Unemployment Insurance Contributions Bill: briefing

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Employment and Labour

11 February 2002
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Meeting Summary

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Meeting report

 

LABOUR PORTFOLIO COMMITTEE
12 FEBRUARY 2002
UNEMPLOYMENT INSURANCE CONTRIBUTIONS BILL: BRIEFING

Chairperson: Mr M S Manie (ANC)

Documents handed out:
Unemployment Insurance Contributions Bill [B85-2001]
Presentation by SARS: Unemployment Insurance Contributions Bill: Introduction (see Appendix 1)
Relevant definitions of Income Tax Act 1962 (see Appendix 2)

SUMMARY
The Unemployment Insurance Contributions Bill needs to be enacted before the Unemployment Insurance Act can be implemented. The Bill is classified as a money bill and although the Committee can review it, it cannot make amendments to it. The Committee heard a presentation from the South African Revenue Services who explained that the Bill incorporated concepts and definitions from other relevant tax legislation in order to maintain consistency and allow for easy amendment later on. The Bill applies to all employers and employees and requires them to pay 1% each of the total remuneration of the employee to either the SARS or the UI Commissioner, whichever applies. An onus is placed on the employer to collect the contribution, failing which, the Bill makes provision for penalties. The Bill sets out the procedure to be followed once the contribution has been collected and allows for a percentage of the total amount collected to be paid to the SARS for operational costs. The Committee unanimously agreed on the desirability of the Bill.

MINUTES
The Unemployment Insurance Contributions Bill is a Money Bill but was referred to the Portfolio Committee on Labour. The South African Revenue Services was present to provide an introduction to the Bill; the Committee could then confer with the Portfolio Committee on Finance but it would decide whether that was necessary later. He reminded the Committee that an amendment to a Money Bill was not possible unless the correct procedure was followed, but that procedure had not yet been legislated on. The Committee could therefore ask questions but not make any amendments until the procedure to be followed was identified.

He introduced Mr Les Kettledas from the Department of Labour and Mr S Mkhonto, the Unemployment Insurance Commissioner, who would be on hand to answer questions, and Mr Kosie Louw from the South African Revenue Services (SARS) who would give the presentation.

Mr Kettledas remarked that the Unemployment Insurance Bill, which had already been passed by the Committee, could only be implemented in conjunction with the Unemployment Insurance Contributions Bill. As the Bill in question was a Money Bill, the responsibility for making the presentation lay with SARS.

Purpose and Background
Mr Louw referred to the SARS handout and stated that the purpose of the Bill was to provide for the collection of contributions for the Unemployment Insurance Fund (UIF) and the Bill was therefore directly linked to the Unemployment Insurance Act of 2001. He reminded the committee that it is a money bill and could therefore not be amended by the Committee. As background to the Bill he stated that it was important for SARS that if involved in the collection, legislation should be passed on the same basis as that for PAYE and skills development. This would make it easier for both SARS and business because employers, for example, could use the same form with three columns for the three types of taxes.

Collection would continue to be done on a split basis. SARS would be responsible for the collection of registered employers while the collection of non-registered employers would be the duty of the Unemployment Insurance Commissioner. A further purpose of the Bill was to link the contributions with the benefits and to this end the Unemployment Insurance Commissioner would collect detailed information.

Definitions
Mr Louw moved on to the three core definitions of the Bill: "remuneration", "employer" and "employee".

The definition of "remuneration" was the one used in the PAYE provision in the Income Tax Act. It included salaries of any kind, fringe benefits such as housing or travel allowances, and these are detailed in a schedule of the Income Tax Act. Only 50% was the travel allowance included as remuneration as in many instances people claim expenses against their allowances and additionally, most people did not spend the entire amount on business purposes. The definition also included 50% of the allowance of holders of a public office. The Bill specifically excluded pensions and annuities, as people who are retired do not receive unemployment insurance benefits. Commissions were also excluded as such income was not of a regular nature and were categorised largely as independent contractors.

The Chair asked the committee to bear in mind that the points in Mr Louw's Handout had to be read in conjunction with the full definition in the Income Tax Act.

Mr G G Oliphant (ANC) enquired about the relevance of definition of "remuneration" and asked if the Unemployment Insurance Fund could not be implemented until the Bill was passed.

