Episode Transcript
[00:00:02] Speaker A: On the street, on the air.
[00:00:05] Speaker B: Inside your Business on Kai Biz is brought to you by Capitech Business Banking.
[00:00:09] Speaker C: Kaya Biz.
[00:00:11] Speaker A: Inside your business.
[00:00:13] Speaker B: Seven minutes to seven o'. Clock. It's tax season.
Yes, filing season is upon us. You make it sound like I'm super excited to pay my taxes, but as a responsible South African citizen, that's what we should do. We should be keen and eager to pay our taxes and hopefully at some point we do see fully the rewards of it. But for anyone who might be an entrepreneur or even within their own personal capacity, first things first. I do want to warn you that the South African SARS Commissioner, Mr. Edward Kisfeta, has been very, very clear in highlighting the fact that we should be just a lot more vigilant during this tax filing season as there is an increase in the number of scams. So don't get caught in phishing where a text, an email or even a call is prompting you to update your details. Do make sure that you follow through with the processes that SARS has, verify the information and of course, verify that you actually are due to change your details or due for a refund or have any outstanding documents that they require. But once you've done that, there do appear to be a few challenges that many entrepreneurs are faced with. And that largely speaks to payroll mistakes that are made by South African taxpayers. To talk us through some of these themes and how we can prevent them, we're joined by Tanya Tossen, tax and remuneration specialist at Tax Consulting sa. Tania, thank you so much for being patient with us tonight. Great pleasure to have you on.
[00:01:33] Speaker C: Thank you so much, Gugu, for inviting me again. It's an absolute pleasure.
[00:01:37] Speaker B: Always exciting to talk about tax, huh? I say this because I imagine many of our listeners will be like, what? No ways. But it really is, especially when we understand the different types of tax, how they impact our livelihoods, and of course, when it comes to. To entrepreneurs, I'm just quite keen, you know, if you take a look at this year's tax season in comparison to the last, are we finding that there's a heightened level of knowledge, information and understanding of the importance of compliance from us as taxpayers?
[00:02:07] Speaker C: Absolutely. And especially with SARS under pressure to, you know, recover and get more revenue, you know, for the coffers, you can even see the investment in technology and AI. They've put in hundreds of millions of rands into that to, you know, curb these mishandlings of and irresponsibilities of both employers and employees alike.
[00:02:32] Speaker B: Now, we Know, you know, tax avoidance is legal and encouraged as long as you do it according to the law, because that is what it is. But tax evasion is what gets people into trouble.
And this, I guess, sometimes is a line that gets blurred for many people because they either work out of ignorance, not knowing, or arrogance where they try to actually, you know, beat the rules.
I'm quite keen to understand, you know, if this is something that does come through in some of the mistakes that typically fall through the cracks that you witness with a few clients.
[00:03:01] Speaker C: Yes, absolutely. And what concerns me is, you know, you would think that this is generally startup companies who don't have that knowledge, but I've come across JSC listed companies who are making some massive mistakes which could literally cost them millions or hundreds of millions of rands. So it is a concern at the level of risk and that certain executives are willing to take or are unaware that they passively taking without their knowledge of being fully compliant on the payroll.
[00:03:35] Speaker B: And SARS is certainly intensifying its focus here. They've invested in technology, as you've said, and really trying to streamline things. So how do we need to make sure that we avoid these rookie mistakes and the red flags that we need to look out for as entrepreneurs? And I believe there are a few themes that we can discuss.
Fuel cards is typically one that comes up top of mind. Talk to us about this one.
[00:03:56] Speaker C: Yes, I think there's a very big misconception. You know, a lot of people feel if I'm given a fuel card by my employer, it's for business, it's mainly for business use, I don't have to pay tax on that benefit. And especially these expenses which are processed via like your finance department.
A lot of organizations don't realize that they should also be processed on the payroll because the essence is there's generally a type of private use element in that fuel usage. And the law typically states where there is this private element. In layman's terms, there is a fringe benefit that has to be captured on payroll and the lines become a bit blurred. And this is where your employers need to get guidance, where a fuel card is provided with a company vehicle, whether it's company owned or held under operating lease, because the tax treatment is different.
Or if you're given a standard owned fuel card as well as if you're given a fuel card in conjunction with a travel allowance. So it becomes a little bit technical. But you can't just put your head in the sand and think, you know, it's, it's An a direct expense process by finance. There's no implication to myself as an employee.
[00:05:16] Speaker B: Ah, got you. That's important. So that would ultimately be. Be a factor that the company needs to prioritize, Would that be correct?
[00:05:23] Speaker C: Absolutely, absolutely.
