Page 1104 - SAIT Compendium 2016 Volume2

MEMORANDUM ON THE OBJECTS OF TAX ADMINISTRATION LAWS AMENDMENT BILL, 2015
2.12 Income Tax Act, 1962: Amendment of paragraph 13 of Fourth Schedule
Ad para (a): Subparagraph (5) of paragraph 11C was deleted by section 10 of the Tax Administration Laws Amendment Act, 2013, and the reference to it is therefore obsolete and must be deleted Furthermore, a subparagraph (5) was added to paragraph 14 by section 22(1)(b) of the Taxation Laws Second Amendment Act, 2008 (substituted by section 16(1) (a) of the Revenue Laws Second Amendment Act, 2008, as from 29 August 2008). The addition of a reference to this subparagraph in the wording of paragraph 13(1) (embodied in section 21(1)(a) of Taxation Laws Second Amendment Act, 2008) was, however, tied to the original effective date in the Taxation Laws Second Amendment Act, 2008, and has not yet come into effect. The present amendment proposes to insert the reference as from the date of promulgation of the Tax Administration Laws Amendment Bill, 2015, and to repeal the pending provision in section 21(1)(a) of the Taxation Laws Second Amendment Act, 2008.
Ad para (b): The extension of a time period from seven to 14 days was similarly envisaged in section 21(1)(b) of the Taxation Laws Second Amendment Act, 2008, with effect from a date to be announced. It is now proposed to effect this amendment as from the date of promulgation of the Tax Administration Laws Amendment Bill, 2015, and to accordingly delete the pending amendment in section 21(1)(b) of the Taxation Laws Second Amendment Act, 2008.
2.13 Income Tax Act, 1962: Amendment of paragraph 14 of Fourth Schedule
The whole of subparagraph (3) deals with returns, while paragraphs (a) and (b) refer to different times for submission of returns. This is a minor correction to make the wording more accurate.
2.14 Income Tax Act, 1962: Amendment of paragraph 17 of Fourth Schedule
Ad para (a): Subparagraph (2) of paragraph 25 was deleted by paragraph 94 of Schedule 1 to the Tax Administration Act, 2011. The reference to it is accordingly deleted.
Ad para (b): Subparagraph (8) provided that every person who is a provisional taxpayer must apply to SARS for registration as a provisional taxpayer. This registration requirement is no longer required as paragraph 19 of the Fourth Schedule imposes an obligation to submit a return of an estimate for each year of assessment and section 25 of the Tax Administration Act, 2011, speci es that the return must be in the prescribed form and manner. The subparagraph can therefore be deleted.
2.15 Income Tax Act, 1962: Repeal of paragraph 18 of Fourth Schedule
As the exempt entities that were listed in paragraph 18 are now listed as exclusions in the de nition of ‘provisional taxpayer’, paragraph 18 has become redundant and is therefore repealed.
2.16 Income Tax Act, 1962: Amendment of paragraph 19 of Fourth Schedule
Ad para (a): SARS no longer informs taxpayers individually that they should submit returns and the obligation to submit returns in paragraph 19 applies to all provisional taxpayers except if the Commissioner directs otherwise (i.e. speci cally excludes certain classes of taxpayers, e.g. dormant companies, from this obligation). The proposed amendment furthermore removes the requirement that the Commissioner must agree to accept an estimate lower than the basic amount i.e. the provisional taxpayer may submit an estimate of a lower amount than the basic amount if justi ed by the circumstances of the case.
Ad para (b): As part of the consequential amendments effected by Schedule 1 to the Tax Administration Act, 2011, paragraph 19(3) was amended by removing the words ‘and the estimate as increased shall be nal and conclusive’. The reason for this was the concern that the words might be regarded as excluding the constitutional right of access to court, for example a review application under the Promotion of Administrative Justice Act, 2000, of the Commissioner’s decision to adjust the estimate. However, as a result of this amendment, it became arguable that increasing the estimate may be regarded as an ‘assessment’ as de ned in the Tax Administration Act, 2011, and consequently subject to objection under section 104(1) of that Act. This was never the intention, as a provisional payment is not a nal payment of the normal tax due for the relevant year of assessment. In the event of an overpayment resulting from an increased estimate, this will be taken into account in the annual assessment. In addition, interest from the effective date is payable on overpayments by the taxpayer under the Income Tax Act. If one or more provisional payments, whether adjusted or not, are objected to and potentially suspended during the year of assessment for purposes of which these provisional payments are made, it would summarily defeat the objective of the provisional tax scheme given the time frames for lodging and dealing with objections and appeals. If the taxpayer is dissatis ed with the estimate by SARS, there is an internal remedy available to the taxpayer under section 9 of the Tax Administration Act, 2011, to request a review of the decision by SARS. Furthermore, if liquidity concerns arise, the instalment payment provisions under that Act are also available to the taxpayer.
Ad para (c): The proposed amendment clari es that both an estimate and an increase made by SARS under subparagraph (2) or (3) shall be deemed to take effect in respect of the relevant period within which the provisional taxpayer is required to make any payment of provisional tax. Furthermore, subparagraph (2) of paragraph 25 was deleted by paragraph 94 of Schedule 1 to the Tax Administration Act, 2011. The reference to it is accordingly deleted.
2.17 Income Tax Act, 1962: Amendment of paragraph 20 of Fourth Schedule
Ad para (a): The amendment proposes a clari cation of the existing subparagraph (1) by adjusting the format and the wording. The penalty envisaged in subparagraph (1)(b) is made subject to the reduction and remittance envisaged in subparagraphs (2B) and (2C), inserted by section 10(1)(d) and (e) of the Tax Administration Laws Amendment Act, 2014. The reference to subparagraph (3) is deleted because that subparagraph was deleted by section 10(1)(f) of the Tax Administration Laws Amendment Act, 2014.
Ad para (b): The liability to pay provisional tax (the ‘charging provision’) is contained in paragraph 17. Liability to pay under paragraph 17 is premised on the amount of taxable income estimated by such taxpayer in terms of paragraph 19(1). Paragraph 19(1)(a) and (b) are the paragraphs that dictate that provisional taxpayers must submit estimates
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