THE IMPACT OF THE NEW BBBEE CODES OF GOOD PRACTICE ON YOUR BUSINESS

A4_bThe compilation and verification of a scorecard for an entity in terms of the Broad-Based Black Economic Empowerment (BBBEE) Act is done according to the Codes of Good Practice (the Codes) issued by the Department of Trade and Industry (the dti). The Codes have been amended and the new Codes were gazetted on Friday 11 October 2013. These changes will have a significant effect on the BBBEE strategy of businesses and careful consideration will have to be given to adjustments in this area.

Major changes to the previous Codes include:

1. The seven elements on the scorecard are reduced to five elements and the weighting of each element has been adjusted as follows:
      • Ownership (25 points weighting)
      • Management Control (15 points weighting)
      • Skills Development (20 points weighting)
      • Enterprise and Supplier Development (40 points weighting)

2. Socio-Economic Development (5 points weighting)The total score will now amount to 105 instead of the previous 100.

3. The elements Ownership, Skills Development and Enterprise and Supplier Development are now categorised as priority elements, which means that certain minimum requirements are set for these elements. Large enterprises are required to comply with all the priority elements, whereas Qualifying Small Enterprises (QSEs) have a choice to comply with Ownership and one of the remaining priority elements.

4. If the minimum requirements set for priority elements are not met, the actual level obtained will be discounted by one level.

5. The limits for Exempt Micro-Enterprises (EMEs) have been adjusted to enterprises with an annual turnover of between R0 and R10 million (unless a sector charter applies). EMEs will still be deemed to be level four contributors.

6. QSE limits have been adjusted to enterprises with an annual turnover of between R10 million and R50 million (unless a sector charter applies).

7. EMEs and QSEs with black ownership of more than 51% will automatically qualify as level two contributors.

8. EMEs and QSEs with black ownership of 100% will automatically qualify as level one contributors.

9. Start-up enterprises will still be measured as EMEs during the first year following the formation of the enterprise.

There will be a twelve-month period from 11 October 2013 to 10 October 2014 during which businesses may choose to have their scorecard compiled and verified under either the old Codes or the new Codes. The purpose of this is to give businesses a chance to align and implement their BBBEE strategy to comply with the new Codes. Sector charters also have to align to the new Codes, but it is unclear whether it will be possible or even required to do this during the twelve-month period.

It is crucial to seek expert advice when adjusting any entity’s BBBEE strategy in order to avoid costly mistakes and ensure maximum benefit for the business, while properly complying with the relevant BBBEE legislation. For instance, enterprises that previously relied on an annual Socio-Economic Development grant in order to obtain a required BBBEE level will have to significantly adjust this amount.

Only qualified verification agents accredited under IRBA or SANAS may conduct independent verifications and issue the applicable certificate.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

PROVISIONAL TAX FOR INDIVIDUALS: DID YOU KNOW?

A3BProvisional tax is not a separate type of tax  but pre-payments on income tax for a specific tax year.  The aim of provisional tax payments is to help taxpayers to fulfil their tax responsibilities by spreading tax payments over a tax year. After SARS has assessed a taxpayer for income tax, the provisional tax payments will be set off against the final liability for income tax for a specific tax year. 

 

Underpayment of provisional tax

If a taxpayer did not pay enough provisional tax during the tax year and there is a liability after offsetting provisional tax against income tax due on assessment, the taxpayer will be liable for penalties and interest on underpayment of provisional tax. The table below provides more information on the penalties and interest applicable to the underpayment of provisional tax. 

Overpayment of provisional tax

If provisional tax was overpaid, i.e. provisional tax payments were more than the assessed income tax liability for a tax year, the excess amount will be refunded to the taxpayer with interest. Please refer to the table below for more details on overpayment of provisional tax. 

Three provisional tax returns per tax year

The provisional tax return/IRP6 must be submitted two or three times per year, depending on the circumstances of the taxpayer.

The following table sets out the deadlines, penalties and interest, and calculations for the different provisional tax payments for the current tax year starting on 1 March 2015 and ending on 29 February 2016.

Please note: the interest rates below are as per the SARS website on 13 April 2015 and subject to change as published in the Government Gazette from time to time.

Description First provisional tax return – IRP6 (compulsory) Second provisional tax return – IRP6 (compulsory) Third provisional tax return – top-up payment – IRP6(3) (optional)
Deadline for submission  and payment (if applicable) of IRP6 return 31 August 2015 29 February 2016 30 September 2016
Taxpayer fails to submit provisional tax return (IRP6) SARS may estimate taxable income and amount of tax payable N/A
Penalty payable by taxpayer on late payment of provisional tax 10% of amount paid late
Interest payable by taxpayer on late payment of provisional tax 9% per annum on amount paid late
Penalty payable by taxpayer  on under-estimated provisional tax 20% of amount under-estimated
Interest payable by taxpayer on under-estimated provisional tax (interest is not tax-deductable) 9% per annum of amount under-estimated
Interest payable by SARS to taxpayer on over-estimate of provisional tax (interest is taxable) 5% per annum on amount over-estimated
SARS’ suggested guidelines for the calculation of provisional tax payments Half of total tax on estimated taxable income for the tax year Total tax on estimated taxable income for the tax year Total tax on estimated taxable income for the tax year
Less: PAYE for the first 6 months of the tax year Less: PAYE for full tax year (12 months) Less: PAYE for full tax year (12 months)
Less: Foreign tax credits (if applicable) Less: Foreign tax credits (if applicable) Less: Foreign tax credits (if applicable)
Less: First provisional tax payment Less: First provisional tax payment
Less: Second provisional tax payment
First provisional tax payment due (note 1) Second provisional tax payment due (note 1) Third provisional tax payment due

Note 1: If there is not provisional tax due, the IRP6 return must still be submitted.

As can be seen from the above table, provisional tax payments are based on an estimate of the taxpayer’s taxable income. Therefore it is crucial to estimate taxable income and tax-deductible expenses as accurately as possible.

If you need professional assistance with the calculations, submission or payment of any of your provisional tax returns, please do not hesitate to contact our office. Our staff are friendly and knowledgeable and looking forward to the opportunity to assist you. 

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. 

Reference List:

  • sars.gov.za