAPITAL GAINS CALCULATION

Proceeds: R3 500 000

Base cost: R1 200 000 + R300 000 = R1 500 000

Capital gains (proceeds – base cost): R3 500 000 – R1 500 000 = R2 000 000

Portion of the capital gains attributable to the property’s use as a home office (10% for 4 years out of 12 years): R2 000 000 × 4/12 × 10% = R66 666

Portion of the capital gains attributable to the property’s use as a primary residence:
R2 000 000 – R66 666 = R1 933 334

Less primary residence exclusion: R1 933 334 – R2 000 000 = nil
Total capital gains: R66 666
Less: annual capital gains exclusion: R66 666 – R40 000 = R26 666

The inclusion rate for capital gains is 40% for individuals. This means that 40% of the gains (i.e., R26 666 × 40% = R10 666) is added to Isabel’s taxable income and will be taxed at her marginal rate of tax.

If we assume her marginal tax rate is 36%, then approximately R3 840 capital gains tax will be payable (i.e., R10 666 × 36%).

If Isabel had not used part of her residence as a home office, the capital gains tax on the disposal of her property would have been nil due to the primary residence exclusion being applied to the total gain of R2 million.

Isabel would have to compare the amount of capital gains tax (R3 840) with her annual tax saving from the home office deduction to decide which is more advantageous from a tax perspective. It seems likely that it would be worthwhile for Isabel to claim home office expenditure annually because the tax benefits would outweigh the capital gains tax she would need to pay on disposal.

Note that on Isabel’s ITR12, she must report the details of the property sale as two separate transactions. This is done by indicating in the opening wizard that two disposals took place. This will open up two capital gains/loss sections so that the details of each can be captured separately. For the primary residence exclusion to be correctly applied, she must pro-rate the proceeds and the base cost for each disposal, so as to reflect the primary residence portion separately from that of the non-primary residence portion.

Consider the experts

Need to find out more about how working from home is impacting your tax or the home office deductions you are allowed to claim? Give us a call, and we can help you through the process. Dirmeik Consulting has an extensive understanding of tax and VAT laws and can give the correct and up-to-date advice on all your tax matters. We make sure to keep up to date with any new rules or regulations made by SARS.

Dirmeik’s tax experts can advise on all South African tax matters and endeavour to create the best solution for you and your business. Get in touch with us on our website.

The post How home office deductions impact Capital Gains tax appeared first on Dirmeik Consulting.

SARS has quite a series of measures in place to conclude your tax residency status and ascertain if you should be paying tax in South Africa, whether you are living in Australia, England, or bouncing around Europe. These measures start with figuring out how much time you spend in SA and where your family and assets remain.

What is tax emigration?

Tax or financial emigration involves informing SARS that you will be changing your tax status. As a South African tax resident, you pay tax based on your worldwide income and worldwide asset base. A non-tax resident, on the other hand, only pays tax on their South African sourced income and South Africa sourced asset base, which is why being classified as a non-resident is seen as beneficial.

Once SARS has determined how you will get taxed, the South African Reserve Bank (SARB) will regulate how your money moves in and out of the country. Home Affairs will then document your citizenship status and rights in and out of SA.

How SARS determines your tax status

1. The ordinarily resident test

Although this is entirely subjective, you’ll be considered an ordinarily resident if your permanent home is in South Africa. This definition includes those living in a place with some degree of permanence, a permanent home, have their belongings stored, and regularly return following temporary absences. SARS will see you as residing somewhere else permanently and not a SA tax resident if these don’t seem true of your lifestyle.

2. The physical presence test

This test is entirely time-based and applicable to someone who is not considered an ordinarily resident. Basically, you will need to prove that you have been physically present in SA for a period or periods exceeding 91 days in aggregate during the tax year under consideration. You will also need to show that you were in SA for 91 days in total during each year of the five tax years preceding the tax year under consideration. And 915 days during the above five preceding tax years or 183 days a year over these five years.

3. Double Taxation Agreement (DTA)

The DTA is an agreement held by South African and many other countries. They are agreed-upon tax legislations to ensure that each country knows what taxing rights they have against their taxpayers. This means that the DTA will make sure you are not unfairly taxed in South Africa and the corresponding country. Great, so, no double taxation for you. This will come into play if you are earning an income in South Africa and the other country, or if you are a tax resident in SA with no income from a SA source and are earning from a foreign company.

Important things to note:

• The onus is on you to inform SARS that you will be changing your tax status, in the same tax year. If you don’t tell them, they will consider you a SA tax resident.
• If there is tax due to SARS when you change your status, you may have to face hefty administrative penalties for non-declaration and non-payment.
• You must communicate tax emigration in the tax return covering the period you change your tax status.
• The day before you become a non-resident for tax purposes, you will be deemed to dispose of your worldwide asset base at market value – triggering Capital Gains Tax or an exit charge. You are then considered to repurchase it – all for tax purposes. (Fixed property in SA is excluded from this equation.)
• SARS deems an additional period of assessment when you are changing your tax status and will require a provisional tax return to be done if your taxable income exceeds R1 million in that tax year. If taxes are owed, they will be due on the day you leave the country.
• After you become a non-resident, you don’t need to submit SA tax returns unless you still have assets left in the country that are generating income streams.

