Andrew Stegmann

South Africa Holds Tax Equalization Payments Taxable

This information is  courtesy of Pete Scott, via WERC

In a case decided 6 September 2019, the Supreme Court of Appeal of South Africa held that payments by an employer for consulting services to expatriate employees were taxable fringe benefits. The case is BMW South Africa v. Commissioner for the South African Revenue Service.

As is frequently done by companies with employees on expatriate assignments, BMW followed a tax equalization process designed to ensure that the employees are not tax disadvantaged from the assignment. In doing so, BMW hired big 4 consulting firms to assist the employees with tax matters, including registration as taxpayers, preparation and submission of income tax returns, review of annual income tax assessments, preparation and submission of provisional tax returns, and resolution of disputes with the tax authorities.

The South African Revenue Service (SARS) took the position that the payments made to the consultants were taxable fringe benefits to the employees. BMW argued that the services were in fact for its own benefit in order to ensure that South African taxes were neither overpaid nor underpaid and that employees did not run afoul of the tax authorities. It also argued that the employees did not receive a benefit because they had no choice but to accept the services, and that the employees were placed in a financially neutral position with respect to their taxes.

The court rejected these arguments, holding that ancillary benefit to the employer was not enough to remove a payment from treatment as a fringe benefit when the employees received services for which they would have had to pay significant amounts had BMW not provided them. Accordingly, the entire amount paid was taxable to the employees.

This position is similar to that taken by the United States Internal Revenue Service.

Employers with expatriate employees in South Africa must begin including in their incomes the value of tax equalization services provided to the employees, with consequent tax gross-up issues.

To view information about the case, click here.

 

For information as to how Relocation Africa can help you with your Mobility, Immigration, Research, Remuneration, and Expat Tax needs, email info@relocationafrica.com, or call us on +27 21 763 4240.

Sources: [1], [2]. Image sources: Ben Bezuidenhout [1], [2].

Andrew Stegmann

No More Unabridged Birth Certificates Required for Minors Travelling to South Africa

SA’s tourism industry is celebrating, as the Department of Home Affairs finally made a U-turn on rules related to unabridged birth certificates for minors travelling to the country.

Home affairs minister Dr Aaron Motsoaledi confirmed in a Moneyweb Radio interview last week that unabridged birth certificates will no longer be required for foreign children travelling to South Africa.

“We have given the instruction that […] it’s no longer wanted. You don’t have to carry it, you don’t have to produce it,” he said in response to a question on the issue from Moneyweb’s SAFM Market Update business show host, Nompu Siziba.

“The argument from Home Affairs was that it was to stop child-trafficking,” added Motsoaledi. “Then we said no, no let’s not trouble tourists with this. Let’s find our own way of fighting child-trafficking, rather than using this method, which interferes with tourism.”

Motsoaledi, who was appointed home affairs minister following the general election in May, has had to deal with the issue which dates back to when Malusi Gigaba held the position.

Despite moves to relax unabridged birth certificate regulations in recent years, it has remained a thorn in the side of the tourism industry and has badly affected foreign tourist arrivals into SA since coming into effect some five years ago.

During his interview, Motsoaledi did not go into detail on how soon the controversial rule will be abolished. However, industry bosses from the Tourism Business Council of SA and the Southern African Tourism Services Association (Satsa) say an official announcement is expected as soon as this week.

TBCSA CEO Tshifhiwa Tshivhengwa, who was at the National Economic Development and Labour Council (Nedlac) meeting with President Cyril Ramaphosa and other business and government leaders last Monday, tells Moneyweb that the matter was discussed at the forum.

“We were told that unabridged birth certificate regulations will finally be abolished, and we’re delighted at the news … However, the minister needs to have written confirmation sent to the International Air Transport Association (Iata) in order for this to be effective,” he adds.

Tshivhengwa says the sooner Home Affairs and Iata meet and finalist the matter the better. “I understand that the Home Affairs Department’s Immigration Advisory Committee will be meeting on October 16, so I expect an announcement soon after that.”

