WITHHOLDING TAX ON INTEREST (WTI)
WTI stands for Withholding Tax on Interest – a tax that now applies where a South African tax resident pays interest to a foreign person (which includes individuals, companies, etc.) on or after March 1, 2015. The foreign person is responsible for the tax, however it must be withheld by the person making the interest payment to, or for the benefit of the foreign person. In effect, the South African resident has become a tax collection agent.
Interest paid will be taxed at a final withholding tax rate of 15%. The South African resident (which would include a trust), would be required to alert SARS of the interest payment to the non-resident, and that it is subject to this tax. The South African resident would then need to withhold this tax and only pay the net interest amount to the non-resident. There are a number of exemptions that apply, for example where the foreign person is a natural person, who was here in South Africa for a period more than 183 days in total during the 12 months before the date when the interest is paid, or where the interest paid is in respect of a listed debt.
When and how should it be paid?
SARS has advised that:
- WTI payments can be made on eFiling.
- In April only a payment must be made for March interest withheld. In these cases, a return will not need to be submitted, but an accurate record (e.g. a spreadsheet) of how the amount of the WTI was calculated and paid must be kept. For all payments made from May 2015 onwards, a return must be submitted together with the payment.
- A payor must calculate the amount of tax to be paid, and make the payment before the end of the month after the month in which the interest was paid.
- Failure to withhold or pay these taxes to SARS could result in the person that is required to withhold the tax being personally liable for the tax.
Please note that this article contains a general summary of information on WTI. For further specific advice and assistance with WTI and SARS requirements relating thereto, please contact our offices.
UIF THRESHOLD ADJUSTMENT – POSTPONED TO 1 MAY 2015
In the 2015 Budget Speech, the Minister of Finance proposed a once-off relief on the UIF contributions for the 2015/16 financial year. The relief proposed is in the form of a reduction in the remuneration threshold, against which the contributions are calculated, from R14,872 to R1,000 per month. The effect thereof is that employees and employers will pay only a maximum of R10 each in monthly UIF contributions, resulting in a collective figure of approximately R15 billion back to employees and employers. The rationale behind the proposal is to “provide temporary support to households and employers, in a fiscally sustainable manner”.
The Minister stated that the proposed reduction in contributions will not reduce any unemployment insurance benefits payable to beneficiaries, as a reduction of those benefits may only take place by amending the current amounts set by the Minister of Labour in terms of the UI Act. The reduction was proposed to take effect on 1 April 2015, and would be reconsidered for the next fiscal year, shortly before 1 April 2016. On 4 March 2015, National Treasury published an invitation for public comment on the proposed reduction, and on the 31 March 2015, issued a media statement stating that the Minister has agreed to a one-month extension of the consultation process. This, in effect, means that the implementation of the UIF threshold reduction has been postponed.
Final consultations will take place during April, with the new implementation date set for 1 May 2015. Should the proposal be implemented as anticipated on 1 May 2015, you will need to bear this in mind when calculating your May salaries. We will keep you updated on progress on this matter, and should you have any queries, please do not hesitate to contact our offices.
CARBON TAX – WILL IT BE IMPLEMENTED?
Carbon tax has been on the cards for a number of years. Two discussion documents were published in 2013 and 2014 and the proposed carbon tax has been further refined after a review of the comments received. From treasury perspective the potential use of carbon offsets is seen as a cost-effective mechanism to reduce greenhouse gas emissions and taxpayers’ carbon tax liabilities.
The tax design seeks to minimise potential adverse effects on low-income households and industry competitiveness. The publication of the draft Carbon Tax Bill later in 2015 will allow for a further period of consultation. From a business perspective carbon tax is seen to have negative impact on the economy, particularly mining, manufacturing and agriprocessing .The argument from treasury is that the tax will be neutral, in that it will channelled back into the economy via the green economy.
From a global perspective carbon taxes have been relatively unsuccessful in reducing carbon emissions. Ultimately our own carbon tax could result in a scenario which drives up prices ultimately affecting the consumer with minimal benefit to the environment. We will monitor developments during the course of the year and keep you advised accordingly.
CIPC COMMISSIONER RESIGNS
The Commissioner of CIPC, Astrid Ludin, resigned from her position during April, creating shock waves and controversy in the industry. A recent article published in News24 states that
the Democratic Alliance has stated that CIPC is in “deep trouble” and “possibly on the verge of collapse’. Recent media reports suggest that the erstwhile Commissioner’s resignation came about more as a result of politics than performance, and the Commissioner has been reported to have stated that her resignation was necessitated as a result of “allegations of misconduct and corruption intended to discredit me and some members of my management team”. She had been handed a notice of suspension, citing that she had infringed the Public and Finance Management Act.
Her response, as per the Sunday Times article (25 April 2015), was to say that “her attempts to root out corruption and achieve a more efficient, paperless operation turned the powerful National Education Health and Allied Workers Union against her”, which has the support of DTI Minister, Rob Davies. She was also quoted as saying that “the government is not prioritising service delivery”.
There have been many issues that have affected CIPC service delivery lately, including strike action, non-performance, and a poorly functioning website. The impact of these recent changes and upheaval at CIPC does not bode well for continued or improved service delivery standards at the government department – which is responsible for the registration of companies, corporate names, governance issues and business rescue – a very worrying time, given the current status of the South African economy.
We shall continue to monitor news and media reports on this issue, and endeavour to keep you informed on developments.