What a wild ride the last few weeks have been.

Tax issues

Budget update

The big question is of course “Do I amend my invoices to 15,5% VAT as of 1 May. The short practical answer to this question is, after the announcement by the Finance Minister: No.

The legal answer is however a little more murky. It’s murky because for 31 years there really hasn’t been a question that what the Finance Minister announced is what would be passed by Parliament – given the ANC majority. As such, much of our procedural and administrative law around rate changes, etc has never actually had to be challenged. This means that there are some ambiguities, nuances, etc which have never been closely examined. What this process has shown is that there are changes that are going to have to be made to the admin processes to provide more certainty in the future.

The current key issues are:

• The VAT Act does state that a rate change announced by the Finance Minister is binding and effective. However, is this clause constitutional? Can a Budget be considered “presented” if not ratified by Parliament?
• How can a Budget be passed by Parliament without having bedded down the spend/income details?
• Is it really “due process” if the Budget is only approved 4 months after the Budget Speech?
• How exact does the expenditure allocation have to be to be considered “a Budget passed by Parliament” and how much discretion is given to the Minister to reallocate spend within their area of responsibility?

Overall, we see this as a positive development. It’s making our processes more robust and more inclusionary. It just means that we have to deal with some uncertainty while we figure out how to deal with the different voices in the room.

DTA relief for RSA pensions earned by non residents

The application for requesting relief from South African tax is now fully automated. Taxpayers who require SARS to apply the provisions of a Double Taxation Agreement (DTA) for pensions and/or annuities payable from a South African Retirement Fund can now submit their application via eFiling. Once submitted, the supporting documents will determine if the pensions and/or annuities payable to the taxpayer will not be subject to tax in South Africa under the applicable DTA.

Tax Directives

IRP3(a) Tax Directive Application Form

A new reason – Backdated (Antedated) Salaries and/or Pensions, has been added to enable employers to include correct information to assist employees who wish to opt to be taxed in terms of section 7A (i.e. employees’ tax has accrued in the prior tax year(s)). The process for non-residents who require a DTA to be considered on the taxation of a Savings Withdrawal Benefit was included.

Form B Tax Directive Application Form

The allowable transfers for the reasons Transfer unclaimed benefit’ and Transfer – Inactive Member with Insufficient Information were updated. The tax directive reason ‘Emigration Withdrawal’ was removed as the enabling provision in the Act was deleted effective from 1 September 2024.

Form C Tax Directive Application Form

The tax directive reason ‘Emigration Withdrawal’ was removed as the enabling provision in the Act was deleted effective 1 September 2024. A new tax directive reason ‘Transfer before Retirement [Par 2(1)(c)] was added. With effect from 1 March 2025 paragraph 2(1)(c) read with paragraph 6A of the Second Schedule to the Act provides that a member of a retirement annuity fund, who has attained the normal retirement age, as defined in the rules of the fund, but before electing to retire from that retirement annuity fund, may transfer his or her retirement interest in that retirement annuity fund, to another retirement annuity fund.

IRP3(c) Tax Directive Application Form

Trusts will be able to electronically apply for a tax directive allowing the annuity provider to not withhold PAYE on annuities owned by a Trust that is registered as an employer. The tax directive is issued in terms of paragraph 10 read with paragraph 11(a) of the Fourth schedule to the income Tax Act 58 of 1962, as amended. The trust will account to SARS for tax withheld from payments to its beneficiaries.

Until next month

Carmen