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SARS Guides On PIT, Medical Tax Credits

by Lorys Charalambous,, Cyprus

04 July 2016

The South African Revenue Service (SARS) has issued an amended short guide to individual income tax in South Africa, as well as a new guide on the determination of medical tax credits.

The purpose of the first guide is to inform individuals who are South African residents of their income tax commitments under the Income Tax Act 58 of 1962 (the Act). It includes the amendments effected by the Taxation Laws Amendment Act 25 of 2015 and the Tax Administration Laws Amendment Act 23 of 2015, both of which were promulgated on January 8, 2016.

As the year of assessment (YA) of an individual ends on the last day of February each year, those amendments are applicable to YAs commencing on or after March 1, 2015 (i.e. YA2016).

It is noted that, for YA2016, the tax threshold above which individuals are liable for income tax on a sliding scale is ZAR73,650 (USD5,065) for individuals below the age of 65; ZAR114,800 for individuals aged over 65 but under 75 years; and ZAR128,500 for individuals aged 75 years and older.

An individual whose gross income consisted solely of remuneration from a single employer and did not exceed ZAR350,000 is not required to furnish a return for the YA2016 year, as long as the person did not receive any taxable allowance or advance (for example, a travel or subsistence allowance), and employees' tax was correctly withheld from his or her income in accordance with the deduction tables prescribed by SARS.

An individual who derives income that does not constitute remuneration (for example, taxable interest, rental, or business income) must pay "provisional tax." Provisional tax is paid twice a year (or on a six-monthly basis). A third or "top-up" payment can also be made to avoid interest.

An individual is exempt from paying provisional tax if that person's taxable income for YA2016 was not derived from the carrying on of any business, and if such taxable income did not exceed the annual tax threshold. In addition, if the taxable income was derived solely from interest, foreign dividends, and rental from the letting of fixed property, it should not have exceeded ZAR30,000.

The second income tax guide provides general guidelines regarding the medical tax credit (MTC), which covers qualifying contributions to a medical scheme, and the additional medical tax credit (AMTC) for other qualifying medical expenses.

The MTC is set at a fixed amount per month, and varies with respect to the number of dependents in a household. Since the MTC is a tax rebate and not a deduction, it is not refundable and cannot exceed the amount of normal tax payable. An employer that effects payment of medical scheme fees is obliged to take into account the MTC when calculating the employees' tax to be deducted or withheld from employees' remuneration.

The AMTC is also a rebate against taxes payable and non-refundable. Qualifying medical expenses can only be claimed in the YA during which they are actually paid.

TAGS: individuals | South Africa | compliance | tax | business | tax compliance | revenue guidance | employees | tax thresholds | fees | tax credits | health care | individual income tax | Africa | Tax

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