“This issue has been a concern for us in the tourism industry for years and tourism operators into SA have said that they’ve been losing as much as 30% in business due to unabridged birth certificate requirements. However, the impact is likely to have been much worse if you consider would-be international tourists being turned off by this additional red-tape. They would not have bothered and chosen to go elsewhere,” he adds.

Satsa’s CEO David Frost, who has vociferously criticized the regulations from the start, hailed the government’s U-turn.

“We welcome the fact that it will finally be abolished, but it has taken too long and has done a lot of damage. It will take time for the tourism industry to fully recover from this,” he says.

“The private sector drives the tourism industry, and the government should have spoken to us before embarking on the changes five years ago. They never wanted to hear us then, but we are glad that they have finally heard us. This will be one major hurdle out of the way, but we have our work cut out for us to put SA back on the international tourism map,” he adds.

 

For information as to how Relocation Africa can help you with your Mobility, Immigration, Research, Remuneration, and Expat Tax needs, email marketing@relocationafrica.com, or call us on +27 21 763 4240.

Sources: [1], [2]. Image sources: [1], [2].

Andrew Stegmann

New Kenyan Retirement Benefit Regulations

This information is courtesy of Iseme, Kamau & Maema Advocates (IKM).

The Government of Kenya, through the Cabinet Secretary for the National Treasury and Planning, published Legal Notice Number 88 of 2019 dated 13th June, 2019 which amended the Retirement Benefits (Occupational Retirement Benefits Schemes) Regulations, 2000 (the “Regulations”). Regulation 19 (5) (a) (ii) was amended to read as follows: “the scheme rules shall provide that: where a member leaves employment after vesting of his benefits but before attaining the specified early retirement age, he may opt for payment of his own contribution where he is a member of a defined contribution scheme.

The effect of this amendment was that where the employment relationship came to an end and the employee had not reached the retirement age provided for in the Trust Deed and/or the Pension/Provident Fund Rules, he/she would no longer be entitled to the employer’s portion of contributions and the investment income gained from the contributions until he attained the retirement age.

The Regulations were, however, challenged on a number of grounds including absence of public participation. The Parliamentary Committee on Delegated Legislations, upon further consideration, proposed through the attached report that the amendments be annulled. The Report was tabled and adopted by Parliament on 2nd October, 2019, thereby annulling the proposed amendments.

Consequently, employees are now entitled to 100% of their contributions and 50% of the employer’s contributions upon termination of employment.

To view the government’s document on the amendment, click here.

 

 

For information as to how Relocation Africa can help you with your Mobility, Immigration, Research, Remuneration, and Expat Tax needs, email info@relocationafrica.com, or call us on +27 21 763 4240.

Sources: [1], [2]. Image sources: Snowmanradio [1], [2].

Andrew Stegmann
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We Have Won Graebel’s Global Superior Quality Achievement Award 2019

Relocation Africa has some great news to share with all its business partners, clients, and community members.

We are proud to say that we have won Graebel’s 2019 global Superior Quality Achievement Award, which was presented to us at Graebel’s recent Golden Globe Awards in Denver.

The award is given to the partner achieving the highest scores as reported by Graebel transferees (assignees) YTD for the current year. This reflects the effort we have put into ensuring that our clients and assignees receive the highest possible level of service quality across the board, for every assignment.

We look forward to celebrating this award with our entire team, strengthening the relationship we have with Graebel and our clients, and continuing to Embrace the Unknown.

For more information about the Denver, CO awards ceremony, visit Graebel’s website by clicking here.

Feel free to view the gallery from the ceremony below.

 

For information as to how Relocation Africa can help you with your Mobility, Immigration, Research, Remuneration, and Expat Tax needs, email info@relocationafrica.com, or call us on +27 21 763 4240.

Sources: [1], [2]. Image sources: [1], [2].