The Chair responded to the second part of the question by stating that if the Contributions Bill were not passed, the Insurance Bill could not begin to be implemented.

Mr Louw explained that the definition of "remuneration" as stated in the Income Tax Act could have been included verbatim in the Bill that, should an amendment to the definition be enacted, 5 or 6 consequential enactments would have to be made in each piece of legislation that incorporated the definition.

Mr J Durand (NNP) enquired whether "holder of a public office" included MP's.

Mr Louw responded that national and provincial spheres of government were excluded.

Ms E Thabethe (ANC) questioned whether the references to the Income Tax Act would make the Bill more difficult to be understood by the layperson. Was it not possible to simplify it so that the layperson enquiring about his benefits could understand it without difficulty?

The Chair stated that the matter had been raised earlier and he no longer thought it an issue. If the entire definition had been incorporated in the Bill, the Bill would become a separate piece of legislation and any amendment would therefore require many more amendments to other legislation also incorporating the definition.

Mr Durand (ANC), expanding on his earlier question, enquired whether it was then implied that the third tier of government was eligible for the benefits.

The Chair responded that local government was, and would continue to be covered. There was a doubt whether politicians were employees or employers but this debate would be resolved later in the year.

Mr Louw moved on to the second core definition, that of "employee". The definition was limited to natural person, which differed from the Income Tax Act, which applied also to juristic persons. The definition specifically excluded independent contractors. The definition of "employer" was also linked to the definition in the Income Tax Act and includes representative employers such as liquidators, curators, etc. who act on behalf of natural persons.

The Chair asked Mr Louw to elaborate on the meaning of 'acting in a fiduciary position'.

Mr Louw gave the classic example of a trust and a trustee where the trustee acts in a fiduciary position and administers the trust on behalf of someone else.

Mr Oliphant (ANC) enquired as to the meaning of "independent contractor" in terms of the exclusion.

Mr Louw replied that an independent contractor was someone who, under normal circumstances, works under the supervision / control of an employer and who contracted to deliver a special product.

The Chair stated that this definition was understood but he felt that Mr Oliphant was referring to people who used the concept of independent contractors to circumvent paying taxes. Would they also fall into the definition, for example, of employers who labelled ordinary employees, such as drivers, "independent contractors" to avoid paying additional taxes. The issue had also been of concern to the Department of Labour.

Mr Kettledas referred to the amendments to the Basic Conditions of Employment Act passed late last year which created rebuttable presumptions to determine whether one was an independent contractor or not.

The Chair agreed that those were the tests to be applied.

Clause 3: Administration of the Act
Mr Louw stated that Clause 3 made the SARS Commissioner responsible for the administration of the Act with the power to delegate to the Unemployment Insurance Commissioner. This was to ensure that there is consistent interpretation of the provisions of the Act.

The question was raised whether interpretation was the only reason for splitting the collections.

Mr Louw stressed the role that SARS can play with regard to the administration of the unemployment insurance fund. The SARS can play a critical role in that they have a reputable experience in dealing with money matters. This is also to ensure the consistent administration and interpretation of the Fund.

Mr Louw also maintained that though the SARS will be dealing with about 80% of collected contributions, there are some areas where the SARS does not have capacity to perform. For example, the SARS does not have enough capacity to collect contributions from small employers and those in the informal sector. The duty to collect contributions from these employers has been assigned to the Unemployment Insurance Commissioner. He added that this was not the ideal situation. It would be best if one person were responsible for the administration of the Act but this would not be possible to achieve by 1 April, although it would most like become possible at a later date.

Mr Middleton (IFP) asked about the depth and extent of risks involved in the process.

Mr Louw answered that there were various risks involved in the process, especially the risks related to the collection of payment contributions from small employers since they did not have maps and contact details of small and informal employers. He also projected that the SARS would not, therefore, be able collect contributions from these kinds of employers on the 1st of April 2002. However, he finally elaborated that the SARS was contemplating feasible strategies to access the traditionally no-go areas.

Mr Middleton (IFP) posed another question concerning the capacity of the SARS. He asked if assigning new duties to SARS would not further incapacitate the SARS, given the fact that SARS is currently looking overwhelmed with its current general tax collection duty?

