August 13, 2021

Why employers should be careful when using ETI schemes

In a Binding Private Ruling issued on 6 July 2021, SARS has made strict ruling on an Employment Tax Incentive Act (ETI) scheme that has been doing the rounds. It is not often that negative rulings get published and it is therefore a unique situation that should serve as a warning to those participating in ETI schemes. The ruling determines that students in the proposed training programme are not considered “employees” as contemplated in the ETI Act and that the applicant in this case will not be entitled to claim an employment tax incentive in respect of any of them. The basic tenets of […]
February 21, 2018

THE TAXATION OF EMPLOYEE INCENTIVE SCHEMES

It has become popular commercial practice for many employers to design employment incentive schemes whereby employees are remunerated for services rendered over a period of time by allowing them to participate in share incentive schemes. Typically, these schemes take the form of either cash-based settled schemes or share-based settled schemes. The former involves participating employees receiving a cash payment after a certain period at the exercise of their share appreciation rights equal to the increase in value of the underlying share value to which the scheme is linked. Share-based payments, on the other hand, involve the employees receiving actual shares […]
December 3, 2015

Donations tax

Donations tax is levied in terms of the Income Tax Act at 20% of the value of any property donated by South African tax residents. The tax is levied on the donor, although the Act does make provision for the tax to also be recovered from the person receiving the donation in certain instances if the donor fails to pay the requisite amount of tax. It is no coincidence that the tax is levied at exactly the same rate as Estate Duty is. It therefore acts as an effective anti-avoidance measure for Estate Duty to ensure that an estate is […]
November 7, 2014

Provisions and liabilities: Do you know the difference?

Provisions and liabilities – words that are often used interchangeably but for accounting purposes they are not the same. To determine whether expenditure is a provision or a liability depends on the certainty, timing and amount of the expenditure. The classification of provisions and liabilities depends on the answers to the questions as set out in the table below:   The definitions of the different provisions and liabilities are discussed in more detail below, together with an example of each one. Provisions A provision is a present obligation for future expenditure of which the amount can be estimated reliably but where […]
September 8, 2014

Public benefit organisations: Profit from tax benefits

Organisations with philanthropic missions serving the general public may enjoy the benefit of SARS’ generosity if they have all their ducks in a row. There are, however, quite a number of requirements and stipulations which must be adhered to in order to qualify, and companies that want to apply, should ensure that they keep to all the stipulations. The Income Tax Act (“the Act”) uses the term Public Benefit organisation as an all-encompassing concept for “old” section 21 companies, trusts or associations with the sole or principal object of carrying on one or more public benefit activities. South African branches […]
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