Current tax issues of interest to the non-profit sector

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Description:
The 2009 National Budget and other recent changes in tax legislation have included a number of issues that are relevant to non-profit organisations. We have highlighted, below, those that we feel could affect your organisation and/or your staff:

• Turnover tax for micro-businesses – for those in the non-profit sector who thought registration as a micro-business would solve their problems with record-keeping and tax, we need to point out that public benefit organisations do not qualify as a micro business!
• Dividend withholding tax – at some point in 2010, dividend withholding tax is likely to come into effect and will impose a 10% tax at shareholder level (i.e. on the beneficial owner of the shares). However, where an approved public benefit organisation is the beneficial owner of the relevant shares, it will be exempt from the withholding tax on dividends.
• Payroll giving – with effect from 1 March 2009, employers can implement a payroll giving scheme whereby staff members can receive PAYE relief on a monthly basis for donations to section 18A approved organisations (up to 5% of remuneration) on presentation of the relevant section 18A certificates. The employer must retain the certificates but record the amounts on the employee’s IRP 5.
• SITE– with the SITE system due to be discontinued, it is now possible for lower-paid employees to claim a refund of SITE where broken periods of employment have caused the “annual equivalent” income for tax purposes to exceed their actual remuneration, regardless of whether or not those employees are registered taxpayers (there is a special form on the SARS website for this purpose). For an individual employee, registration as a taxpayer is required once remuneration reaches R60,000 per annum but, if that employee has only 1 employer, a tax return is only required when remuneration reaches R120,000 per annum.
• Offences and administrative penalties – SARS is getting tougher with regard to offences and non-compliance. A false statement on VAT forms will be punishable as an offence and a fixed amount penalty table for issues of non-compliance has been introduced – what must be noted is that the penalties become monthly amounts (not one-off payments) for every month that, for example, a return is not submitted. There are very limited circumstances for waiver. SARS may also estimate employees’ tax if an annual PAYE return is not submitted or if the organisation fails to deduct or pay over employees’ tax.
• IRP 5’s and EMP 501 – unless an employee has left the organisation during the course of the tax year, IRP 5 certificates cannot be issued until the EMP 501 reconciliations have been submitted to SARS, the penalty for non-submission of the EMP 501 is 10% of employees’ tax for the relevant year!
• Medical aid scheme contributions – as from 1 March 2009, the payment of medical aid contributions by an employer on behalf of an employee becomes a taxable fringe benefit, against which the allowable deductions (R625 for each of the first 2 beneficiaries and R380 for each additional beneficiary) can then be set. This is to prepare us for when, in 2 years time, the allowable deductions will be replaced by a tax credit that will be applied to the tax payable on our taxable income.
• Personal use of employer-provided laptops and cellphones – this is no longer a taxable fringe benefit, providing that the asset is used mainly for business purposes. Employers should ensure that employment letters/contracts of relevant staff members include a clause that such items are “required to be used mainly for business use”.
• Providing accommodation to expatriate staff members – expatriate staff members who have residential accommodation provided by their employer (up to the value of R25,000 per month) now have a 2 year tax-free period in relation to the provision of that accommodation.
• Travel allowances – tax continues to be levied at 60% of the value of travel allowances. However, as from 1 March 2010, taxpayers who are required to use their personal vehicles for business purposes will have to keep a logbook to claim business travelling expenses against their allowance (a sample logbook is available on the SARS website).
• Subsistence allowance rates – for travel within the Republic, the allowances are raised to R260 per day for meals and incidental costs and to R80 for incidental costs only. For travel outside the Republic, SARS has now prepared a table of daily subsistence amounts per country (which can be accessed via the SARS website).
• Repayable remuneration – where a staff member is required to repay remuneration because s/he has not fulfilled the necessary conditions (e.g. with regard to returning to work after a period of receiving maternity pay), the repaid benefit is now allowed as a tax deduction for the employee (through PAYE or on the annual tax return).

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