Mr Louw stated that it would not be overloading SARS since the other 20% would be collected by the Unemployment Insurance Commissioner. Most importantly, SARS has over the years developed strong and reliable expertise in dealing with monetary matters. He added that this would not hinder SARS' administrative abilities.

Clause 4: the application of the Act
Mr Louw showed that the Act applied to employers and employees. There were four categories of exclusions based on the Unemployment Insurance Act: those employed less than 24 hours a month; learners under learnership agreement; national and provincial spheres of government; and employees who have to leave the Republic upon termination of contract. The reasoning behind this was to correlate the concepts used in employment tax-related legislation.

Ms E Thabethe (ANC) asked what the SARS should do in a situation where one party, i.e. the employer, was not paying a contribution to the Fund.

Mr Louw indicated that he could not answer the question at that stage however, it was the domain of the Unemployment Insurance Commissioner to deal with cases of that nature.

The Chair stated that new legislation has not come into effect but allowed the Commissioner to comment.

The Commissioner responded that it was currently a problem. The department had done simulations to check the situation but found that there is a big discrepancy. To compound the problem, the courts do not deem such matters to be serious. At present, employers are required to provide details of employment.

Clause 5:
The duty to contribute
Both the employer and employee are responsible for contributions; Clause 5 was also the first indication of a split collection.

Clause 6: Contribution to the fund
Each party, i.e. employer and employee, contribute 1% to the UIF on a monthly basis. For example, if an employee earns R1000 per month, the total contribution will be R20 per month. However, SARS is trying to make this service user-friendly to small employers by allowing them to make one contribution once a year. In addition, the Act does not apply to employees who receive a monthly remuneration in excess of the amount stipulated by the Minister of Finance -currently R8099.

Ms Thabethe (ANC) felt that the interest that accrued to the 1% held by the employer should not go to the employee but rather remain with the employer as collectively the interest would be high.

Mr Louw replied that the employer would only hold the money for seven days. The amount of interest that would accrue would be difficult for SARS to determine. However it was his belief that the interest would not amount to a substantial amount and was largely regarded as compensatory for the administration work that the employer was responsible for. He gave the example of a person who earns R1000 a week. Interest would amount to the employer for an average of 3 weeks and would amount to six cents. Even in the event of the employer being responsible for 1000 other employees, the interest accruing would only amount to R60 a month.

Furthermore, the Act specifically excluded employers from charging employees any administration fees in respect of the implementation of the Act.

Clause 7: Employer to Deduct Contribution
Clause 7 placed an obligation on the employer to deduct a monthly contribution from the employees remuneration and also permits other weekly or daily intervals. Restrictions placed on the employer in terms of ss(2) relate to amounts in excess of contribution; the receiving of fees; and the deduction of arrears contributions after the end of the financial year. Prior to the end of the financial year, employers are given some leeway to rectify mistakes or make adjustments. Subsection (4) holds the employer liable for amounts that were not deducted. Amounts deducted in excess must also be refunded to the employee.

Clause 8: Payment of Contribution to SARS
Mr Louw stated that the contribution must be made to the SARS Commissioner within 7 days in respect of the previous month. Provision was made for refunds to be made to employers. Once the SARS Commissioner received the contribution, he then pays it into the National Revenue Fund (NRF) and notifies the Director-General of the amount collected and related refunds. The Director General then authorises the transfer from the NRF to the Unemployment Insurance Fund.

Clause 9: Payment of Contribution to Unemployment Insurance Commissioner
Mr Louw explained that the payments made to the UI Commissioner were similar to those made to the SARS Commissioner, however the flow was different in that the contribution was paid directly into the UIF.

Mr S A Mshudulu (ANC) enquired whether employees who do not fall into the PAYE or skills levy bracket would always be the responsibility of the Unemployment Insurance Commissioner?

The Chair answered that he hoped as the system became more efficient that SARS would be able to take over from the Commissioner. Mr Louw could not add to that.

Mr Oliphant (ANC) asked if there was a process in place to effect annual payment?

Mr Louw responded that this must be discussed with the UIF Commissioner. A similar process was in place with regard to skills but there was no existing mechanism for this Bill until such time as it is gazetted. The Commissioner agreed and added that the department was also exploring this issue with regard to seasonal workers.