If there’s one thing to take from all of this, it’s vital to understand that changing your tax residency does not mean you automatically undergo financial emigration. You may not even benefit from applying for tax emigration. It’s essential to speak to the experts as the process can be arduous and complicated. Contact Dirmeik Consulting for professional services to take care of the process for you and advise you on the way forward.

Consider the experts

Are you changing your tax status? Want to find out more about financial emigration? Give us a call, and we can help you through the process. Dirmeik Consulting has an extensive understanding of tax and VAT laws and can give the correct and up-to-date advice on all your tax matters. We make sure to keep up to date with any new rules or regulations made by SARS.

Dirmeik’s tax experts can advise on all South African tax matters and endeavour to create the best solution for you and your business. Get in touch with us on our website.

The post The Tax Implications of Leaving SA appeared first on Dirmeik Consulting.

Many South Africans have made millions with Cryptocurrencies recently and everyone is asking, is there a SARS Cryptocurrency tax? The answer is, yes, there is indeed. The taxman said in an April 2021 statement that there will be a SARS Cryptocurrency tax.

“South Africans will be taxed on all earnings from cryptocurrencies.” Although there wasn’t much more information given than that, SARS explained that existing regulations should provide taxpayers with more than enough guidance on how they will be taxed. SARS commissioner Edward Kieswetter confirmed that undisclosed cryptocurrency holdings will be a big area of focus for the tax agency in 2021.

With the new tax season upon us, let’s uncover what to expect regarding the taxation of Cryptocurrencies.

SA Cryptocurrency taxes, in short

SARS considers Cryptocurrencies to be “assets of an intangible nature” as opposed to currency or property. That means income received or accrued from Cryptocurrency falls under “gross income”. However, under certain circumstances, gains may be considered capital under the Eighth Schedule to the tax act.

The tax rules for Cryptocurrency allow for deducting costs. So, with regards to income, taxpayers may claim expenses on their taxes. In the case of Capital Gains Taxes, you only pay capital gains on any appreciation of your Cryptocurrency from the cost of the purchase price.

Capital gains Cryptocurrency taxes

SARS specifies that “investors can exchange local currency for a Cryptocurrency (or vice versa) through private transactions or by using Cryptocurrency exchanges”. Cryptocurrency exchanges are essentially markets for cryptocurrencies.

These regular cash transactions will need to be reported on the Provisional Tax return (IRP6). For tax purposes, short-term trading activity to earn daily wages is deemed income, while long-term investments (typically over three years) are subject to capital gains taxes.

What is the best way to document your Cryptocurrency transactions? SARS says that conventional receipts and/or invoices will suffice. Cryptocurrency transactions won’t go through any more scrutiny than typical payment or receipt activity.

Are there recommended accounting methods for Cryptocurrency? SARS noted that the Cryptocurrency “purchase price is determined on the earlier receipt and accrual date. Cryptocurrency is not regarded as a share, and therefore SARS does not treat it as the average for the year.” In other words, a first-in, first-out approach is better than the average cost or last-in, first-out accounting method.

Tax on Cryptocurrency exchanged for goods or services as income

The 2018 SARS guidelines specify that “goods or services can be exchanged for cryptocurrencies. This transaction is regarded as a barter transaction. Therefore, the normal barter transaction rules apply”. In other words, this Cryptocurrency is taxed as income to be reported on the ITR12 form.

Cryptocurrency mining taxes

The tax treatment of Cryptocurrency mining activity falls under both standard cash and barter transaction rules. This means Cryptocurrency miners are first taxed when they acquire the Cryptocurrency in line with income taxes. According to SARS guidelines, “a cryptocurrency can be acquired through so-called ‘mining’.

What is Cryptocurrency mining? Mining is conducted by verifying transactions in a computer-generated public ledger, achieved through the solving of complex computer algorithms. By verifying these transactions, the ‘miner’ is rewarded with ownership of new coins, which become part of the networked ledger. This gives rise to an immediate accrual or receipt on successful mining of Cryptocurrency.

While the initial receipt of Cryptocurrency through mining is treated as income for tax purposes, SARS treats the subsequent disposition of the Cryptocurrency under a different set of tax rules.

Their 2018 guidelines state that “until the newly acquired cryptocurrency is sold or exchanged for cash, it is held as trading stock which can subsequently be realized through either a normal cash transaction…or a barter transaction.”

These are the same tax regulations that it designates for Cryptocurrency investments and transactions in exchange for goods and services.

What must be declared?

Many people seem to think their Cryptocurrency transactions only need to be declared once they are cashed out. That is not true.