[00:05:25] Speaker B: Got you. You mentioned travel allowance, and I think that's an interesting one to go into. Myself and my colleagues often travel to various provinces and parts of the country and the world, and you buy water, you get lunch, you grab a Uber, and then before you know it, you know, you perhaps have to tap into some of your own resources or that. That the company has offered you.
How does subsistence allowances typically get abused when it comes to tax deductions, if at all?
[00:05:51] Speaker C: Yes, so that's a very good question, Gugu. And that's where, you know, our tax law is not literally black and white and there are a little bit of blurred lines. But, you know, typically, you know, your employers need to understand the nature of subsistence. And I see this in certain industries, and especially with expats, you know, in engineering sectors and construction sectors, who provide continuous subsistence allowances. And that's where the abuse happens. So, you know, the nature of the subsistence is where you are supposed to be away from your usual place of residence, like on a business trip like yourself, you know, you know, an employer could provide you a subsistence allowance to defray, you know, meals and incidental costs, but where it becomes a contrast continuous allowance, if I can put it that way, then you're treading on dangerous grounds because source is of the view that it's not been given with the intention of defraying those costs because it's a continuous allowance. And the minute they, they see that continuous element, it is a bit gray.
They would want to tax that.
[00:07:03] Speaker B: That is so interesting. They're people who get continuous subsistence allowances even when they're in their hometown. And I understand that essentially does seem as though it's an alternative payment.
[00:07:12] Speaker C: Right.
[00:07:12] Speaker B: Which would then be taxable.
[00:07:14] Speaker C: Absolutely.
[00:07:15] Speaker B: Okay, makes sense.
[00:07:17] Speaker C: And, and just to give you context, Google. Many years ago, when I first started dealing with expats, you know, it was a great structuring mechanism where the expat was away from home and they would get continuous subsistence allowances with. On month on end. But then, you know, it goes to the courts and they say, you know, are you really away from your usual place of residence? And, you know, court cases have been presented where now that that expat has adopted a new place of residence, which is where they working. So that's why I say it's a Bit of a grey area. And legal advice is critical where these employers are still giving these continuous subsistence allowances, which is not allowed 100%.
[00:08:00] Speaker B: And I guess it becomes even more complex, right, when you take a look at where one's primary residence is, but the primary country where they earn an income and essentially which jurisdiction are they in? You know, as a resident or non resident of South Africa.
[00:08:13] Speaker C: Yes. And it gets more technical, you know, especially when you're traveling abroad. SARS has released a subsistence rate per current country and jurisdiction. Remember, that's not law.
Your organisation determines how much they want to actually provide as part of their policies. SARS just governs how you treat it for tax purposes. And that's where there's a lot of confusion as well, in the market. Sure.
[00:08:38] Speaker B: And this also speaks to a theme around travel allowances assigned by grade or seniority in an organization. Yes, talk us through this one. Because one would assume the higher up in an executive role or organization and the higher the benefits, would that still stand? But what does that mean for the tax rules?
[00:08:55] Speaker C: So cuckoo. Many years ago, now I'm showing my age in the tax fear. You know, SARS is really clamped down on travel allowances.
And a travel allowance is generally provided to an employee where they use their private vehicle for business purposes.
So the challenge comes in. Historically, a lot of your traditional organizations used to give a travel allowance by grade or seniority.
And then because of the abuse that happened, you can actually see how SARS has closed the net over the decades on travel allowances. So first of all, you know, many years ago there wasn't a cap on the vehicle value. And then SARS realized they were financing these massive, expensive vehicles on the road.
[00:09:38] Speaker B: So I could get a Rolls Royce and a Rolls Royce and say, well, I need it, that's it.
[00:09:43] Speaker C: Or Lamborghini, whatever your flavor is.
And then as very many years ago, they used to only tax travel allowances at 50% on the payroll. Again they've clamped down. And now travel allowances are either taxed at 80% or 20%. If you can prove that more than 80% of your total travels for business.
So that was another clamping down.
But the challenge comes in is, you know, I still see companies who make offers to new recruits and to optimise the take home pay, they'll say, let's just structure a travel allowance.
So many years ago anyone could structure a travel allowance. And then SAR said, no, it has to be a condition of your employment to use your private vehicle for business purposes. So it must be stipulated in your contract, you have to keep a logbook and, and the quantification now is critical.
So what they say is that you know that quantification on apparel it can't be given at grade level with an executive I get 20,000, a middle manager 15 and a lower manager 10,000.
What they say is you've got to quantify what is that anticipated business expense that you will incur on a monthly basis.