Clause 10: Registration and Information Gathering
Mr Louw clarified that Clause 10 places an obligation on the employer to register with either SARS or the UI Commissioner, whichever is applicable in terms of Section 8 and 9. In addition, the employer is obliged to furnish monthly information - in correlation with Section 56 of the Unemployment Insurance Act - such as details of the workforce and addresses and identities of employees. The information is intended to be fed into the database of the Commissioner.

Clause 11: Payment into NRF
Mr Louw explained that Clause 11 elaborates on the flow of the contribution once it reaches the SARS Commissioner. The Commissioner pays the money into the NRF when it is certified by the Director-General of Labour and then paid into the UIF. Contributions made to the UI Commissioner however, are paid directly into the UIF, by passing the NRF.

The Chair enquired, with regard to long-term sustainability of funds, whether it was possible to pay money into the fund in times of difficulty and if there was provision for this in the Act.

Mr Louw replied that there was no such provision in this Act and such a provision would have to be made in terms of the Appropriation of funds Bill or some other legislation as it covered the expenditure side of budget.

Clauses 12 and 13: Interest and Penalties
Clause 12 regulated interest on late payments. If the employer does not pay over the contribution within the stipulated time, interest is charged from the first day of the late payment to the day that the payment is made. Clause 13 relates to penalties on late payment. There are two types. The first type is an automatic 10% penalty; the second is an administrative penalty for more serious cases relating to fraud.

Mr Middleton (IFP) enquired whether the interest charged on these late payments went to SARS or the UIF.

Mr Louw replied that it went to the UIF.

The Chair commented that one of the reasons for reviewing the legislation was that penalties were very low and as a result employers had thought it worth taking a risk in the past.

Mr Mshudulu (ANC) asked if there is a requirement for businesses to register with SARS.

Mr Louw replied that SARS was linked to the registrar of companies and of close corporations. The Memorandum of Articles that was registered with either of these bodies was automatically forwarded to SARS, who had a lot of experience in this area. There was currently an initiative to create one national register for all types of businesses, regardless of the form and SARS, GTI and the Departments of Labour and Statistics were exploring this.

Clause 14 and 15: Application of Income Tax Act and Labour Inspectors
Clause 14 made the administrative provisions of the Income Tax Act applicable to the Bill in respect of: secrecy; returns, production of information, documents or things, searches and seizures; assessments; objections and appeals; payment and recovery of tax, interest and penalties; refunds; representative taxpayers and representative employers; transactions, operation or schemes for tax avoidance; reporting of unprofessional conduct and the jurisdiction of courts. Clause 15 related to the Labour Inspectors who are granted certain powers. The clause enables both the SARS and UI Commissioners to make use of these inspectors in respect of this Act.

Mr Mshudulu (ANC) enquired as to the problems encountered by inspectors in respect of them being deliberately hindered from entering a property by dogs.

Mr Louw responded that this was an offence and the person responsible could be held criminally liable.

Clause 16 and 17: Collection Costs and Offences & Penalties
Clause 16 governs the costs of collection and allowed for SARS to be remunerated for collection costs. There were two types: start-up costs to install or adjust systems and Annual operations costs that would amount to 1.5% of the collections or the actual cost, whichever is the higher.

Mr Middleton (IFP) questioned the source of the 1.5% figure and in what capacity was it needed by SARS.

Mr Louw answered that the 1.5% amount is the closest figure to the actual anticipated operational costs. This was based on the experience of the four big taxes, which included PAYE. SARS's experience was that the same ratio could be applied to other taxes. The money was then used for administration purposes, installing systems, printing forms, etc.

Mr Louw continued to Clause 17 relating to offences. The Bill makes certain acts offences. These include failure to pay an amount due, failure to submit anything required in terms of the Act and the hindering or obstructing the carrying out of provisions of the Act. The sentences that may be imposed included imprisonment, fines or both.

The Chair added that this was in addition to the interest that they may have to pay.

Mr Louw closed the presentation by going through the regulations and short title of the Act and the target date of 1 April 2002.

The Chair asked the opinion of the Portfolio Committee with regard to the desirability of the Bill to be passed as legislation. The Committee agreed on the Bill and on each individual clause unanimously. The Chair made the formal report to the National Assembly that the Portfolio Committee, after having considered the Bill, agreed to it.

The meeting was adjourned.

