Page 655 - SAIT Compendium 2016 Volume2

IN 76 Income Tax acT: InTeRPReTaTIon noTes IN 77
See 4.1.2 – A recipient will have to register for provisional tax if the tips received do not constitute remuneration and the recipient does not qualify for an exemption from the requirement to register for provisional tax. The exemptions applicable to natural persons vary depending on whether the person will be younger than 65 years on the last day of the year of assessment or 65 years and older on that day. A natural person who is younger than 65 and who does not derive any income from the carrying on of any business will be exempt if –
• his taxable income for that year will not exceed the tax threshold;* or
• his taxable income for that year which is derived from interest, foreign dividends and rental from the letting of xed
property will not exceed R20 000.
Accordingly, if the tip is not ‘remuneration’ as de ned and the person is younger than 65, that person will need to consider the particular facts and circumstances to determine whether or not he or she is required to register for provisional tax. A natural person (other than a director of a private company) who is 65 or older will be exempt if the Commissioner is satis ed that that person’s taxable income for that year –
• will not exceed R120 000;
• will not be derived wholly or in part from the carrying on of any business; and
• will not be derived otherwise than from remuneration, interest, foreign dividends, or rental from the letting of xed
property.
The last requirement will not be met if the tips are not ‘remuneration’ as de ned which means that a natural person who is 65 or older would need to register for provisional tax if the tips received do not constitute remuneration.
INTERPRETATION NOTE: NO. 77
DATE: ACT: SECTION: SUBJECT:
Preamble
4 March 2014
INCOME TAX ACT 58 OF 1962
PARAGRAPHS 2 (b), 2 (e), 2 (h), 6, 10 AND 13 (1) OF THE SEVENTH SCHEDULE
TAXABLE BENEFIT – USE OF EMPLOYER-PROVIDED TELEPHONE OR COMPUTER EQUIPMENT OR EMPLOYER-FUNDED TELECOMMUNICATION SERVICES
In this Note unless the context indicates otherwise –
• ‘section’ means a section of the Act;
• ‘paragraph’ means a paragraph of the Seventh Schedule to the Act; • ‘the Act’ means the Income Tax Act 58 of 1962; and
• any word or expression bears the meaning ascribed to it in the Act.
1. Purpose
This Note provides clarity regarding –
• the determination of the value of the taxable bene t arising from the private or domestic use by an employee of
employer-provided or employer-owned telephone or computer equipment (including cellular telephones, laptops,
tablets, modems, removable storage devices, printers and software) or telecommunication services; and
• the taxability of any allowance or reimbursement granted by the employer to the employee for the employee’s privately-
owned equipment or service contract which is used by the employee for purposes of the employer’s business.
For the purposes of this Note, software is regarded to be computer equipment and should be evaluated on the same basis as any other telephone or computer equipment provided to an employee. The facts and circumstances of the particular case will determine whether the software should be treated as a separate asset for purposes of paragraph 2(b) or whether it should be treated as part of the asset on which the software is installed. For example, operating system software which is acquired as part of the acquisition of an item of equipment, such as a laptop, and the use of which is limited to the equipment acquired, should not be treated as a separate asset. However, software which is acquired separately, even if at the same time as the item of equipment on which it will be installed, or software which is acquired as part of an item of equipment but its use is not restricted to that item of equipment, must be treated as a separate asset.
The Note does not consider paragraph 2(a). Paragraph 2(a) deals with the fringe bene t tax consequences when an employee acquires an asset, which the employee may or may not previously have had the use of, from an employer or associated institution as a bene t of employment.
2. Background
Employers often provide employees with telephones or computer equipment. The intention is that the employee will use the assets for work purposes. However, given that the assets are often used outside of the of ce, some private or domestic use is inevitable.
Previously, the Seventh Schedule to the Act treated almost all private or domestic use by employees of employer- owned telephones and computer equipment and employer-provided telecommunication services as a taxable bene t under paragraphs 2(b) or 2(e). The associated compliance and enforcement costs were potentially prohibitive and in
* The amount of the tax threshold varies each year depending on the marginal tax rates and the rebates available.
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