So it becomes a little bit more tricky and complex. And we've actually built tools to help employers guide them, which is accepted by sars. And you know, to assist where the employees actually sign a stringent declaration that they are declaring this as true and accurate because there's risks all over here. SARS still knows there's a lot of fraudulent claims and people taking chances here.
So companies have to tighten up on travel allowances.
[00:11:33] Speaker B: This is so fascinating. We've got a WhatsApp message that's come through here from one of our listeners, Manonoza. She says hi Siskoku. Interesting topic on tax and subsistence. I work in finance and I used to pay petrol claims to staff when traveling for work purposes. We've had to order company petrol cards to free up cash as we used to make weekly payments for claims and it was somehow abused by staff. And I think what you're highlighting here and the text that also comes through from Manonza is the importance of the documentation. Right. Cuz cash, sometimes you come back with a receipt, sometimes you don't. When it comes to cards, you've actually got at least some kind of digital footprint to know when you fueled up, how much you paid up, fueled up for and what the kilometers were. And I think this is an important aspect because some of us might say well we did it differently in the past, we just use cash. And we might put our heads in the sand and say, well that happened three, four, five years ago. SARS doesn't need to know about it now. But talk to us about, about the importance of disclosure, voluntary disclosure, should it be raised. But also the importance of capturing this information and data. As you mentioned, quantitative information and data is now even more critical.
[00:12:41] Speaker C: Absolutely. Remember, onus of proof is always on the taxpayer, on the taxpayer. So remember in our law we are guilty until we prove ourselves innocent. Okay. So we're not like other legislation. So that is critical to understand.
The second thing that people don't realise is that tax non compliance issues never prescribe.
So if SARS has reason, they can go back 10, 20 years and make you accountable with penalties and interest for a shortcoming of, you know, pay as you earn or taxes that you were not compliant on.
And technically, you know, there's only one mechanism that actually assists both individuals and companies where they are, where they've been non compliant is to utilise the voluntary disclosure program.
And this is a critical program.
We've assisted many clients to utilise this, where our tax attorneys actually help to get rid of those penalties. There will always be interest on the shortcomings, but then at least your executive team can sleep soundly and they can know that those past non compliances have been remedied.
And that is absolutely critical. Gugu, I can't stress that enough. You know, you're obviously going to get the cowboys in South Africa who are going to take the risk, but it's a ticking time bomb.
[00:14:05] Speaker B: Definitely a ticking time, Bob. And I think that's also important, you know, for those who do participate in the voluntary disclosure program, as you mentioned, it makes the journey slightly easier but most importantly also improves compliance. So we shouldn't think that we. It almost feels like you're giving yourself up for corporate punishment and that's not the mindset to have, right?
[00:14:24] Speaker C: Absolutely not. You know, I know, I mean I've dealt with many an executive who's anxious and they don't want to go down this route. They don't want to upset employees, employees and start taxing a benefit that they should have done many years ago. But you know, these various solutions and middle ground which you can put on the table when you sit with these clients. But at the end of the day, you know, the most critical is to be compliant with SARS.
We know SaaS is going after those high net worth individuals who haven't been compliant for many years.
I'm sure you've seen it in the media. They've been owed millions of rands. So, you know, in my experience, SaaS is more likely to go after an employer because they've got more money to make there versus an individual unless it's a very high net worth individual.
[00:15:16] Speaker B: Got you Tania. Such amazing insight you've given us today. Educational. And I also believe, you know, helps us improve our level of compliance when it comes to tax. Thank you again for your time this evening. I must remind you that you took me back to that big text textbook. Ah, I remember it throughout my studies. Houghton Heart. Right, the notes on South African Income Tax. Oh yeah, I can imagine.
I imagine how much?
[00:15:41] Speaker C: Thank you so much.
[00:15:42] Speaker B: Thank you, Tanya, really appreciate your time.
[00:15:45] Speaker C: Thank you. Have a good evening.
[00:15:46] Speaker B: Likewise. That's Tanya Tossen, Tax at Remuneration Specialist at Tax Consulting South Africa. I One of the biggest points that Tanya has mentioned tonight is that tax defaults do not prescribe what that means SARS has the authority to reassess historical data and reassess historical years without time limits in the case of any suspected fraud, misrepresentation or non disclosure.
So in other words, your crime or your sin doesn't disappear or grow old and can no longer be found guilty as a result of it. They can go back and say, well hey, you didn't comply in these years so we're coming back now to correct it and fix it now. So do best. And also make sure that you do speak to a tax specialist and get your details and data up to date. It's 10 minutes after 7 o'.
[00:16:39] Speaker C: Clock.
[00:16:39] Speaker B: You're listening to Kaya Biz.
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