Appendix 1:

UNEMPLOYMENT INSURANCE CONTRIBUTIONS BILL


INTRODUCTION

PURPOSE:
Collection of contributions for UIF
Linked to Unemployment Insurance Act, 2001
MONEY BILL:
Parliamentary process - No amendment of money bills

BACKGROUND

Consultation process:
Department of Labour and UI Commissioner

Reason for using PAYE basis:
Compliance - both SARS and business
Simplification (systems, forms, training, etc.)
Legislation - existing concepts; and
fringe benefit valuation rules

Splitting of collection: SARS and UI Commissioner

Information gathering

DEFINITIONS (Clause 1)

'remuneration'

means remuneration as defined for PAYE purposes
PAYE definition includes, inter alia:
salary, leave pay, allowances, wages, overtime, bonus, etc. in cash or otherwise
50% of travelling allowance
50% allowance of holder of public office
UI Contributions Bill excludes:
pensions, superannuation allowance & retiring allowance
annuities, restraint of trade, payments for termination of service, lump sum from pension funds, transfer between benefit funds; and
commissions.

'employee'

limited to natural persons

receiving remuneration or to whom remuneration accrues

for services rendered or to be rendered

excludes independent contractor

'employer'

person who pays remuneration

includes representative employer (e.g. liquidator, curator, representative of non-resident employer)


ADMINISTRATION (Clause 3)

SARS Commissioner administers Act

May delegate powers or duties to UI Commissioner

APPLICATION (Clause 4)

Applies to employers and employees

Exclusions based on UI Act:
employed less than 24 hours per month
learners under learnership agreement
national and provincial spheres of government
employees who have to leave the Republic upon termination of contract

Reason: Match contributions and claims

Domestic and seasonal workers - Follow UI Act

DUTY TO CONTRIBUTE (Clause 5)

All employers and employees to whom Act applies

Contribute on monthly basis

Split collections

DETERMINATION OF CONTRIBUTION (Clause 6)

Employee: 1% of remuneration

Employer: 1% of remuneration

Limited to monthly cap: R8 099 - to be Gazetted

EMPLOYER TO DEDUCT CONTRIBUTION (Clause 7)

Deduct contribution monthly from remuneration

Other intervals e.g. daily or weekly

Employer may not:
amounts in excess of contribution
receive a fee
deduct arrear contributions after the year end

Employer liable for amounts which were not deducted

Amounts deducted in excess must be refunded to employee

PAYMENT OF CONTRIBUTION TO SARS (Clause 8)

Registered for PAYE or skills levy

Pay to SARS Commissioner within 7 days i.r.o. previous month

Information with return Total amount and number of employees

Refunds to employers

SARS Commissioner pays into NRF and notifies DG of amount collected and refunds

DG authorises transfer from NRF to UI Fund

PAYMENT OF CONTRIBUTION TO UI COMM (Clause 9)

Not registered for PAYE or skills

Pay to UI Commissioner within 7 days i.r.o. previous month

Pay into UI Fund

Refunds to employers

Particulars submitted with payment as required by UI Commissioner

One annual payment where total payroll does not exceed a certain amount to be Gazetted

REGISTRATION AND INFORMATION GATHERING (Clause 10)

Obligation on employer to register

Monthly information to UI Commissioner

PAYMENT INTO NRF (Clause 11)

SARS Commissioner must pay into NRF

INTEREST AND PENALTIES (Clauses 12 & 13)


Interest on late payments at prescribed rate for Income Tax purposes 13 per cent


Penalties on late payment 10%


Administrative penalty where employer evades payment or causes irregular refund up to 200% of contribution

APPLICATION OF INCOME TAX ACT (Clause 14)

Apply provisions relating to e.g.:
secrecy
returns, production of information, documents or things, searches and seizures
assessments
objections and appeals
payment and recovery of tax, interest and penalties
refunds
representative taxpayers and representative employers
transactions, operation or schemes for tax avoidance
reporting of unprofessional conduct
jurisdiction of courts

LABOUR INSPECTORS (Clause 15)

SARS Commissioner or UI Commissioner may request labour inspectors to assist in investigations

COLLECTION COSTS (Clause 16)

DG defrays cost of SARS Commissioner on monthly basis from UI Fund

Collection costs equal to 1,5% of collections or actual costs (higher of)

Start-up costs
OFFENCES AND PENALTIES (Clause 17)

