Tax Directives legislative changes implemented

Apr 25, 2022 | Uncategorised

22 April 2022 – Legislative changes to the Tax Directives process have been implemented. The following information is important for Fund Administrators, Insurers, Tax Practitioners, Advisors and taxpayers.

Taxpayers who are members of a pension preservation or provident preservation fund, who have reached retirement age and are 55 years and older are now allowed to transfer the retirement benefit to another preservation fund or a retirement annuity fund tax neutral on a Form A&D – reason Transfer before Retirement [par 2(1)(c)]
Taxpayers can now on retirement use two third (⅔) or more of the retirement benefit in the fund to purchase a living annuity and / or a guaranteed annuity. Alternatively, they can keep a portion of the retirement benefit in the fund which will provide a pension / annuity and use a portion to purchase a living annuity and or a guaranteed annuity from an Insurer. However, it is important to note that the condition placed on a purchase of an annuity is that the value of each annuity (living, guaranteed and / or remaining in the fund) must be R165 000 and above respectively.
A new reason has been added on the IRP3a to cater for foreign companies that are not registered for Pay As You Earn to make severance payments to South African tax residents who have performed work within the Republic for the said company. When the employer pays the employee, the tax practitioner or SARS will select reason <Severance benefit – Paid by a non-resident Employer>
When the taxpayer/Tax Practitioner completes the return, a new field will be added on the ITR12 to cater for payments made by foreign entities. The taxpayer/Tax practitioner must select <Y>
This will open a container whereby <new source code 3925) will be generated to capture the amount of the severance benefit received and the Tax Directive number which would have been issued for this purpose. 

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