You must report all cryptocurrency transactions, including:

• If you bought any Cryptocurrency or exchanged Cryptocurrency for another Cryptocurrency, it must be declared on your tax return.
• You must state if you mined Cryptocurrency.
• You must report if you were in any way paid in Cryptocurrency.

How much tax will I pay?

If you are a short-term investor or trader in Cryptocurrencies, you will pay tax at your personal income tax rate (which can be upwards of 40%). For longer-term investors, capital gains tax (18% for individuals) is payable.

Consider the experts

Need to declare your Cryptocurrency holdings or want to find out more about SARS Cryptocurrency tax? Give us a call, and we can help you through the process. Dirmeik Consulting has an extensive understanding of tax and VAT laws and can give the correct and up-to-date advice on all your tax matters. We make sure to keep up to date with any new rules or regulations made by SARS.

Dirmeik’s tax experts can advise on all South African tax matters and endeavour to create the best solution for you and your business. Get in touch with us on our website.

The post The Taxation Of Cryptocurrencies appeared first on Dirmeik Consulting.

Let’s take a closer look at the 2021 Budget Speech Highlights

Vaccinations and COVID-19

The first port of call for the budget speech highlights is the country’s vaccination campaign. The COVID-19 pandemic has done significant damage to our people’s lives and jobs and the economy as a whole. As the country moves forward with its vaccination campaign, the government has allocated more than R10 billion in the national budget to purchase and deliver vaccines over the next two years. That means access to vaccinations will be provided free of charge, in line with need and the rollout schedule. Since the state is procuring vaccines on behalf of both the public and private sectors, some revenue will return to the fiscus when private providers buy vaccines from the state.

In terms of numbers, the COVID-19 shock is estimated to have caused a 7.2% contraction in GDP growth in 2020. We are starting to see the economy slowly recovering in response to improved global conditions and easing lockdown restrictions. GDP growth of 3.3% is projected for 2021, moderating to an average of 1.9% in 2022 and 2023.

No Direct Tax Increases

To help aid economic recovery and ease the financial pressures that households and businesses are going through, the government will not introduce increases in personal or corporate income tax. Tax revenue estimates, while higher than projected in October 2020, are R213.2-billion lower than projected previously.

Indirect Tax Hikes

• It’s time to kick those bad habits. Indirect tax increases include duties on alcohol and tobacco by 8% for 2021/22. The price of a 340ml can of beer will rise by 14c, and a 750ml bottle of spirits will increase by R5.50. The reasoning behind this is to promote health amongst SA’s communities.
• Regarding fuel, we saw an inflation-related increase of 15c/litre and 11c/litre to be implemented for the general fuel levy and the RAF levy, respectively, with effect from 7 April.
• For those with a sweet tooth, you’ll be glad to hear there were no new increases in sugar tax or carbon tax announced.

On to business:

• The UIF contribution ceiling will be increased to be in line with the benefit ceiling at R17 711.58 per month from 1 March 2021.
• The urban development zones and learnership tax incentives will be extended for two years while their reviews are completed.
• The sunset date for the venture capital company (VCC) incentive, which was initiated in 2009 to encourage retail investments in smaller businesses, will not be extended beyond 30 June 2021. The reason for this is that this incentive hasn’t achieved the objectives of developing small businesses, generating economic activity, and creating jobs. Instead, it is being used as a tool for the wealthy to provide a significant tax deduction.
• SARS will be reviewing submissions made regarding travel and home office allowances due to the increased instances of staff working from home during the COVID-19 pandemic.

Debt Defaults for some SOEs

State-owned Enterprises saw a deterioration in their financial performance, partly due to the pandemic, and they are now at risk of defaults.

Unemployment

Despite the government’s best efforts to boost job creation, unemployment shows no signs of slowing down. The program allocating R12.6 billion to various sectors to create more short-term jobs will continue into the 2021/22 financial year, although the outlook is uncertain.

Increase in Debt

The gross national debt was projected to grow continuously over the long term, despite 2020 budget proposals to reduce expenditure growth. Gross debt has increased from 65.6% to 80.3% of GDP for the year 2020-21. The 2021 Budget proposes measures to narrow the main budget primary deficit from 7.5% of GDP in the current year to 0.8% in 2023-24. The proposed fiscal framework will stabilise debt at 88.9% of GDP in 2025-26.

Although these points discussed here are just a summary of the more significant budget speech highlights and proposals, they are not yet legislated and may be subject to further changes. If there are any areas you need to understand further or if you would like to find out how these new plans may affect your business, contact the professionals for help.

Consider the experts

Dirmeik Consulting has an extensive understanding of tax and VAT laws and can give the correct and up to date advice on all your tax matters. We make sure to keep up to date with any new rules or regulations made by SARS.

Dirmeik’s tax experts can advise on all South African tax matters and endeavour to create the best solution for you and your business. Get in touch with us on our website.

The post 2021 Budget Speech Highlights appeared first on Dirmeik Consulting.