These include:

failure to pay amount due
failure to submit anything required in terms of the Act
hinder or obstruct carrying out of provisions of the Act
conviction up to 12 months imprisonment or fine, or both

REGULATIONS AND SHORT TITLE (Clause 18 & 19)

Minister of Finance may make regulations after consultation

Unemployment Insurance Contributions Act, 2002

Commencement date by proclamation

Target date: 1 April 2002

Appendix 2:

RELEVANT DEFINITIONS OF INCOME TAX ACT, 1962
"employer" means any person (excluding any person not acting as a principal
but including any person acting in a fiduciary capacity or in his capacity as a
trustee in an insolvent estate, an executor or an administrator of a benefit fund
pension fund, provident fund, retirement annuity fund or any other fund) who
pays or is liable to pay to any person any amount by way of remuneration, and
any person responsible for the payment of any amount by way of remuneration to
any person under the provisions of any law or out of public funds (including the
funds of any provincial council or any administration or undertaking of the State)
or out of funds voted by Parliament or a provincial council

"representative employer" means-
(a) in the case of any company, the public officer of that company, or, in the
event of such company being placed in liquidation or under judicial
management, the liquidator or judicial manager, as the case may be;
(b) in the case of any divisional council, municipal council, village
management board or like authority or any body corporate or
unincorporate (other than a company or a partnership) any manager,
secretary, officer or other person responsible for paying remuneration or
behalf of such council, board, authority or body;
(c) in the case of a person under legal disability, any guardian, curator,
administrator or other person having the management or control of the
affairs of the person under legal disability; or
(d) in the case of any employer who is not ordinarily resident in the Republic,
any agent of such employer having authority to pay remuneration,
who is a resident, but nothing in this definition shall be construed as relieving an)e
person froip any liability, responsibility or duty imposed upon him by this
Schedule

"remuneration" means any amount of income which is paid or is payable to any
person by way of any salary, leave pay, allowance, wage, overtime pay, bonus,
gratuity, commission, fee, emolument, pension, superannuation allowance,
retiring allowance or stipend, whether in cash or otherwise and whether or not in
respect of services rendered, including—
(a) any amount referred to in paragraph (a), (c), (cA), (d), (e), (eA) or (f) of the
definition of "gross income" in section 1 of this Act;
(b) any amount required to be included in such person's gross income under
paragraph (i) of that definition;
50 per cent of—
(i) the amount of any allowance or advance in respect of transport
expenses referred to in section 8(1)(b), other than any such
allowance or advance contemplated in section 8(l)(b)(iii) which is
based on the actual distance travelled by the recipient, and which is
calculated at a rate per kilometre which does not exceed the
appropriate rate per kilometre fixed by the Minister of Finance
under the said section 8(l)(b)(iii); and
(ii) the amount of any allowance referred to in section 8(l)(d) granted
to the holder of a public office contemplated in section 8(1)(e),
but not including—
(i) …
(ii) any amount paid or payable in respect of services rendered or to be
rendered by any person (other than a person who is not a resident
or an employee contemplated in paragraph (b), (c), (d), (e) or ( f) of
the definition of "employee") in the course of any trade carried on
by him independently of the person by whom such amount is paid
or payable and of the person to whom such services have been or
are to be rendered: Provided that for the purposes of this paragraph
a person shall not be deemed to carry on a trade independently as
aforesaid
(aa) if he is subject to the control or supervision of any other
person as to the manner in which his duties are performed or
to be performed or as to his hours of work; or
(bb) if the amounts paid or payable for his services consist of or
include earnings of any description which are payable a1
regular daily, weekly, monthly or other intervals;
(iii) any pension or additional pension under the Aged Persons Act,
1967 (Act No. 81 of 1967), or the Blind Persons Act, 1968 (Act No.
26 of 1968), any disability grant or additional or supplementary
allowance under the Disability Grants Act, 1968 (Act No. 27 of
1968), or any grant or contribution under the provisions of section
89 of the Children's Act, 1960 (Act No. 33 of I960);
(iv) …
(v) …
(vi) any amount paid or payable to any employee wholly in
reimbursement of expenditure actually incurred by such employee
in the course of his employment:
(vii) any amount paid or payable to any director of any private company
in respect of services rendered or to be rendered by such director
to such company, unless the Commissioner in the particular case
otherwise directs;
(viii) any annuity under an order of divorce or decree of judicial
separation or under any agreement of separation;

