B-BBEE CERTIFICATES AND SMALL BUSINESS
The amended B-BBEE Codes of Good Practice became effective as from the 1 May 2015. The DTI published a Notice in the Government Gazette shortly thereafter, clarifying the dates the Codes become effective, as follows:
All B-BBEE verifications conducted using the financial year ending before 30 April 2015, can still be verified using the old 2007 Codes, and those conducted using financial years ending after 1 May 2015 must be verified using the amended Codes. The exception being the Sector Codes- as the transitional period for the alignment of the Sector Codes has been extended to 31 October 2015.
All B-BBEE certificates issued under the old 2007 Codes as well as the Sector Codes will remain valid for the first year of the amended Codes, in other words, until 30 April 2016. In addition the DTI notice stated that all Exempted Micro Enterprises (EME’s) will automatically be recognised as empowering suppliers. The amended Codes raise the threshold for EME’s from less than R5 million annual turnover to less than R10 million. Thus all businesses with an annual turnover of less than R10 million will qualify as an EME and will automatically obtain a level 4 status (100% B-BBEE compliant).
It is important to note that this threshold figure might change depending on the sector the business falls into. A start-up enterprise must be measured as an EME for the first year following their formation or incorporation. This applies regardless of expected total revenue of the start-up enterprise. In order to qualify as a start-up, the enterprise must provide an affidavit stating the same. Qualifying Small Enterprises (QSE’s) are affected differently.
These are enterprises with a turnover between R10 million to below R50 million. For the purposes of measurement, the QSE is required to comply with all 5 of the elements of the amended Codes (Ownership, Skills development, Enterprise and Supplier development, Management Control and Socio- Economic development). Both the EME and the QSE will automatically obtain a level 2 rating if 51% of the business is black owned, and a level 1 rating of 100% black owned. Both the EME and QSE do not require an accredited consultant to conduct the B-BBEE scorecard and give them a rating, a sworn affidavit will suffice.
There are many benefits that can be obtained from obtaining a B-BBEE Certificate for the small business enterprise (even although it may not be required) – such as providing the business with a competitive edge, improved marketing, and increased success with government tender applications and licences (where applicable). B-BBEE, and its measurement and compliance, is a highly specialised and complex area, requiring expert knowledge of the mechanics of measurement and compliance. We urge you to consult a professional adviser for further assistance and information on this topic.
TAX MATTERS SOUTH AFRICAN RESIDENTS AND FOREIGN BANK ACCOUNTS
On the 9th July 2015, SARS issued a media statement advising that it has been matching information obtained through the international exchange of information system, with their taxpayer database, and analysing the data. This exercise has resulted in the discovery that some South African residents with foreign banking accounts and/or investments have been using their foreign accounts to evade South African tax liabilities.
The media statement advises, however, that taxpayers will have an opportunity until the 12th August 2015, to approach it via its Voluntary Disclosure Programme (VDP) to regularise their tax affairs. To avoid penalties, and even criminal prosecution, these taxpayers are encouraged to submit their applications to the VDP unit before 12 August 2015. Any individual or company is able to voluntarily disclose their tax affairs to SARS, provided they qualify for the VDP.
In order for an application to be valid, the following requirements should be complied with:
- The disclosure must be voluntary. It must involve a default which has not previously been disclosed by the applicant or representative of the applicant
- It must be full and complete in all material aspects
- It must involve the potential imposition of an understatement penalty in respect of the default
- It must not result in a refund due by SARS
- It must be made in the prescribed form and manner
Please contact our offices for more detailed information on the VDP, and for further assistance pertaining to the above.
IMPORTANT DATES TO DIARISE
- 7 August 2015 – Submission and payment of EMP201
- 25 August 2015 – Submission and payment of VAT201-Manual registered vendors
- 31 August 2015 – Submission and payment of VAT201 – VAT e-Filers
- 31 August 2015 – Submission and payment of Provisional Tax
DAVIS TAX COMMITTEE VAT RECOMMENDATIONS
The Davis Tax Committee recently published its findings and recommendations as regards Value Added Tax. The committee’s mandate was to inquire into the role of the tax system in the promotion of inclusive economic growth, employment creation, development and fiscal sustainability, and in particular, as it relates to value-added tax (VAT).
We have summarised the key findings below:
Taxpayer compliance: The VAT Gap
Tax gaps exist in all economies, and South Africa is no exception. Essentially, the VAT gap is the difference between the VAT that is due under the law, and the amount of actual VAT
collected. The magnitude of the gap “can be seen as an indicator of the effectiveness of VAT enforcement and compliance measures, as it arises as a consequence of revenue loss through cases of fraud and evasion, tax avoidance, bankruptcies, financial insolvencies as well as miscalculations”. One of the key recommendations is that SARS should continue to monitor the VAT compliance gap as a means of evaluating its performance, and of informing strategic decisions about tax.
Zero rated items
Introduced as a means of addressing equity disparity, this approach significantly benefits the wealthy households. It is recommended that no further zero-rated food items be introduced.
Dual (multiple) rates
These would add to the burden of administration of the VAT, and possibly impact the poorer households, and is not recommended.
In order to eliminate and reduce tax cascading and vertical integration in the financial services sector, the Committee suggests various approaches should be considered.
Place of supply rules
Currently the SA place of supply rules are not clear and it is recommended that the VAT Act be amended to adopt the internationally accepted rules.
The newly created rules regarding the taxation of the supply of electronic services do not distinguish between business to business, or business to consumer.
Impact of raising VAT
Greater impact on the poor than raising personal tax or company tax. Consideration should be made to introduce social grants in order to compensate the impact of higher VAT on the poor.
DAVIS TAX COMMITTEE –ESTATE DUTY
The Davis Tax Committee (DTC) recently released its discussion document on estate duty which is available for public comment until 30th September 2015. Their mandate was to enquire
“The progressivity of the tax system and the role and continued relevance of estate duty to support a more equitable and progressive tax system. In this inquiry, the interaction between CGT and the estate duty should be considered.”
The South African estate duty system contains allowances that allow most estates to be subject to both CGT and estate duty only on the death of all spouses. This defers estate duty collection for many years. The net result is that estate duty collections have declined both in real terms and in terms of their overall contribution to National Revenue to the extent that today this represents a mere 0,1% of total tax collections. It is mooted there is scope to increase performance in this regard.
In its review the DTC has made the following key recommendations:
In principle the DTC has recommended taxpayers be allowed to make use of trusts when it makes sound sense to do so in the pursuit of a commercial benefit, as opposed to an estate duty benefit. In this regard a number of recommendations have been made, which if passed into law, will have far reaching implications from an estate planning perspective.
The Inter-Spouse Bequest
The DTC has recommended that the principle of inter-spouse exemptions and roll-overs should be either withdrawn completely, or subjected to a specified limit.
In essence, inter-spousal exemptions were the primary focus of the discussion paper. It has been recommended that exemptions relating to interests in fixed property, companies and “substantial” donations of cash in anticipation of death be removed.
Abatements and Rates
The DTC recommended that the primary abatement be increased to R6 million per taxpayer. It is noted that a surviving spouse will be in a position to increase the total abatement to R12 million by electing to use the primary abatement in the computation of the estate duty of the first dying spouse.
The above is a brief synopsis of key recommendations. Estate planning is a complex task and in light of these proposed changes we strongly recommend that you commence a review process in anticipation of legislative amendments in the near future.