Page 193 - SAIT Compendium 2016 Volume2

IN 5 (2) Income Tax acT: InTeRPReTaTIon noTes IN 5 (2)
liability in respect of the director must be determined with reference to the actual remuneration paid or payable to the director by the employer during the current year of assessment.
Refer to the practical example (Annexure A) and the owchart (Annexure B).
4.16 New registrations for Employees’ Tax
Companies like xed property companies and investment companies that pay fees to their directors but were not previously registered for employees’ tax as they had no employees will now have to register for employees’ tax and the skills development levy. However, a company will not be required to register for employees’ tax where none of its directors or employees will be liable for normal tax, i.e. where the total remuneration of each director or employee, in a year of assessment, is below the threshold that will result in a liability for income tax.
4.17 Skills Development Levy
As the remuneration of a private company director will fall within the de nition of ‘remuneration’ for purposes of the Fourth Schedule, the remuneration must be brought into account in the calculation of the Skills Development Levy with effect from 1 March 2002.
4.18 Regional Services Levy
The current method of calculating the ‘regional services levy’ in terms of the Regional Service Councils Act 109 of 1985 and the KwaZulu and Natal Joint Services Act 84 of 1990 will not be affected by the new legislation for employees’ tax for directors of private companies.
4.19 Unemployment Insurance Fund
Directors of private companies fall within the de nition of ‘employee’ in the Unemployment Insurance Fund Act, 2002 and have to contribute to the Unemployment Insurance Fund if the remuneration is greater than the Gazetted amount.
4.20 Operational Guideline
A guideline [Operational Guideline — Employees’ Tax: Directors of Private Companies (which include persons in close corporations who perform functions similar to directors of companies)] that deals with examples and operational aspects like the application for tax directives is available on the South African Revenue Service website, www.sars.gov.za, under ‘PAYE’.
5. Effective Date
This Interpretation Note is applicable from 01 March 2002. Paragraph 11C (6) of the Fourth Schedule is applicable from 1 March 2004.
6. Practical Example
See Annexure A
7. Flowchart to determine whether paragraph 11C (6) applies
See Annexure B
Example
Annexure A
During the year of assessment ending on 28 February 2006 a director of a private company received the following remuneration:
Salary
Bonus
Gross remuneration
Less: Retirement annuity fund contributions (RAF)
Remuneration (‘T’ in the formula)
Deemed remuneration
Y = T/N
Y = R280 000/12
Y = R23 333
Fixed monthly remuneration
Salary
Less: RAF
Fixed monthly remuneration
75% of ‘T’ in the formula amounts to R210 000 (R280 000 x 75%).
R250 000 R 65 000 R315 000 R 35 000 R280 000
R250 000 R 35 000 R215 000
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