"Gross Income", in relation to any year or period of assessment, means—
(i) in the case of any resident, the total amount, in cash or otherwise,
received by or accrued to or in favour of such resident; or

 


(ii) in the case of any person other than a resident, the total amount, in cash
or otherwise, received by or accrued to or in favour of such person from a
source within or deemed to be within the Republic,
during such year or period of assessment, excluding receipts or accruals of a
capital nature, but including, without in any way limiting the scope of this
definition, such amounts (whether of a capital nature or not) so received or
accrued as are described hereunder, namely—
(a) any amount received or accrued by way of annuity, including any amount
contemplated in the definition of "annuity amount" in section 10A (1)
(c) any amount, including any voluntary award, received or accrued in respect
of services rendered or to be rendered or any amount (other than an
amount referred to in section 8 (1)) received or accrued in respect of or by
virtue of any employment or the holding of any office:
(cA) any amount received by or accrued to any person who—
(i) is a natural person;
(ii) is or was a labour broker as defined in the Fourth Schedule (other
than a labour broker in respect of which a certificate of exemption
has been issued in terms of that Schedule);
(iii) is or was a personal service company as defined in the Fourth
Schedule; or
(iv) is or was a personal service trust as defined in the Fourth
Schedule,
as compensation for any restraint of trade imposed on such person;
(d) any amount, including any voluntary award, received or accrued in respect
of the relinquishment, termination, loss, repudiation, cancellation or
variation of any office or employment or of any appointment (or right or
claim to be appointed) to any office or employment:
(e) any amount determined in accordance with the provisions of the Second
Schedule in respect of lump sum benefits received by or accrued to such
person from or in consequence of his membership or past membership
of—
(i) any fund which has in respect of the current or any previous year of
assessment been approved by the Commissioner, whether under
this Act or any previous Income Tax Act, as a pension fund,
provident fund or retirement annuity fund; or
(ii) a fund referred to in paragraph (a) or (b) of the definition of
"pension fund",
if such person was a member or past member of such fund during any
such year: Provided that the provisions of paragraph (g) of subsection (1)
of section nine shall mutatis mutandis apply in the case of any amount
determined as aforesaid;
(eA) where, in relation to a member who effectively remains in the employment
of the same employer, or the dependants or nominees of a deceased
member—
(i) any amount in a fund contemplated in paragraph (a) or (b) of the
definition of "pension fund", the rules of which provide that on
retirement of such member a portion of his benefit has to be taken
in the form of an annuity, has been transferred to a fund, the rules
of which entitle such member, or the dependants or nominees of a
deceased member, to a benefit on retirement in the form of a lump
sum exceeding one-third of the capitalised value of all benefits
(including lump sum payments and annuities); or
(ii) a fund contemplated in paragraph (a) or (b) of the definition of
"pension fund", the rules of which provide that on retirement of such
member a portion of his benefit has to be taken in the form of an
annuity, is wholly or partially converted by way of an amendment to
its rules or otherwise, to entitle such member, or the dependants or
nominees of a deceased member, to a benefit on retirement in the
form of a lump sum exceeding one-third of the capitalised value of
all benefits (including lump sum payments and annuities); or
(iii) any amount in a fund contemplated in paragraph (a) or (b) of the
definition of "pension fund" has become payable to the member or
is being utilised to redeem a debt,
an amount equal to two-thirds—
(aa) of the amount so transferred; or
(bb) in the case of a conversion, of the amount representing the amount
converted for the benefit or ultimate benefit of the member or the
dependants or nominees of the deceased member, and such
amount shall be deemed to have been received by or accrued to or
in favour of such member, dependants or nominees, as the case
may be: Provided that where any endorsement has been made in
the records of the fund which provides that any part of such amount
shall be paid to the former spouse of such member, as provided for
in section 7(8) of the Divorce Act, 1979 (Act No. 70 of 1979), such
part shall for the purposes of this paragraph be deemed to be an
amount converted for the benefit or ultimate benefit of such
member; or
(cc) in the case of an amount becoming payable to a member or being
utilised to redeem a debt, of the amount so payable or so utilised:
( f ) any amount received or accrued in commutation of amounts due under
any contract of employment or service

 


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