The Minister of Finance in his Budget Review this year announced that certain amendments would be introduced into the Income Tax Act to:
The Taxation Laws Amendment Act (No 30 of 2000) introduced the following concepts and amendments:
A detailed brochure to explain the new legislation pertaining to these entities will be published in due course.
The IRP 12 table (volume 37) for the calculation of provisional tax in respect of the 2001 year of assessment does not make reference to rates applicable to the companies and corporations mentioned in item 1 above.
The applicable tax rates and the date on which the new rates become applicable are as follows:
|Taxpayer||Rate of tax||Effective date|
|Personal Service Company||35%||Years of assessment commencing on or after 1/4/2000|
|Personal Service Trust||Up to R100 000 32%, more than R100 000 42%||Year of assessment ending on or after 28/2/2001|
|Labour broker with no exemption certificate||35%||Year of assessment ending on or after 1/4/2000|
|Small Business Corporation||Up to R100 000 15%, more than R100 000 30%||Year of assessment ending on or after 1/4/2000|
The remuneration payable to a personal service company and personal service trust during the year of assessment commencing on or after 1 April 2000 will be subject to employees' tax with effect from 1 August 2000. The employees' tax withheld from payments to these entities may be taken into account when the estimated taxable income for the purpose of calculating the provisional tax payable by the entities is determined.
ISSUED BY THE COMMISSIONER FOR THE SOUTH AFRICAN REVENUE SERVICE
I submit that the above table is incorrect. The rates for all the entities listed, except for a personal service trust, are effective for years of assessment commencing on or after 1 April 2000. See section 12(c) of the Taxation Laws Amendment Act, 30 of 2000. Although I have followed up on this point, as I undertook to do in the previous revision of this page, I have nothing further to post as yet.
The point made in the paragraph following the table is best illustrated by way of an example. An employer employs two personal service companies, one of which has a financial year running from 1 January 2000 to 31 December 2000 while the other has a financial year running from 1 April 2000 to 31 March 2001. Employees' tax must is due on payments made to the first company from 1 January 2001, being its first year of assessment commencing on or after 1 April 2000. Employees' tax is due on payments made to the second company from 1 August 2000.
There is an obvious temptation for the first company to extend its financial year end in order to put off the commencement of its next year of assessment. However, the Commissioner's approval is required for a change in year of assessment and it is likely to be refused under these circumstances, even if the Registrar of Companies has approved the change in financial year.