Tax laws amendment act and learnerships

Posted by Transcend
Tuesday, 31 January 2017  |  Comments

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In full force: The Taxation Laws Amendment Act has gotten the nod. Act 16 of 2016 was signed into law and gazetted this month.

We’ve set out a short analysis of some important proposed amendments at the end including Tax deductions Learnerships. To help you find the details you need, the English pages are as follows:

  • page 2 explains the purposes and you will note the Skills Development Levies Act, Unemployment Insurance Contributions Act, and the Employment Tax Incentive.
  • pages 38 - 42 give you the tax reductions that employers can claim for learners on Learnerships - until 1 April 2022,
  • page 88 gives you the changes to Adult Education and Training and Continuing Education and training, and provision and publication of qualification and certification services,
  • page 96 - amendment to the SDL may be included in the national budget. and the same for the UIF contribution,
  • and pages 102 - 106 the Employment Tax Incentive has been extended until the 28 February 2019.

Analysis

Section 7c- Loan or credit advanced to a trust by a connected person

Paragraph 1 of Section 7c of the Act defines the official rate of interest as a rate of interest equal to the South African repurchase rate (repo rate) plus 100 basis points, where a debt is denominated in rand. Based on the current repo rate of 7%, it means that the official rate of interest is currently 8% where a debt is denominated in rand. For purposes of section7C(3), the effect of this provision is that if a natural person and a trust are connected persons and the trust owes R200,000 to the person on loan and no interest is payable in terms of the loan, an amount of R16,000 (R200,000 x 8%) will be included in the income of that person.

The section will not apply to certain public benefit organisations, vested interests, special trusts, primary resident assets, affected transactions, Shariah-compliant financing arrangements or connected person debt.

Additional deduction for learnership agreements in Section 12H of the Act

Section 12H provides additional deductions to employers for qualifying learnership agreements. These additional deductions are intended as an incentive for employers to train employees in a regulated environment to encourage skills development and job creation. Training contracts that qualify for these deductions are learnership agreements and apprenticeships registered with a SETA. These additional deductions consist of an annual allowance and a completion allowance.

The application of learnership agreement deductions has been extended to 31 March 2022 and will now require a National Qualifications Framework (NQF) qualification to qualify as a deduction.

The primary deduction has been increased to R 40 000.00 and an additional secondary deduction of R 20 000.00 has been introduced if a learner has an NQF 7 to 10 qualification (and a further increase to R 30 000.00 if such a learner has a disability).

Taxation of directors and employees on vesting of an equity instrument

Subsection (1A) of Section 8C of the Act has been amended to include dividends, foreign dividends, gains, and losses related to restricted instruments in income. A further subsection namely Section 10(k)(i)(jj) has been introduced to the Act and limits the exemption on certain dividends in respect of Section 8C restricted equity instruments.
Furthermore, the exclusion of Section 8C restricted equity instruments from the exemption of foreign dividends provision has been expanded.

We recommend that everybody familiarises themselves with these proposed changes and gets professional advice on how these will affect the way they conduct business in future. You can download the gazette here or on the SARS website.

 

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